China's EV giant BYD is slowly closing its profit gap with Tesla

The UAW isn't even in the game. Their workers will soon find themselves either out of work or a small player among giants. Tesla, BYD and Asian hybrid automakers will take over the space.

China's EV giant BYD is slowly closing its profit gap with Tesla

The Chinese company is now neck and neck with Tesla on pure-electric vehicle sales. Can it achieve Tesla's fat margins, too?

By Mary Hui, Quartz Media

Last year, Chinese EV champion BYD dethroned Tesla as the world’s biggest seller of electric vehicles, counting both full-electric and plug-in hybrid cars.

Now, BYD is neck and neck with Elon Musk’s company for the number of fully electric cars sold as the Chinese company ramps up both production and sales. In the third quarter ending in September, BYD sold over 431,000 full-electric cars, just several thousand behind Tesla’s 435,000.

It’s not only on pure sales volume where BYD is catching up with its American competitor. In terms of how much profit each company makes per vehicle sold, BYD is also gradually eating into Tesla’s lead.

A rough calculation based on each company’s reported figures bears this out. In the third quarter of this year, BYD sold over 2.08 million “new energy vehicles,” which includes both full-electric and plug-in hybrids, but excludes gas-powered vehicles. Dividing BYD’s net profit for the same period by its sales indicates that the company made about 10,300 yuan ($1,730) per vehicle sold. That’s a notable increase from the third quarter of 2022, when BYD averaged under $1,470 of profit per car sold.

While BYD has fattened its profit margin on each vehicle it delivers to customers, Tesla’s profit per car is slipping. Again dividing its third quarter sales by its net profit over the same period, Tesla averaged around $4,260 in profit per car sold. That’s down from over $9,500 in the third quarter of 2022.

To be sure, Tesla still earns more money per car sold than any other global competitors. And those fat margins have proved to be a nifty weapon in the EV price war, giving the company a buffer to slash prices amid cut-throat competition.

But BYD is gathering strong momentum: it just logged a record quarterly profit of 10.41 billion yuan ($1.42 billion) in the third quarter, a 82.2% increase from a year earlier. And as the company continues developing its vertically integrated supply chain from mining and batteries to cars and even shipping, it will be looking to lower its production costs and raise its profit margins even more.