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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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The Billionaire Battle For EV Dominance

The neck-to-neck race to dominate the electric vehicle space continues between Elon Musk’s Tesla and Warren Buffet’s BYD.

But it’s a much larger story than just EV sales — with both companies being leaders in global sales of battery packs used in EVs and energy storage, and Tesla ready to enter BYD’s home market of China. Two other elements of the story include a decline in EV sales in both the U.S. and in China, and the next trend in electric buses and commercial vehicle global sales.

Last year, BYD narrowly beat Tesla in deliveries to be No. 1 in the world — BYD sold about 250,000 EVs compared to Tesla's 245,240.

In April, BYD announced that six new EV models will be coming up, a mix of all-electric and plug-in hybrid. In July, BYD announced an alliance with Toyota to develop EVs that will be coming out in China between 2020 and 2025.

Arch-rival Tesla’s compact SUV Model Y will be the company’s second mass-market model after the Model 3. It will be able to go 300 miles on a single charge, and it will begin shipping in late 2020. The Tesla Roadster 2020 is the first-ever follow-up to the company’s debut electric car, the Roadster 2008. Musk boasts that the upcoming supercar will be able to go from 0 to 60 in 1.9 seconds, and can reach a top speed of 250 miles-per-hour. It will cost at least $200,000 when it rolls out next year.

The Tesla Semi heavy-duty truck will go into production next year and will go nearly 400 miles on a 30-minute charge. The company also says it will go from 0-60 in 20 seconds while hauling 80,000 pounds. It’s expected to have a $180,000 starting price.

For now, BYD has Tesla squarely beat on the commercial vehicle front, with a long list of commercial clients. Recent announcements include Glasgow Airport going electric with BYD ADL Enviro200EV buses, and the Chinese company delivering the largest fleet of electric waste trucks outside of China to Rio de Janeiro. BYD also benefits from being based in China, the world’s largest electric bus market by far.

On the lithium-ion battery side of the business, BYD is ranked No. 3 and Tesla came in at No. 5. BYD has agreements in place to supply BYD Auto, Toyota, and others — along with the fast-growing energy storage market. Tesla has its US gigafactory, jointly run with Panasonic, and the world’s largest li-ion manufacturing factory. Tesla Energy, the company’s energy storage unit, continues to grow.

But for the Q3 profit statements coming in at the end of the month, it’s expected that both companies won't have good stories to tell. Related: Dreams Of An Aramco IPO Are Fading Fast

BYD warned in August that net profit will fall significantly in Q3 after soaring 204 percent in the first half of the year. The company’s interim 2019 financial report played out two significant negatives — China’s slumping new-vehicle sales and a steep cut in government “new energy vehicle” subsidies for EVs.

BYD also expects competition to remain intense for its internal-combustion engine vehicles. In 2018, BYD sold 507,127 new vehicles — less than half of which were plug-in vehicles (150,150 battery electric and 72,986 plug-in hybrid electric vehicles). But China’s slumping new vehicle sales market won’t be coming back right away.

Tesla was able to set a record by delivering 97,000 vehicles globally in the third quarter. But its stock price tumbled 3 percent in after-hours trading, with investors expecting that number to grow and stay in line with Musk’s ambitious promises for meeting year-end goals.

On the stock performance side, both companies have been seeing turbulence. BYD Co. Ltd. (BYDDF) has seen a steady decline in share prices in the past two years, with a peak reached of $10.52 in US dollars in October 2017 and a steady decline in the past six months to $4.84 on Oct. 22, 2019. Tesla Inc (TSLA) has seen a similar trend with its peak of $383.45 in June 2017, and ups and downs over the past year with a stock price of $254.83 on Oct. 22, 2019.

BYD has always benefited from support coming from investments by Warren Buffet’s Berkshire Hathaway firm and Tesla had used to be able to brag about sky-rocketing stock prices. But for now, both companies are having to build their cases as being worth it long-term for those companies looking into equity shares and stock performance.

The last three months have been tough for the Chinese makers, and the US has followed a similar pattern. Year-to-date, the end of September saw global EV sales down to 157,696 units from 175,362, breaking the traditional market growth and with China accounting for most of these results. US EV sales dropped down to 236,067 for the year as of Sept. 30, 2019 compared to 234,635 for the year on Sept. 30, 2018. September 2018 sales reached 44,589 while September 2019 saw sales down to 33,128 units.

A cooling economy has certainly impacted the Chinese market. The US is seeing a similar sales slide with the overall new vehicle market down 12 percent in September from the previous year, while EVs were down 25.5% year-over-year. Related: Trump’s Latest Trade War Move Sends Oil Tanking

One reason for the drop is that the Tesla Model 3 had an unexpectedly high ramp up of production in the second half of 2018. The Model 3 is the key driver of trends now in the US EV market.

Tesla Model 3 deliveries are slightly up over last year — 236,067 for the year at the end of September, versus 234,635 units through the end of September 2018. The US plug-in vehicle market is expected to decline through this year before a rebound starts next year.

China will be the core battleground in the BYD vs. Tesla war. It accounts for more than half of the world’s EV sales and is expected to resume its growth trend long-term even if government subsidiaries go away entirely.

Tesla was given the green light last week by the national government to start manufacturing its EVs in its Shanghai factory. The company is spending $2 billion on its second assembly plant that is scheduled to be putting out 1,000 Model 3s each week. It’s expected to be up and running well before the end of this year.

By Jon LeSage for Oilprice.com

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