Photo: Tesla, BYD
Tesla announced the Q4 2023 production and delivery results, and although they were higher than ever, the achievement was overshadowed by BYD's success. The Chinese company overpassed Tesla in the same quarter to become the EV sales king, although it's still behind in yearly deliveries. However gloomy this might sound, this doesn't mean much for Tesla in the grand scheme of things.
As Tesla reported Q4 2023 production and deliveries, we're again facing a typical optimists-versus-pessimists case. While the former group points out that Tesla reported its best quarterly production and delivery results, the pessimist would rather see that BYD sold more electric vehicles than Tesla in the quarter that ended on December 31. Both groups are looking at the same numbers, and both have their arguments, but it's unlikely this would change anything for Tesla and its mission.
To start with the cold facts, Tesla produced 494,989 EVs and delivered 484,507 in the fourth quarter of 2023. This brought 2023 numbers to 1,845,985 and 1,808,581 vehicles, respectively. Both results were in line with the guidance Tesla offered earlier in 2023 but slightly exceeded analysts' consensus for the quarter.
Tesla overhauled its production lines at Giga Shanghai and Fremont, which led to a pause in production in the third quarter, which also spilled into the fourth quarter. This explains the discrepancy between the production and deliveries. As Tesla ramped up production toward the end of the year, many of those EVs it built toward the end of the year are yet to be delivered. We should see this changing in Q1 2024 unless something bad happens.
Now, everyone painting this as a defeat for Tesla is delusional. This is not a zero-sum game for the American carmaker, as it doesn't share customers with its Chinese rival. Based on their product portfolios, they can hardly be named rivals, considering that they are not competing for anything except media headlines and analysts' attention. For all it's worth, BYD could sell ten times as many EVs, and that would not change Tesla's fate. On the contrary, I believe that many of those BYD customers would want to upgrade their (likely) first EVs to a Tesla after they see their advantages.
BYD has indeed achieved an impressive result in 2023 (and especially in the last quarter) and has all the reasons to celebrate. However, its scope is much narrower than Tesla's. BYD only produces vehicles and batteries and operates 30 labor-intensive factories, with over 600,000 employees on payroll. Even though 2023 revenue for both companies looks similar (BYD around $97 billion and Tesla around $85 billion), Tesla will likely report three times BYD's net profit, $9.5 billion versus $3.5 billion.
As Elon Musk keeps saying, Tesla is not a car company anymore, even though many still see it like that. Tesla is an AI/robotics company, but it's also much more than that. Its areas of expertise span multiple domains, from cars and batteries to energy generation (Solar), storage (Megapack, Powerwall) and retail (Supercharger), software, artificial intelligence (neural-network-based full self-driving), and robots (Tesla Bot). Some of these lines of business are growing much faster than car sales and are expected to replace EVs as Tesla's main profit center.
Wherever BYD or other carmakers will be by then, Tesla will be doing just fine. And don't get me wrong, BYD is doing a fantastic job and will probably get even better and faster in time. But this will tell more about its performance than Tesla's. Critics will likely notice that BYD will only improve its lineup and move upmarket with future models. Tesla, on the other hand, will push to expand its market with more affordable models (the $25,000 EVs). This means that BYD will, in time, become more like Tesla, while Tesla will become more like BYD, blurring the lines between the two.
What's remarkable in this development is that BYD is doing (and has been doing) what other legacy carmakers should have done years ago. Namely, phasing out combustion vehicle production and switching to an electrified lineup while pushing to become an EV-only carmaker. If Western carmakers have not done something similar yet, they would not be able to compete in the future, and their future might not exist. It took BYD only two years to accomplish all that; imagine how far it will be ten years from now.
To start with the cold facts, Tesla produced 494,989 EVs and delivered 484,507 in the fourth quarter of 2023. This brought 2023 numbers to 1,845,985 and 1,808,581 vehicles, respectively. Both results were in line with the guidance Tesla offered earlier in 2023 but slightly exceeded analysts' consensus for the quarter.
Tesla overhauled its production lines at Giga Shanghai and Fremont, which led to a pause in production in the third quarter, which also spilled into the fourth quarter. This explains the discrepancy between the production and deliveries. As Tesla ramped up production toward the end of the year, many of those EVs it built toward the end of the year are yet to be delivered. We should see this changing in Q1 2024 unless something bad happens.
Tesla will no longer be the EV volume leader, but that won't matter
In the opposite corner, BYD reported 526,400 EVs delivered in Q4 2023, marking the first time the Chinese carmaker sold more electric cars than Tesla in a single quarter. However, Tesla still preserved its lead for the whole year, as BYD only delivered 1.57 million electric vehicles in 2023. This will likely change in 2024, as BYD is on a steeper growth path than Tesla, thanks to the particularities of the Chinese market. BYD also sells a lot of hybrid cars, almost as many as EVs.Now, everyone painting this as a defeat for Tesla is delusional. This is not a zero-sum game for the American carmaker, as it doesn't share customers with its Chinese rival. Based on their product portfolios, they can hardly be named rivals, considering that they are not competing for anything except media headlines and analysts' attention. For all it's worth, BYD could sell ten times as many EVs, and that would not change Tesla's fate. On the contrary, I believe that many of those BYD customers would want to upgrade their (likely) first EVs to a Tesla after they see their advantages.
BYD has indeed achieved an impressive result in 2023 (and especially in the last quarter) and has all the reasons to celebrate. However, its scope is much narrower than Tesla's. BYD only produces vehicles and batteries and operates 30 labor-intensive factories, with over 600,000 employees on payroll. Even though 2023 revenue for both companies looks similar (BYD around $97 billion and Tesla around $85 billion), Tesla will likely report three times BYD's net profit, $9.5 billion versus $3.5 billion.
As Elon Musk keeps saying, Tesla is not a car company anymore, even though many still see it like that. Tesla is an AI/robotics company, but it's also much more than that. Its areas of expertise span multiple domains, from cars and batteries to energy generation (Solar), storage (Megapack, Powerwall) and retail (Supercharger), software, artificial intelligence (neural-network-based full self-driving), and robots (Tesla Bot). Some of these lines of business are growing much faster than car sales and are expected to replace EVs as Tesla's main profit center.
Tesla is a car company as much as Amazon is a bookstore
Considering all this, saying that Tesla is just a car company is like saying Amazon is just an online bookstore. And yet, Tesla will always be measured by its EV performance, and that's okay. The American EV maker will continue to expand this sector thanks to its superior technologies and brand image. The arrival of the next-generation vehicles, hopefully in 2025, will undoubtedly help grow the total addressable market and boost Tesla's numbers in the second half of the decade.Wherever BYD or other carmakers will be by then, Tesla will be doing just fine. And don't get me wrong, BYD is doing a fantastic job and will probably get even better and faster in time. But this will tell more about its performance than Tesla's. Critics will likely notice that BYD will only improve its lineup and move upmarket with future models. Tesla, on the other hand, will push to expand its market with more affordable models (the $25,000 EVs). This means that BYD will, in time, become more like Tesla, while Tesla will become more like BYD, blurring the lines between the two.
What's remarkable in this development is that BYD is doing (and has been doing) what other legacy carmakers should have done years ago. Namely, phasing out combustion vehicle production and switching to an electrified lineup while pushing to become an EV-only carmaker. If Western carmakers have not done something similar yet, they would not be able to compete in the future, and their future might not exist. It took BYD only two years to accomplish all that; imagine how far it will be ten years from now.
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