Following on and expounding upon Monday's "Chinese EV Stocks Tumble After BYD Slashes Prices Up to 35%".
From ZeroHedge, May 29:
"Race To The Bottom": BYD Price Slashing To Prompt Chinese EV Consolidation
BYD’s aggressive discount campaign is shaking up China’s EV market, pushing rivals to slash prices and raising concerns of an industry-wide “race to the bottom,” according to Nikkei Asia.
Since January, BYD has launched repeated limited-time offers. Its latest, running through June, cuts prices by up to 34% across 22 EV and hybrid models, with its Seagull now starting at just $7,700. Morningstar’s Vincent Sun said investors are worried this signals a prolonged price war. “I believe sales targets are the main driver behind this,” he said.
BYD aims to sell 5.5 million vehicles in 2025, including 800,000 overseas. But its stock fell over 8% Monday and continued sliding Tuesday after the discount news.
Great Wall Motor chairman Wei Jianjun hinted at growing debt in the industry, saying, “The Evergrande of the automotive industry already exists; it just hasn't collapsed yet.” Many believe he was referring to BYD, whose debt ratio stood at 70.7% in March. BYD’s Li Yunfei appeared to hit back with a cryptic social media post: “A dog can bite a person! But a person cannot bite a dog!”
Nikkei writes that other carmakers quickly followed BYD’s lead. Geely’s Galaxy brand launched deals with discounts up to 20,000 yuan, while Changan and Leapmotor also cut prices. Rising inventories are partly to blame—China had 3.5 million unsold vehicles in April, a 57-day supply, the highest since late 2023. BYD alone reported 154.4 billion yuan in inventory, up 33% from the previous quarter....
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Our out-the-door comment on October 2024's "Chartology — Breakout or Breakdown: Tesla (deliveries reported tomorrow, robotaxi etc.) TSLA":
One quibble. The line "Tesla has relied on price cuts since late 2022..." reads like a bad thing but the fact of the matter is that the entire industry has been cutting prices and Tesla getting out in front of that reality has kept them competitive in the battery-electric-vehicle business.
As we've been saying for quite a while now, Mr. Musk saw something a couple years ago that led him to a) the price cuts and production efficiencies that are proving crucial to survival in not just EV's but in the wider automobile market as well. Volkswagen talking about possibly laying off 30,000 of their German employees was inconceivable five years ago. And b) whatever it was he saw also led to the emphasizing of things they been working on for a decade: robotaxis and AI and supercomputers and robots.
So, for patient reader, having read this far, here's my two cents worth:
Deliveries will be in-line this month and the next few months and the robotaxi unveil will be written up as a bust. The people who write the headlines hate Elon Musk and nothing he does will ever, ever change that. The financial question is: will the self-driving taxis be contributing to sales and earnings in two years?
Based on the fact that Waymo is now booking 100,000 rides per week I think the answer is yes but your mileage may vary. To repeat the comment on the April earnings call transcript:
Earlier in 2024:Personally I think Musk is going to pull it off, but that's just me—perhaps informed by posting on the company and its stock since before the June 2010 share flotation (which, adjusted for the 5:1 and 3:1 stock splits gives a $1.133 IPO price)—however, there are plenty of other opinions to choose from if one doesn't care for that one....
"Biden slaps tariffs on nonexistent Chinese EV imports"
*****
....And that is why Elon Musk was so focused on the cost-cutting that allowed the price-cutting that kept Tesla competitive for the last eighteen months.In January 2023 this bit of nonsense was making the rounds:
Tesla is about to experience the seven perils of discountingIt went in the same folder as 2015's:
Tesla's Battery: No Thanks
One more, also 2024:
"Tesla’s in China – It’s just a question of how long" (TSLA)
The writer appears to think Mr. Musk is a naïf or even a Candide, blissfully unaware that all may not be for the best in this best of all possible worlds.
Wrongo, Bucko. Musk has a minor depression, possibly akin to Churchill's “Black Dog” that leads him to catastrophize worst case scenarios without succumbing to the debilitating effects (learned helplessness, hopelessness, suicide) you'd look for in a victim of a major depression.
He would be a good risk manager. The ketamine probably helps.....
and the outro:
As Intel's Andy Grove famously said:
Mr. Musk has his blind spots but China sneaking up on Tesla probably isn't one of them. He knows that Western companies will eventually lose the battle for electric vehicle dominance and something that he saw sometime in the last couple years seems to have scared him into action on the fronts where Tesla has a competitive advantage: access to some truly brilliant people; artificial intelligence facilitated by a long history with Nvidia and autonomous vehicles.
So again, we wish him luck, and think he'll succeed but this stuff is serious business.
Again, we wish him luck.
