Tesla cut its prices in China to reclaim lost ground... but this move backfired and instead sparked a price war.
👉 Background: BYD, which stands for Build Your Dreams, is a Chinese electric car maker founded 20 years ago. It is Tesla's #1 competitor in China and counts Warren Buffett as one of its largest investors.
👉 What happened: Last year, Tesla cut its car prices in China to reclaim lost ground in the Chinese market. But this move backfired and instead sparked a price war between BYD and Tesla. Chinese consumers responded by opting for cheaper, newer models of BYDs.
👉 What else: This year, Chinese carmakers are on track to sell more cars than their foreign rivals for the first time ever. And it’s all thanks to BYD’s vertically integrated structure.
💡A home ground advantage is a major competitive advantage. BYD has managed to appeal to consumers through low prices and a sense of patriotism.
💡Since China mines two-thirds of the world’s rare earth metals (think: lithium, to batteries, and chips), it is able to keep prices low.
💡So, Tesla somehow needs to to back away from its dependence on China’s supply chains. And with BYD’s first-quarter sales predicted to increase by 80%, Tesla could be in for even more pain.
Sign up for Flux and join 100,000 members of the Flux family
