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Tesla’s China Sales Skid as Buffett-Backed BYD Booms

Last Updated September 23, 2020 2:19 PM
Mark Emem
Last Updated September 23, 2020 2:19 PM
  • Sales of the Shanghai-made Model 3 sedan fell in July.
  • Wall Street has warned of the risk U.S.-China tensions pose to companies like Tesla.
  • Chinese electric vehicle (EV) makers are growing in stature and competitiveness.

After selling a record number of Model 3s in June, Tesla’s sales of its lowest-priced sedan in China fell drastically last month.

According to the China Association of Automobile Manufacturers, Tesla’s deliveries of Model 3 sedans produced in Shanghai fell 26% in July. The EV maker sold 11,014 Model 3s last month  compared to the 14,954 units delivered in June.

Overall, electric vehicle sales in China rose by 19.3%.

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While Tesla (NASDAQ:TSLA) led battery electric vehicle (BEV) sales in July, it was behind the Berkshire Hathaway (NYSE: BRK.A)-backed BYD Company in the broader category of new energy vehicles (NEVs).

BYD sold 14,000 units  of NEVs (which comprises BEVs, fuel-cell, and plug-in vehicles). Berkshire Hathaway owns a 24.59% stake in BYD . The investing conglomerate purchased the stake over a decade ago.

Unlike Tesla, BYD only recorded a slight month-on-month decline in sales. In June, BYD sold 14,165 new energy vehicles , a decrease of 0.4%.

Going forward, Tesla’s lead in the Chinese BEV market is likely to come under threat from both competitive forces and geopolitical tensions.

Chinese Rivals Are Closing in on Tesla from All Sides

Tesla may have a significant market share in China, but competitive pressure is growing rapidly. Both established players and startups are eager to bite a bigger chunk of the pie.

Last month, BYD started delivering Han EV, the Model 3 rival. It managed to sell 1,205 units and has so far garnered over 30,000 pre-orders.

The long-range version of the Han sedan boasts a range of 376 miles  compared to the Model 3’s 322 miles for the Long Range  AWD version.

Tesla’s competitive edge in the EV market is slowly waning. | Source: @BYDCompany/Twitter 

XPeng Inc., the Alibaba-backed new energy carmaker, introduced its Model 3 rival, the Xpeng P7, a few weeks ago. The company sold 7,641 units in July, which was the first month since deliveries began.

Tesla Model 3 Loses Its Edge in Range

The P7 beats the Model 3 range-wise based on the New European Driving Cycle (NEDC) tests. Under ideal conditions, the sedan reaches a maximum range of 416 miles  on a single charge.

Xpeng, the maker of the P7, is seeking to list in the U.S. | Source: XPeng Website 

There is more competition on the horizon, too. NYSE-listed electric SUV maker Nio (NYSE:NIO) will release a crossover, the EC6, in September . This will give Nio a head start since Tesla has yet to ramp up Model Y production.

Additionally, Chinese EV makers are bolstering their finances. XPeng is now seeking to list in the U.S. Last month, another Chinese electric vehicle startup Li Auto Inc (NASDAQ: LI) achieved this feat.

As they turn to the markets for funding, Tesla should expect the Chinese EV scene to get increasingly competitive.

Sino-U.S. Tensions Could Upset the Apple Cart

Ongoing Sino-U.S. tensions could result in China retaliating against American companies such as Tesla. Wall Street analysts have already sounded the alarm.

Tensions between the U.S. and China pose a risk to Tesla’s future in the world’s largest EV market. | Source: @TraderJ95886811/Twitter 

Besides possible retaliatory moves by the Chinese government, there is growing anti-American sentiment  in the world’s second-largest economy.

Nationalistic fervor could make the Chinese favor domestic brands over foreign ones. This could turn to a disadvantage for Tesla and other U.S. businesses.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no investment position in any of the securities mentioned.