Monthly Archives: February 2024

BYD is not first world competition for Tesla

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In Q4 2023, BYD became the world’s largest electric vehicle (EV) manufacturer, passing Tesla in world wide sales. They mostly sell in China, and claim to make a profit while selling cars for about half the price of a Tesla. They also make robots, trucks, busses, smart phones, and batteries — including blade batteries that Tesla uses for a variant in its Berlin facility. They are a darling of the wall-street experts, in part because Warren Buffett is an investor. BYD cars look to be about as nice as Tesla’s at least from the outside and sell (In China) for a fraction of the price. The experts are convinced enough to write glowing articles, but I suspect that the experts have not invested, nor bought BYD products. — What do I know?

BYD truck. It looks good on the outside. Is it competition?

Part of the BYD charm is that it is considered socially progressive, while Tesla is seen as run by a dictatorial villain. A Delaware judge who concluded that Musk did non deserve the majority of his salary, and confiscated it. There are no such claims against BYD. BYD also has far more models than Tesla, 41 by my count, compared to Tesla’s 4. The experts seem to believe that all BYD has to do is bring their low-cost cars west, and they will own the market. My sense is that, if that was all they needed, they’d have done it already. I strongly suspect the low cost cars that are the majority of BYD’s sales are low quality versions — too low to sell in the US. Here are some numbers.

Total number of vehicles made 2023:
Tesla: ~1,800,000
BYD: ~3,020,000 (1,570,000 BEV)

Employees 2023: Vehicles / Employee 2023:
Tesla: ~140,000 Tesla: 12.86
BYD: ~631,500 BYD: 5.03

Gross Revenue 2023: Gross revenue per vehicle:
Tesla: ~$96.8B Tesla: $53,900
BYD: ~ $85B BYD: $28,100

Net Profit 2023: Profit per employee: Profit per vehicle:
Tesla: ~$9.5B (9.7%). Tesla: $67,857. Tesla: $5,280.
BYD: ~$3.5B (4.1%). BYD: $5,542. BYD: $1,160

Market share based on sales in western countries 2023:
Tesla: US: 4%, EU: 2.6%
BYD: US: 0%, EU: 0.1%

The most telling comparison, in my opinion, is BYD’s tiny market share in western countries. Their cars sell for 1/2 what Tesla’s sell for. If their low-cost cars were as good as Tesla’s, there is no way their market penetration would be so low. My sense is that the average BYD vehicle is lacking in something. Maybe they’re underpowered, or poorly constructed, unsafe, or unreliable: suitable only for China, India, or other poor markets. I suspect that the cars BYD sells in Europe are made on a separate line. Even so, customers say that BYD cars feel “cheap.” BYD charges more for these cars in Europe than Tesla charges for its top sellers, suggesting that these vehicles are of a different, better design. Even so, the low numbers suggest that BYD does not turn a profit on the sales. I suspect they do it for PR.

Both cars look sporty. Why doesn’t the BYD sell?

Another observation is that BYD produces 5.03 vehicles per worker, per year. That’s half as many as Tesla workers produce per worker-year. It’s also about half of Ford’s Rouge plant (Detroit) worker production in the 1930s. That Ford plant was vertically integrated starting with raw materials and outputting finished cars. This low output per worker suggests that BYD is built on low wage, low skill production, or equally damning, that none of these models are really mass-produced.

A first world market favors a polished product that your mechanic is somewhat familiar with. That favors Tesla as it has significant market penetration, and a network of mechanics. Also, Tesla has built up a network of fast charge stations and reliable service providers. BYD has no particular charging infrastructure and virtually no service network. Charging price and experience is a key decider among first world customers. No American will tolerate slow charging in the snow at a high price — especially if they must travel to a charger without being sure the charger will be working when they get there. Tesla has figured out how to make charging less painful, and that’s worth a lot.

Tesla might fail, but if so I don’t think it will be because of BYD success. Months ago the experts assured us that cybertruck would be deadly a failure. I disagree, but it might be. I don’t think BYDs will be better. Government subsidies have ended in many states and countries (Germany, California…) putting a dent in Tesla sales, and they are having manufacturing difficulties, particularly with batteries. These seem fix-able, but might not be. I see relatively little first world competition in the US EV market from legacy auto companies. Maybe they know to avoid EVs. They currently make decent products, IC and EV, but lose money on every EV. They treat EVs as a passing fad. If they are right, Tesla and BYD will fail. If they are wrong, Tesla will do fine, and they may not be able to make up their lost place in the market. As for BYD, given their low production numbers, they will need some 3 million new workers and many new factories. I don’t think they can find them, nor raise the money for the factories.

Most of the data here was taken from @NicklasNilsso14. All of the opinions are mine.

Robert Buxbaum February 18, 2024.

Prosperity guardian; whose prosperity are we guarding?

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The Houtis, a Shia Islamic group, have been attacking ships in the Red Sea, hitting European ships, mostly carrying goods going between China and Europe. They use ballistic missiles plus cheap drones with great effect, targeted by an Iranian spotter ship in the Red Sea narrows, the Bab el Mandab. The US response is “Prosperity Guardian.” We’ve sent four missile destroyers. and the British one. These are arrayed along the entire coastline, too much coast for 5 ships to protect, and we try to shoot down drones and missiles. We manage to shoot down most of the missiles and and drones, but some always get through, and they mostly hit US and British targets. Recently the Maersk Detroit, a US flagged ship and 3 days ago, the British tanker, Marlin Luanda, shown below. It was carrying Russian naphtha headed for China. Some months ago, The Houtis kidnapped a British ship (Jewish owned) and took it to Yemen, as described previously.

British oil tanker, Marlin Luanda, on fire in the Gulf of Aden after being hit by an Iranian missile fired by Yemen’s Houthis. The tanker is hauling Russian naphtha, headed for China.

Iran supplies the missiles, and helps choose targets. According to Kissinger the aim of their attacks, and of the attacks on Israel, is to delegitimize Sunni Moslem countries like Egypt and Turkey that have made peace with Israel and the west. Whatever the motivation, Chinese and Russian ships are not targeted, but our ships are. We don’t attack the Iranian spotter for fear of starting a war. Instead we bomb Yemen, and protect ships carrying Chinese good and Russian oil. Currently 80% of the oil tanker transits of the Suez carry Russian oil (see below).

Most of the oil trade in the Suez is Russian — yellow line. Everyone else is shown in blue-black. It’s down to 0.5 ships per day, on average.

I don’t mind helping European countries get cheap Chinese goods, but I think the the main folks to pay should be the Europeans. We’re firing expensive anti-missiles and we’re showing the strengths and vulnerabilities to the Iranians, Chinese and Russians. Currently it’s our sailors who are at risk. The US trades with China too, but our China trade is not benefitted by ‘Prosperity guardian. Mostly our China trade avoids the Suez Canal, and comes around Africa to Savana or NY, or it comes across the Pacific, directly to Los Angeles. Our India trade most goes the same way. Some used to go through the Suez before the Houtis started attacking.

France and Japan have not joined prosperity guardian. Instead they have chosen to convoy their own flagged ships, even allowing the occasional stringer to tag along. Doing this, they use fewer ships, and it seems to work better than our approach. The picture at left shows a French courvair-escort escorting two French container ships. Note how much bigger the container ships are than the French warship. Should the Houtis’s missiles get too close to a French ship, I suspect that the French would retaliate hard. I think we should switch to following the French model and convoy-protect our shipping, plus whoever wants to tag along.

Map of Yemen and the Red Sea narrows.

Shipping, insurance rates have risen to about 1% of the cargo value. It’s now so expensive that no US cargo carrier will transit the area except when needed to supply our troops. At this point it’s worth asking, “Whose property are we guarding?” Also, is this really worth the lives of US sailors? If it is, why not hit the source of the problem — The Iranian spotter. The behavior of the French and Japanese makes sense to me. Biden’s behavior here does not.

Robert Buxbaum, February 6, 2024. Iran also funds and arms Hezbollah, a group that killed 3 US soldiers two months ago, and who killed several Kurdish allied troops in Syria just yesterday, and have shelled Israel intensely for months. IMHO, you want a few, well defended bases, not in harms way in Syria, but close enough to come back fast, in force.