BYD vs. Tesla China Race

Investment Analysis Clubs Macro Economic Trends and Risks
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This post is in reply to albaby1 in another Tesla thread

It’s possible that BYD will pass Tesla in 2023 but it won’t hold the lead for long. I see a dramatic change of pace for Tesla happening in China.

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Giga presses

Several years ago Elon musk was dreaming of making real cars like they make toy car, die cast, which is where IDRA and the giga presses come into play. It started with two piece front and rear castings which evolved into one piece front and rear castings which are joined by the structural battery pack when using the 4680 cells for models Y and 3. Those were 6,000 ton presses. For the CyberTruck in Texas they are assembling a 9,000 ton giga press. Yesterday IDRA announced the shipment of 9,000 ton giga press to China without mentioning the Customer.

January 9, 2023
IDRA Group announces a second 9,000 ton Giga Press is heading to Asia – but to who?

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China Design Studio

A couple of years ago Tesla announced a China Design Studio tasked with designing EVs specifically for the Chinese markets

2021
Tesla Inc said on Thursday it is planning to set up a design studio in China to develop vehicles for local customers in one of its largest markets worldwide.

“We look forward to soon seeing China-designed and China-made Tesla models sold in the world,” said the electric car maker in a statement to China Daily on Thursday, without giving further details.

https://www.google.com/search?client=safari&rls=en&q=tesla+china+design+stiudio&ie=UTF-8&oe=UTF-8

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Next Generation Platform

Recently Tesla announced the Next Generation Platform with the aim of cutting manufacturing cost in half. I’m not sure why but I had the impression that it was a China project.

Jan 7, 2023
Tesla Next Generation Platform: Everything We Know So Far

The excitement around the new platform is because, reading between the lines, this is going to be the basis for the much-anticipated “$25,000 Tesla”.

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Putting it all together

Up to here it was facts, what follows is speculation.

To cut production costs in half requires some drastic innovations way beyond what Wright’s Law offers. A smaller car is not likely to save 50% on raw materials and batteries, the innovation must be radical, like eliminating half of the production line, half the robots, and half the workforce.

• The China model will be smaller than current models
• The China model will use giga castings, the new way to make cars
• The 9,000 ton giga press is going to Tesla.

Why would a smaller car need a bigger giga press than the 6,000 ton used for model Y?

My best guess is that the underbody will be a single piece giga-casting, front, rear, and structural battery pack tray as a single unit.

When this new EV comes to market, likely in late 2024, it should be low cost and high gross margin and a very strong competitor in the Chinese market. Tesla might have to reduce the gross margin to meet the price and volume expectations.

I repeat, this is speculation on my part. Let’s see how well it ages. :wink:

The Captain

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An interesting post. A few thoughts:

  1. When I said BYD was going to overtake Tesla in BEV sales, I wasn’t talking about in China. I was talking globally. In China, BYD is already well ahead of Tesla in BEV’s - more than double their sales, and growing much faster.

  2. Tesla’s likely not bringing a new model to market by late 2024. Tesla has many strengths, but timely bringing new models to market quickly is not one of them. We’re not even yet at the “tease a design” or “tease a reveal date” for the new model - and to my knowledge, they’ve never brought a new model to market within two years from where they are now.

  3. While your speculation is interesting, it doesn’t really go towards the point you set out to answer.

I mean, it’s not a surprise that Tesla will (and needs to) introduce a new model at some point over the next few years in order to meet its sales growth goals. Nor that they’ll be taking China into account for that model, both in production and as a market. The question isn’t whether they’ll be growing in 2024-2025, or that they’ll be growing pretty quickly - it’s whether they’ll be growing faster than BYD.

But the above doesn’t really answer that question - because isn’t that already kind of “baked in” their 50% annual growth rate projections? That they would be bringing a smaller, cheaper car to market? Meanwhile, BYD is growing much much faster than that right now - and they’re growing faster than Tesla did when it was a similar size in BEV’s. They moved 911K BEV’s in 2022 - roughly the same amount that Tesla did in 2021 - but that represents a 184% rate of growth from the prior year (more than double that of Tesla at a similar stage - Tesla “only” posted 87% YoY growth in 2021). Note that their PHEV sales are growing even faster still, rising 247% YoY - so it’s not like this is coming from cannibalizing or converting their PHEV to BEV sales.

That’s why BYD is expected to catch Tesla globally in BEV sales - their BEV segment alone is growing 2-3x faster. It’s not that Tesla isn’t growing fast - it’s that BYD is growing much, much faster.

Do you think that the new model will push Tesla’s sales growth faster than the ~50% annual they’re projecting now?

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So again we disagree. :wink:

Do you think that the new model will push Tesla’s sales growth faster than the ~50% annual they’re projecting now?

I can’t answer because we don’t agree on what the new model will be, which market it targets, besides, my guessing a number does not amount to data. I find analysts’ projections a waste of time but stock market traders love them. Louis Navellier rates ‘earnings surprises’ very highly.

The Captain

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Fair enough - but that 50% annual growth is Tesla’s projection of their future growth rate, not analysts’.

Like you said, we disagree. I don’t think there’s anything to support the idea that Tesla’s going to catch up to BYD in BEV sales in China. BYD’s already twice the size in BEV’s and growing faster (and they’re producing another million PHEV’s per year as well). And while a new cheaper model will be instrumental (indeed necessary) for Tesla to keep growing quickly, there’s no reason to think it will allow Tesla to grow faster than BYD globally either.

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I think you guys are misunderstanding Musk. His 20M Tesla sales by 2030 is not a business projection. It is an aspiration based on what Musk believes is required to save the world.

Elon Musk said, “The 20 million by 2030 is an aspiration, not a promise. And the reason for aiming for something like that is there are approximately two billion cars and trucks in the world and for us to really make a dent in sustainable energy and electrification, I think we need to replace at least one percent of the fleet per year to really be meaningful. And that’s where the 20 million units comes from.

“Let’s try to replace one percent of the global fleet of two billion cars and trucks per year. That’s our aspiration. It’s not a promise; it’s an aspiration. I think we’ve got a good chance of getting there and people will see based on the products that we unveil — will be able to judge for themselves whether that goal is realistic or not.” Elon Musk On Tesla's Aspiration Of Reaching 20 Million Cars Made Per Year By 2030 - CleanTechnica

A lot of the analysis on this thread assumes a conventional car market with EVs simply replacing ICES. I don’t think it can work that way. The concentration of people in the two biggest populations, India and China, is simply too dense for their highway systems to accomodate western car ownership behavior of multiple cars per household.

Tesla’s proposed 50% annual growth will come from dominating the alternative transport systems that will be necessary in these high population nations. This will depend on whether automated driving is possible in the near term and whether it will revolutionize the concepts of ride sharing and shared ownership as some predict.

BYD can make all the $20K EVs it wants, but if the public becomes enamored with automated driving, those cheap EVs become dinosaurs. I don’t think it will be possible to make an inexpensive self-driving car in the near future. My guess is that they will only be available for ownership by the rich. The availability of these vehicles for the masses will be in ride sharing and shared ownership. My guess is that this is where Tesla will focus. BYD isn’t Tesla’s future competition, it is Waymo and Motional, and maybe Apple.

In short, I don’t think Tesla grows 50% based in car sales. It is only possible if Tesla can win a major chunk of the self-driving car market and take advantage of the changes in car ownership behaviors that result.

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Hopefully they finally start selling the pickup truck before the end of 2024!!!

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It just so happens that when Musk said the above, 50% unit growth would have met that ‘aspiration’ and on other occasions Musk has talked about 50% per year on average, some years more, some less.

An inexpensive mass market model would do it. I believe that is the goal of the Next Generation Platform which should start deliveries late 2024 or early 2025.

The Captain

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You would think that - but I’m not sure it’s true. The population density of Shanghai isn’t all that much greater than that of Los Angeles (10K/sq. mi vs. 8.3K/sq. mi.). The densest parts of Shanghai are much denser, of course - but like LA, there’s tons of middle density areas all throughout. And of course, as China’s income gradually rises to approach western levels, you might see a similar “flight to the suburbs” and disaggregation of the urban cores that we’ve seen in most other parts of the wealthy West.

Perhaps. We don’t yet really have a good idea of what TaaS looks like, or what the actual costs and experience will be, in a world with actual autonomous driving. Certainly actual AV’s (whosoever develops them first) could be hugely disruptive to the plans of all auto manufacturers - but whether they are or not will depend a lot on what the economics of that product end up looking like. We don’t know yet whether AV’s are the end of privately owned cars, the end of “dumb” cars, or perhaps the end of cars altogether and we all move to a system of AV busses and shared transport.

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The population of Shanghai is about 25M, roughly 6X that of LA. LA’s congestion is infamous, now imagine that spread over a much larger area.

We don’t. I just think that the Tesla “aspiration” we should be paying attention to is not a cheaper car to enter the low margin entry-level market but rather a robotaxi to restructure the car market.

A optimistic POV:

A pessimistic POV:

Tesla is more of a revolutionary company than an evolutionary one. It takes moonshots. It seems to be modeled more like the Apple of Steve Jobs than Toyota, creating new product lines that change the industry rather than making the Tesla equivalent of a Corolla, i.e., a better conventional product.

It takes a different mindset to invest in Tesla.

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I get that, sure. I just think it’s not entirely a given that a robotaxi is going to restructure the car market. We don’t know if that’s the case. I think it will depend a great deal on the cost of the robotaxi service - not just the vehicle cost, but the total cost that they’ll need to recoup in order to be commercially viable.

We don’t know if robotaxis will be cheaper than privately-owned cars on the whole. It’s dead certain that in some cases it will. It’s exceptionally likely that in other situations it won’t. We just don’t know yet what the economics of the robotaxi will be, so we don’t know which situation will predominate.

I wasn’t aware that Tesla was planning to manufacture a dedicated robotaxi, though. That’s interesting. I had thought that the plan was that the existing Tesla stock would be the Tesla robotaxis once FSD was turned on - individuals would enroll their vehicles in the Tesla Network and earn money when they’re not using their vehicles. If Tesla is designing a new vehicle with a dedicated form factor for taxi use, does that reflect a change in those plans?

That’s the path that Cruise is taking, it seems - they have a dedicated vehicle that’s designed for ride-hailing as a robotaxi:

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Shanghai has a good public transportation system. LA’s is rudimentary (and that’s being charitable). Instead of public transit, LA has freeways (and now the occasional toll road).

–Peter <== lives just south of LA proper and avoids LA as much as possible

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To Tesla it appears…

But, why assume that the giga press is a technological advantage that cannot be replicated by China? Certainly IDRA would love to have a few more customers than just Tesla - and China seems to have no qualms about stealing tech.

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Given that IDRA is owned by LK Machinery, a Chinese company, I don’t think anybody is assuming that.

I don’t think it’s known whether the second machine is going to Tesla, but it is painted Tesla red, so it seems likely.

-IGU-

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Tesla won’t be the first. The question is whether they can execute in this sector better than Cruise/GM.

In the meantime I find it interesting that conservative Toyota seems to be going big time into robotaxies with a joint venture in China (with Pony.ai) using hybrid-electric Toyota Siennas.

https://www.greencarcongress.com/2022/01/20220124-ponyai.html

As well as in Texas:

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These kind of opinions seem a bit of a stretch. Recency bias, maybe. I think there’s a strong case to be made that there HAS to be a market for “lower end” mass market vehicles, regardless of power source, but especially EVs. The % of Tesla drivers involved in the “FSD Beta Pilot” is small, and getting smaller as the flaws continue not to be addressed and the price keeps going up. I think very few people as a % will ever trust a computer to handle every single crazy driving situation - when a small misjudgement without your hands on the wheel can be a very, very expensive mistake.

It stands to reason that many, many cheaper EVs will come out in the next several years as the production process stabilizes, as battery recycling expands, as innovation continues to happen throughout. Tesla’s high end model was targeted at wealthy first adopters who cared, and could afford to care. This seems like a pretty typical technology adoption cycle. Accelerated by increasing, relentless government pressure (ex-China, unfortunately) to force fossil fuel emissions and consumption out of our daily lives.

Those cheaper EVs don’t have to include autonomous driving and logistically can’t, for many years. But these companies will make awesome, fast, comfortable and affordable EVs that are simpler to build and (certainly) maintain than ICEs. Nissan dropped a battery in a Sentra 10 years ago and called it a Leaf.Toyota, Subaru, and yes Nissan probably will figure out how to deliver an electric Corolla, cheap 'Bru or a better Leaf in the next few years - all more affordable than a Model Y/S/X or a Lucid Air.

FC
19 model 3 owner

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Mainly because there’s no such thing as “FSD”. I would have gladly paid the $12k (now $15k) if the car could take my kids to school in the morning and then come back to my driveway empty so I could use it the rest of the day. But it can’t, so it isn’t very useful in that regard.

M
21M3LR

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The future has a lot of surprises. February 16 will be the 63rd anniversary of my getting a job programming at the IBM Service Bureau in Caracas. Two years later, while on vacation in NYC, I looked up an IBM colleague at 25 Broadway. In one room they had more computers than the seven or so we had in Venezuela! Twenty years later people were debating what possible use a home computer would ever have. Now people walk around with supercomputers in their back pockets.

I’ve used the smartphone on wheels metaphor before. What might be the cost of the hardware relative to the software. Each additional copy of the software is essentially free. My best guess is that the self driving hardware might cost the equivalent of a high end Android phone, maybe less. The difference between a robo-taxi and a regular car will be the missing steering wheel, instruments, and pedals. Self driving will be an optional feature on all Tesla models.

The Captain

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Word. I think there may be a minor alteration, even a new segment, but restructure the market? Hardly. People want ownership. They want to own their houses, not rent them. The want to own their own washing machines and front lawns, even when laundromats and city parks are available. And they surely want to own (or exclusively lease) their cars.

Even in New York, Chicago, or other dense areas where there is a taxi-cab or Uber every 22 feet, most people would rather own a car - except for the impediments of “no place to park” and similar. Having a car at your instant disposal beats waiting for it, even for 5 minutes, every time. And given that so much of the country now lives in the suburbs, a five-minute wait would be a wildly aspirational metric, anyway.

Robotaxis, to my mind, is “mass transit with a gilded edge.” People want a car when they want it, not later. Instant gratification.

I’m not arguing that there won’t be a market for it, surely there will, just as there is a market for taxicabs, Ubers, jitneys and other under-the-radar options in some neighborhoods. But wholesale replacement of personally owned (or leased) automobiles? Not gonna happen.

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Remember milk delivery? It got replaced by people having to go to the store and buy it themselves. Why? PRICE. People go by PRICE first. If the price DIFFERENCE is small, then it could go either way. However, ownership is–and will be–MUCH more expensive. Why? Costs of:

  1. Storage when NOT in use (most times you do NOT need to drive yourself).
  2. Employers will NOT pay to have employee parking, so MORE storage costs if you choose to drive to work. If you do NOT drive to work, then you do NOT need to own a car to do so.
  3. Auto insurance will be FAR more expensive. Fewer drivers and fewer cars = high insurance rates (high fixed overhead costs for insurance companies divided over a small number of drivers).
  4. IMO, there will be two zones. One zone is inside the city, where ONLY automated transportation will exist. The second zone is outside the city, where there is relatively little automated driving because the cost to do so is too expensive unless it is along a few high-traffic routes leading to specific destinations (other major cities, amusement and/or vacation areas, and so on).
  5. Never mind the initial purchase price (HIGH), ongoing operational costs and maintenance, and so on.
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Exactly Jerry but you forgot one more. I can’t wait for automated transportation.

  1. No more back seat drivers telling you how to drive. When they refuse to drive in traffic.

Andy

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