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China’s BYD sold a record number of cars in 2023, moving it closer to displacing Tesla as the world market leader for electric vehicles.
The Chinese company posted a 62% surge in global sales to just over three million units last year, compared to 2022, according to a stock exchange filing.
BYD sold 1.57 million battery electric vehicles (BEVs) last year, up 73%, as well as 1.44 million hybrids, 52% higher than the previous year.
Tesla (TSLA) is due to unveil its full-year sales figures as early as Tuesday. Analysts expect the US EV maker to have roughly met its annual delivery target of 1.8 million BEVs. It does not sell hybrids.
In 2022, BYD trailed Tesla in global BEV sales by about 400,000 units. The gap is expected to have narrowed last year. And in the most recent quarter, BYD may have already overtaken Elon Musk’s company.
In the fourth quarter, BYD sold 526,409 BEVs, up more than 20% from the third quarter. Tesla is likely to have delivered 473,000 units in the same quarter, according to a poll of 14 analysts cited by Reuters.
The rapid growth of BYD, which is backed by Warren Buffett, is a symbol of China’s rising EV industry.
China is progressing quickly in its transition to electric vehicles, thanks to strong government support for the industry.
Beijing has set a target that at least 20% of new cars sold annually by 2025 should be new energy vehicles (NEVs), which include BEVs, plug-in hybrids and hydrogen fuel cell vehicles. By 2035, the government says, NEVs should become the “mainstream” of new car sales.
The first goal was achieved in 2022, about three years early. The second may also be reached earlier than expected.
In the first 11 months of 2023, 8.3 million units of new energy vehicles were sold, accounting for more than 30% of total car sales, according to data released last month by the China Association of Auto Manufacturers.
Miao Wei, former minister of China’s Ministry of Industry and Information Technology, said at a car forum in November that the government’s NEV penetration target of 50% by 2035 is likely to be achieved by 2025 or 2026 at the latest, according to state media.
China’s leading role in the global industry is also thanks to its market scale, cheap labor and supply chain dominance, according to analysts.
“China is now leading in production and increasing its comparative edges, banking on its massive domestic market and the first mover advantage,” analysts from Natixis Asia, a French investment bank, wrote in a report in late November.
Its first mover advantage and government support through infrastructure investment and subsidies have made it easy for Chinese EV makers to expand domestically and internationally, they said.
However, intensifying competition and a brutal price war last year have impacted the profit margins of many car makers.
As China’s economy lost momentum, automakers were concerned about a demand slowdown. In January, Tesla cut prices in China to attract customers and stem slowing growth, triggering a price war. Dozens of auto makers followed suit to stay competitive.
The price war has driven up sales, but threatened industry-wide profitability. For the first 11 months of last year, China’s car industry recorded a profit margin of just 5%, lower than 2022’s 5.7% and 2021’s 6.1%, according to figures published last week by the Chinese Passenger Car Association, a government-backed industry group.
To offset the slowing domestic market, Chinese car makers have been seeking growth outside the mainland by expanding in Europe, Australia and Southeast Asia.
Last month, BYD announced it would build an EV factory in Hungary, which would be its first passenger car plant in Europe. It already has a bus factory in Komárom, Hungary.
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