Say what you want about the guy up top these days—and there's plenty to say—this has been an objectively excellent year for Tesla. Even without all the hype it got from the Cybertruck, it was still far and away the leader for EV sales in the U.S., Europe and beyond. But arguably Tesla's greatest rival is about to pull into the passing lane for 2024.
Welcome back to Critical Materials, your morning roundup of auto industry tech and electrification news. You could've been anywhere in the world, but you're here with me, and I appreciate that. Also on tap for today's roundup: investors are as sick of public charging companies as you probably are, and what we're expecting from CES 2024 with an "uncertain" EV market ahead. Let's get started.
30%: BYD Closes In On Tesla
It took South Korea's Hyundai about 40 years to go from building absolute junk to selling some of the world's very best cars. Now, it seems like China's BYD has done the same thing in roughly half the time.
The battery giant went from acquiring a failing state-owned car company in the early 2000s to seemingly being poised to overtake Tesla as the leader in worldwide electric vehicle sales.
(A quick point of order: avid BYD-watchers in the West may know that the company, like many Chinese automakers, often counts plug-in hybrids as "electric vehicles," whereas we draw a harder line between the two. That isn't what we're talking about here. We're talking fully-electric car sales, no internal combustion engines, full stop.)
These trends are highlighted in a new report from Bloomberg, which stresses how BYD leads the charge—pun sort of intended—for a rising Chinese auto industry that aims to take the world by storm. And it's not doing this with gasoline-powered cars.
That story says Tesla sold just 3,456 more EVs globally than BYD in Q3, and when Q4's results are in, it's very likely that it will have stolen the American company's sales crown. It also offers more models than Tesla does and at lower prices. While BYD is making cautious inroads into Europe for now (probably not without some kind of tariff fight) and it's stuck in "wait and see" mode for U.S. sales, the sheer volume of EVs that the company sells in China alone makes up the difference:
The passing of the EV sales crown also reflects the shift in competitive dynamics between Tesla’s Elon Musk, the world’s richest executive, and BYD’s billionaire founder Wang Chuanfu.
Whereas Musk has been warning that not enough consumers can afford his EVs with such high interest rates, Wang is firmly on the offensive. His company offers half a dozen higher-volume models that cost much less than what Tesla charges for its cheapest Model 3 sedan in China.
When a Tesla owners’ club shared a clip in May of Musk snickering at BYD’s cars during a 2011 appearance on Bloomberg Television, Musk wrote back that BYD’s vehicles are “highly competitive these days.”
The likely change in the global EV pecking order marks the realization of a goal that Wang, 57, set back when China was just starting to foster its now world-beating electric car industry. While BYD continues to pull away from Tesla and all other auto brands at home, replicating its runaway success abroad is proving tricky.
Europe looks poised to join the US in slapping Chinese car imports with higher tariffs to shield thousands of manufacturing jobs. Other countries’ EV markets are still in their infancy and aren’t nearly as lucrative. Management views the US as virtually off-limits due to the escalating trade tensions between Washington and Beijing.
That story also notes that China is about neck-and-neck with Japan in export volume this year. Again, awfully impressive when you consider how much Chinese cars are limited in some of the world's biggest markets, like the American one.
It also sheds some light on why Warren Buffett's Berkshire Hathaway Inc. made some early bets on BYD that are now paying off handsomely. I did not know this:
The late Berkshire Vice Chairman Charlie Munger saw BYD primarily as a battery play. On Bloomberg TV in May 2009, he said the company was working on “one of the most important subjects affecting the technological future of man.” Munger’s family had invested in the company years ahead of Berkshire, and he told an interviewer weeks before his death in November that he had tried to dissuade Wang from getting into the car business.
“BYD was a miracle,” Munger told the podcast Acquired in an episode that aired in October. He called Wang a genius, saying he kept the company from going broke by working 70-hour weeks, and described him as a fanatical engineer. “The guy at BYD is better at actually making things than Elon is,” he said.
As that story notes, "Tesla still has BYD beat on key metrics including revenue, income and market capitalization." And obviously, Tesla is still dominant in the U.S., Europe and other markets.
But I'm convinced the lack of a Chinese automaker presence in our market is a temporary situation at best. Capitalism, even their brand of it, finds a way, and if BYD and the rest can make well-priced EVs with great specs that undercut most competitors, it's going to be a headache for not just Tesla but General Motors, Toyota, Volkswagen and the rest.
60%: Investors Are Also Sick Of Public Charging
For the last 20 years or so, we saw VC firms willing to throw almost endless amounts of cash at various startup companies in hopes that "scale" would somehow translate to big profits one day; call it Facebook, Amazon and Tesla FOMO. That approach doesn't work in the current capital environment when interest rates are much higher; it turns out you can't run the economy off free money forever.
Now that investors are more focused on profits than ever, the multitude of EV charging companies out there aren't exactly winning them over, reports the Wall Street Journal. These are capital-intensive operations plagued by the "chicken and egg" problem with plugs and EVs, and profits are still far off.
ChargePoint Holdings shares have tumbled 74% this year, and the company missed initial revenue projections for the third quarter. Blink Charging shares have dropped 67%, while EVgo is down 21%, and both project annual losses.
The charging providers don’t expect to turn profitable for about a year and face the prospect of EV market leader Tesla opening much of its popular charging network to other drivers starting in 2024. The blistering pace of U.S. sales growth for EVs has moderated. Some charging executives say they are running into challenges that include customer unease about the direction of the economy, higher costs and delayed deliveries of EVs to fleet customers.
Companies say that with more EVs hitting the road, their chargers are in use more steadily—an important metric for the burgeoning industry. However, selling jolts of electricity to drivers still isn’t a moneymaker because of relatively low use rates.
“I think the investor class has grown weary of the industry’s lack of profitability,” said Blink Charging’s chief executive, Brendan Jones, who added that charging stocks had previously frothy valuations.
As that story notes, the Administration Biden seeks to have 500,000 public chargers in the ground by 2030; McKinsey estimates we'll actually need three times that if 50% of new car sales are EVs by then. Right now, America has about 159,000 public charging ports as we close out this year.
The good news is that the number is still growing quickly. And while my InsideEVs colleagues and I aren't convinced that opening up Tesla's Supercharger network and plugs to the rest of the industry will be some magic bullet to fix our charging woes, it will help.
Most industry experts believe we'll see a great deal of consolidation in 2024 and beyond. (Anyone who's sick of having two dozen charging apps on their phone will probably be fine with that.) And the automakers are finally stepping up and paying for charging networks too. But some businesses are getting cold feet:
Places such as offices, restaurants, hotels and shopping centers that might offer EV charging as an amenity are holding back on installing equipment amid questions about the economy, Rick Wilmer, ChargePoint’s newly appointed CEO told analysts this month.
“I think we’re seeing this viewed as a discretionary purchase and the CFOs of the world are being cautious with discretionary purchasing,” he said about chief financial officers.
“It’s easier to get vehicles into people’s hands than it is to get chargers into the ground,” one executive said. And that says a lot.
90%: Software Takes Center Stage At CES 2024
In recent years, arguably the most important live "auto show" has been CES, the annual tech conference in Las Vegas. Last year, Stellantis, BMW, Volkswagen, Sony Honda Mobility Afeela (whatever happened to those guys?) all had big debuts at the show.
Next year's CES—which is just a few weeks away—is expected to be a little smaller, as automakers probably get a little more conservative on EVs after the ups and downs of the market. Mercedes-Benz will be on hand and Honda has a big presentation about its future electric lineup.
Beyond those automakers, the big focus may be on software, reports Automotive News. Here are some examples:
Continental will be displaying evidence of its growing software capabilities this year. Its booth will include a vision for a "road-to-cloud ecosystem" and illustrate how the supplier can provide a "full-stack architecture solution" for software-defined vehicles, Continental said on its website. It also plans to show off smart cockpit capabilities and new displays that can help shape the "mobility experience of the future."
The company will also show off new offerings in safety and autonomous driving, including automated valet parking and the logistics related to it, and new results from its partnerships with Ambarella on automated driving systems and with Aurora for self-driving trucking systems.
And another story on how we'll see less AI news this time too, as that technology also faces a cooling-off period after some hilariously unrealistic expectations this year:
High interest rates, tighter capital access and a general impatience among investors and customers have changed things. Expectations for automotive AI have come back down to earth.
"We are now in a reality check environment," said Rashid Galadanci, CEO of Driver Technologies, which makes a dashcam mobile application that monitors the road for hazards and the driver for drowsiness and distraction.
The huge funding days of 2020 and 2021 based on "big, hairy, audacious goals" are gone, he said.
None of this stuff—the industrywide shift to EVs, autonomy, AI and software-defined vehicles—is going anywhere. It's just taking a bit longer than most expected.
100%: Where Do You Want To See More EV Chargers?
If you ask me, I just want them in more regular, ordinary parking lots. Even the slower Level 2 kind. Those are extremely underrated in the EV space. If you're parked somewhere, it would be nice to have the option to add some electrons, right?
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