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Munger is right, BYD continues to be far ahead of Tesla in China

Good Chinese economic data can give a boost to all Chinese stocks.

BYD (1211.HK) announced on Wednesday (March 1) that BYD's passenger car sales in February 2023 were 191664 units, up 112.3% y/y, higher than 150164 units in January 2023 and 90,268 units in February 2022. 

BYD's battery electric vehicle sales reached 90,639 units in February, up from 71,338 units in January and 43,173 units in February 2022. 

So far this year, BYD has sold 341828 electric passenger cars, including battery electric vehicles and plug-in hybrids, up nearly 90 percent from 183,000 in the same period last year. In the first two months of this year, BYD's sales of pure electric models were 161977 units, a year-on-year increase of about 80%. 

Barron's believes that the increase in BYD's deliveries is good news for all electric vehicle manufacturers, as it shows that the electric vehicle market is still growing. But Tesla (TSLA) bulls may be uneasy because BYD's China market share appears to be growing faster than Tesla's. 

Charlie Munger, vice chairman of Berkshire Hathaway, who owns BYD shares, recently told CNBC: "BYD is so far ahead of Tesla in the Chinese market, almost to the point of ridiculousness." "It looks like Munger is right.

Munger is right, BYD continues to be far ahead of Tesla in China

BYD quickly extended its lead

China is the world's largest market for new and electric vehicles. 

According to industry data tracked by Citi analyst Jeff Chung, Tesla sold about 60,000 electric vehicles in China in the first two months of 2023. Tesla does not disclose monthly deliveries in the Chinese market, so the available data is an approximation based on car insurance registrations, etc. Sales of 60,000 vehicles will increase by 40% compared to sales in the first two months of 2022. Tesla did not immediately respond to Barron's request for comment. 

Citi's analysis based on data shows that Tesla's market share in China may have increased a little in early 2023, but its growth rate in the Chinese market is still lagging behind BYD. China's total EV sales data for February has not yet been released. 

In 2022, BYD sold 911,140 pure electric vehicles in China, equivalent to accounting for about 20% of all electric vehicle market share. By comparison, Tesla sold about 440,000 electric cars in China last year, equivalent to about 10 percent of the market. 

Although BYD sells more in the Chinese market, it sells less than Tesla vehicles. Tesla is much more profitable, and the company sells more pure electric vehicles worldwide than BYD. Tesla's Shanghai plant also exports cars to the European market. Since not all cars produced in China are sold domestically, Tesla's market share in China fluctuates from month to month. 

However, BYD is increasing its production capacity for electric vehicles and batteries, and the company's chairman Wang Chuanfu has set a target of delivering 4 million vehicles in 2023.

Most of BYD's electric and hybrid vehicles cost between $15,000 and $34,000, which is much lower than Tesla cars, but BYD's models are increasingly selling for more than $40,000.

BYD also plans to shift to the premium market, with the company leveraging its Denza to enter the affordable luxury segment, with deliveries of 7,325 units (7,015 Denza D9 DM-i and 310 Denza D9 EVs) in February, up 13.8% month-on-month, according to the latest data. 

On January 5 this year, BYD released the high-end brand "Yangwang", which targets luxury cars of more than 800,000 yuan (about 110,300 US dollars), and the first model is an off-road SUV.

Another professional personalized new brand will also be launched within this year, and the future product matrix will cover multiple categories such as sports cars, off-road, and coupes, which will be between looking up and Denza in the BYD system. 

Barron's noted that BYD's growth is good news for Tesla and other electric car makers. Wall Street expects electric vehicle sales in China to grow by 30 to 40 percent in 2023, and BYD's sales at the start of the year suggest this is possible.

Tesla closed lower on Thursday, and analysts and investors appeared disappointed by Tesla's Investor Day event on Wednesday. 

"Wei Xiaoli" delivery volume is mixed, and investor confidence has increased, driving the stock price to stop falling and recover

Wei Xiaoli, a new Chinese automaker, recently announced its February delivery data.

NIO delivered 12,157 vehicles that month, up from 8,506 in January. The company expects deliveries of 31,000 to 33,000 units in the first quarter of this year, which means that 11,000 to 12,000 units will be delivered in March, down from February deliveries. NIO also said it expects first-quarter sales of $1.6 billion, down from Wall Street's estimate of $2.5 billion. 

Li Auto (LI) delivered 16,620 units in February, up from 15,141 units in January. The company expects deliveries of around 53,500 vehicles in the first quarter, which means more than 21,000 vehicles will be delivered in March, close to the company's record high. 

XPEV delivered 6,010 units in February, up 15 percent from 5,218 units in January. Xpeng has yet to release quarterly guidance, and the company will report fourth-quarter earnings on March 17. 

Wei Xiaoli delivered a total of 34,787 vehicles in February, up from 28,865 in January but down from a record 48,340 in December. 

The total monthly delivery volume of "Wei Xiaoli" from January 2020 to February 2023

Munger is right, BYD continues to be far ahead of Tesla in China

Overall, the ideal delivery volume was in line with Wall Street analysts' expectations, with Xpeng and NIO delivering less than analysts' expectations.

After the release of the delivery data, in addition to the ideal, the stock prices of NIO and Xpeng both fell sharply. However, on Thursday, "Wei Xiaoli" rose strongly, of which Xiaopeng rose more than 5%, Li rose more than 3%, and NIO rose more than 2%. 

Barron's pointed out that this is mainly because the good news on China's economy overshadowed investors' concerns about delivering data. 

China's manufacturing PMI rose to 52.6% in February, expanding for the second consecutive month and hitting its highest level since April 2012, according to official manufacturing purchasing managers' index (PMI) data released on Wednesday. The official non-manufacturing PMI rose to 56.3%, also expanding for the second consecutive month. 

The fastest expansion of the manufacturing PMI in more than 10 years suggests that China's economy is recovering faster than expected, boosting investor confidence in Chinese companies. 

Barron's believes that good Chinese economic data can give a boost to all Chinese stocks. U.S. stocks closed on Thursday, with popular Chinese concept stocks rebounding for the second straight session and outperforming the market for two consecutive days, with the Nasdaq Golden Dragon China Index closing up nearly 2.7%.

Article | Barron's Chinese Edition Contributor Guo Liqun

Edit | Peng Ren

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(The content of this article is for informational purposes only and the investment advice does not represent the interests of Barron's; The market is risky, and investment should be cautious. )

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