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Tesla didn’t lose to BYD because of cheap cars. It lost to better economics
Updated on: January 07, 2026 7:49 AM
Sam Bourgi
View attachment 170781
China’s BYD has taken the global crown in electric vehicles from Tesla, but the headline sales figures only hint at what’s really going on.
A closer look at the numbers reveals two very different businesses — and a growing long-term challenge for Tesla.
As InvestorsObserver reported, BYD sold roughly 2.2 million battery electric vehicles last year, comfortably surpassing Tesla’s 1.7 million and making it the world’s largest pure-play EV maker.
Those top-line figures, however, don’t tell the full story.
Despite selling cars at roughly half Tesla’s average selling price, BYD earns about the same gross profit per vehicle. That distinction matters far more than revenue or unit sales in a capital-intensive industry like automobiles.
Over time, it’s profit per unit, not price, that determines strategic power.
In other words, BYD isn’t winning by flooding the market with cheap cars and thin margins. It’s winning by building vehicles far more efficiently.
That efficiency creates a serious problem for Tesla. If BYD generates Tesla-like gross profit on much lower-priced vehicles, it has far more room to cut prices, expand into new segments, or absorb industry downturns without damaging its financial position.
In a price war, BYD can attack Tesla’s core price bands without sacrificing profitability, while Tesla has far less margin for error.
The dynamic was recently highlighted by entrepreneur and venture capitalist Glenn Luk, who co-founded Healthcare.com.
“That means BYD has double the gross profit to reinvest back into R&D, capex, marketing, and distribution,” Luk wrote, “and this is before accounting for the four-to-five-times difference in nominal per-employee costs.”
The implication is clear. BYD’s cost structure gives it excess cash flow that can be reinvested not just to defend the low end of the market, but to build and scale higher-end sub-brands, without ever needing to charge Tesla-level prices.
That’s the real reason BYD’s rise matters. It’s not just outselling Tesla today — it’s building a financial and operational advantage that compounds over time.
BYD’s competitive position strengthens
BYD’s explosive growth has come with one notable absence: the United States. Even without operating in one of the world’s largest auto market, the Chinese automaker has still managed to surpass Tesla on the global stage.
BYD isn’t subject to a literal ban in the United States. However, a combination of steep import tariffs, regulatory hurdles, and vehicle certification requirements has effectively made the U.S. passenger car market commercially unviable for the company.
In 2024, BYD said it had no plans to enter the U.S. market, choosing instead to prioritize expansion across other regions, including Europe, Latin America, and parts of Asia.
Tesla, by contrast, has struggled to gain momentum in BYD’s home market of China. Tesla’s China sales totaled 531,855 vehicles in the first 11 months of 2025, putting the company on pace to fall well short of its full-year 2024 deliveries of 657,105 in the country.
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Tesla didn’t lose to BYD because of cheap cars. It lost to better economics. | Investorsobserver
BYD sells EVs for half the price, earns the same profit, and is quietly building a financial machine Tesla may not be able to outrun.investorsobserver.com
carnewschina.com
Same for Tesla, EV competition is fierce, but all driven by Chinese brands.um the picture isnt exactly all rosy for BYD
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BYD sold 4.6 million cars in 2025, but outlook for 2026 weakens
BYD sold 414,784 cars in December, the fourth consecutive month of decline.carnewschina.com
BYD sold 4.6 million cars in 2025, but outlook for 2026 weakens
BYD sold 414,784 passenger vehicles globally in December, down 18.6% from the same month last year and down 12.7% from November. This is the fourth month of consecutive year-over-year decline. Overseas sales reached record-breaking 133,172 vehicles in December, up 133% from last year.
In December, BYD sold 190,712 battery electric vehicles (BEVs), down 8.2% from the same month last year (YoY). It is the first YoY decline in 2025 and only the third YoY decline in all-electric vehicle sales in the previous five years (the second was in February 2024 due to CNY, and the third in July 2024, otherwise there was only YoY growth since 2021).
BYD also sold 224,072 plug-in hybrid vehicles (PHEVs), down 25.7% year over year. This is the ninth consecutive month of PHEV sales decline, which started in April.
BYD ceased ICE-only vehicle sales in April 2022, focusing only on BEVs and PHEVs.
Note: We track passenger vehicle sales only; together with commercial vehicles and buses, sales are a bit higher – 420,398 units in December and 4,602,436 in 2025.
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Editor’s comment
Nothing grows forever, and BYD just learned that. BYD’s initial annual target was 5.5 million, with some speculation that it could reach 6.5 million at the beginning of the year. This was corrected to 4.6 million targets in September, which BYD somehow reached.
But 2026 is gonna be even more challenging for the largest Chinese NEV maker. The domestic sales are falling (BYD brand was 35% down in China in November, and it is expected that it will be down over 10% in 2025) as the Chinese government now scrutinizes their primary weapon of massive discounts, and dozens of other EV makers have proved to provide fair enough budget EVs (Geely and Leapmotor are celebrating). Folks in Shenzhen know that their 2026 performance will heavily depend on overseas markets and whether they will be able to continue winning hearts (and wallets) of buyers outside China. We will keep an eye on that.
And BYD is not the only EV maker China hasum the picture isnt exactly all rosy for BYD
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BYD sold 4.6 million cars in 2025, but outlook for 2026 weakens
BYD sold 414,784 cars in December, the fourth consecutive month of decline.carnewschina.com
BYD sold 4.6 million cars in 2025, but outlook for 2026 weakens
BYD sold 414,784 passenger vehicles globally in December, down 18.6% from the same month last year and down 12.7% from November. This is the fourth month of consecutive year-over-year decline. Overseas sales reached record-breaking 133,172 vehicles in December, up 133% from last year.
In December, BYD sold 190,712 battery electric vehicles (BEVs), down 8.2% from the same month last year (YoY). It is the first YoY decline in 2025 and only the third YoY decline in all-electric vehicle sales in the previous five years (the second was in February 2024 due to CNY, and the third in July 2024, otherwise there was only YoY growth since 2021).
BYD also sold 224,072 plug-in hybrid vehicles (PHEVs), down 25.7% year over year. This is the ninth consecutive month of PHEV sales decline, which started in April.
BYD ceased ICE-only vehicle sales in April 2022, focusing only on BEVs and PHEVs.
Note: We track passenger vehicle sales only; together with commercial vehicles and buses, sales are a bit higher – 420,398 units in December and 4,602,436 in 2025.
![]()
Editor’s comment
Nothing grows forever, and BYD just learned that. BYD’s initial annual target was 5.5 million, with some speculation that it could reach 6.5 million at the beginning of the year. This was corrected to 4.6 million targets in September, which BYD somehow reached.
But 2026 is gonna be even more challenging for the largest Chinese NEV maker. The domestic sales are falling (BYD brand was 35% down in China in November, and it is expected that it will be down over 10% in 2025) as the Chinese government now scrutinizes their primary weapon of massive discounts, and dozens of other EV makers have proved to provide fair enough budget EVs (Geely and Leapmotor are celebrating). Folks in Shenzhen know that their 2026 performance will heavily depend on overseas markets and whether they will be able to continue winning hearts (and wallets) of buyers outside China. We will keep an eye on that.
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“A License to Print Money”: Tesla Stock (NASDAQ:TSLA) Notches Up as Lithium Refinery Goes Live - TipRanks.com
It is no secret that electric vehicle giant Tesla ($TSLA) requires lithium to live. Lithium is a key component in electric vehicle batteries, which require a sort o...www.tipranks.com
“A License to Print Money”: Tesla Stock (NASDAQ:TSLA) Notches Up as Lithium Refinery Goes Live
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Tesla launches robotaxi rides without a human chaperone in Austin
A Tesla executive said the company has removed human supervisors for some rides. It comes 10 months after Waymo offered its self-driving competitor.www.businessinsider.com
Tesla launches robotaxi rides without a human chaperone in Austin
@F-22Raptor
@AZ_HighCountry
@Davey Crockett
@Get Ya Wig Split
Many..many..many..many years in the making gentlemen
2016
Looking forward to the first lost robotaxi to come up to NE Oklahoma with about an hour charge left.
Last summer had to break the news to a lady driving a Tesla, running low, the nearest charging station may be up in Independence, Kansas.
But if she can't get there, be very nice to a cattle rancher who may let her charge at a ranch along the way.
Unless a woman overrides it and ends up at my truck stop with a low battery in Oklahoma?Won’t happen unless a traffic jam or somebody jacking up the A/C or heating. The car is smart enough to calculate the power needed to get to and back from somewhere. If it can’t it will just decline the ride.

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