Tesla (NASDAQ: TSLA) CEO Elon Musk recently took a dig at Warren Buffett, quipping that the legendary investor’s job of reading “lots of annual reports and accounting [is] pretty boring really.”
Well, the boring tasks that the Berkshire Hathaway CEO has been performing nearly all his life led to an electric vehicle (EV) investment that is now giving Tesla a run for its money in China.
In April, Tesla’s Model 3 sales in China fell by 64% to 3,635 units. Meanwhile, the Qin EV, a car produced by the BYD Company, outsold the Model 3. BYD delivered 5,096 Qin EV cars last month, tops in China.
There are at least three reasons why Tesla fell behind BYD in April.
While the Model 3 is branded a mass-market car, its price belongs in the luxury category. This puts it out of reach of most buyers but also China’s EV subsidy program.
Under China’s subsidy program for new electric vehicles, only passenger cars priced under 300,000 yuan are eligible for government subsidies.
Musk acknowledged this fact during the Q1 2020 earnings call by announcing ongoing efforts to lower the production costs in China. Last month, Musk promised to offer a car priced “below the subsidy limit.”
The starting price of the Made-in-China Standard Range Model 3 is 303,550 yuan ($42,851). That’s steep compared to the comparable BYD Qin EV300.
The price of the Qin EV300 starts at 169,900 yuan ($23,984).
In March, Tesla got a lot of flak from Chinese buyers for false advertising. This occurred after several Chinese buyers discovered their cars were equipped with older, less-capable self-driving hardware.
Instead of getting the improved HW3.0 chips necessary for powering Tesla’s Autopilot functions, certain Chinese buyers got the older inferior HW2.5 chips.
HW3.0 possesses seven times the computing capability and 21 times the image handling capacity of HW2.5.
Tesla blamed an HW3.0 chips supply shortage for the problem. The company promised to replace the chips, but the damage may have already been done.
By the standards of electric vehicle firms, Tesla is old. Now hungrier, more aggressive Chinese EV startups are growing their market share faster than Tesla.
The NYSE-listed Nio (NYSE:NIO), which debuted its first car in 2018, grew its April sales by 106% relative to March. It delivered 3,155 vehicles in April, managing to overcome the financial woes that had emerged in the first quarter. Year over year, NIO recorded 181% growth.
Lixiang, which delivered its first NEV in December, grew month-over-month sales by 80% in April, selling 1,447 units.
The EV sales numbers are only for one month, but the implications are clear–Tesla cannot afford to rest on its laurels. Chinese EV makers, including the Warren Buffett-backed BYD, are in no mood to let their domestic advantage go to waste.
Disclaimer: This article reflects the author’s opinion and should not be considered investment advice from CCN.com. The author holds no investment positions in any of the firms mentioned above.