Proceedings of the 7th International Conference on Economic Management and Green Development

DOI: 10.54254/2754-1169/38/20231917

Tesla and BYD Comparison Analysis

Yao Cheng1,a,*
1
Faculty of Business and Management, Beijing Normal University - Hong Kong Baptist University
United International College, Zhuhai, 519087, China
a. [email protected]
*corresponding author

Abstract: After centuries of development, the world automotive industry is embracing a new
wave of low-carbon transformation. The world is now facing a shortage of oil and energy and
air pollution. In this context, clean energy has become the main development concept of the
industry to replace fuel energy. This paper takes Tesla and BYD, the giants of the new energy
vehicle industry, as an example, provides a comparative analysis of their products, profits,
and R&D perspectives, and uses ratio analysis to analyze the two companies for investment
purposes. The study found that Tesla has stronger profitability and higher international
recognition. BYD is the second-largest new energy vehicle manufacturer in the world due to
its rapid growth in battery innovation. Tesla and BYD have good prospects for future growth.
Tesla and BYD are facing new opportunities and challenges in the new energy vehicle
industry, which is currently gaining momentum.

Keywords: new energy industry, BYD, Tesla, value investment

1. Introduction
1.1. Background
At present, in the world, a new round of technological revolution and industrial reform is developing
rapidly, and the related technologies in the fields of automobile and energy, transportation, infor-
mation and communication are being integrated faster. Electrification, networking and intelligence
have become the development direction and development direction of the automobile industry. With
the integration of new energy, new materials, the Internet, big data's new energy vehicles, artificial
intelligence and other transformative technologies, cars can be transferred from simple vehicles to
mobile intelligent terminals, energy storage units, and digital space, thus driving the transformation
and upgrading of energy, transportation, information and communication infrastructure, thereby im-
proving the optimization of energy consumption structure, transportation system and the intelligent
level of urban operation. In recent years, with the major automobile countries in the world strength-
ening the planning of new energy vehicles, new energy vehicles have become the main force in the
transformation and development of the global automobile industry, and it is also an important engine
to promote the sustainable development of the world economy.

© 2023 The Authors. This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0
(https://creativecommons.org/licenses/by/4.0/).

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1.2. Related Research

For Tesla, Long et al. used data from a survey of a representative sample of 2123 Canadian purchasers
to investigate overall consumer perceptions of vehicle brands and compared consumer perceptions of
the future development of vehicles for the study. The study found that forty percent of respondents
believed that Tesla would be better developed as a representative brand for the future of new energy
vehicles, and they believed that Tesla was more innovative [1]. Similarly, Dolbec and Fischer use
market research to examine how Tesla is driving the market for the electric vehicle industry. Innova-
tive entrants and other stakeholders were investigated about the changes in new market opportunities.
The study found that a shift in social perception from energy consumption to sustainability has driven
the development of Tesla's new energy vehicles [2]. In terms of technological innovation, Lehtinen
analyses the system innovations of Tesla Motors about electric vehicles. The study investigates how
Tesla has achieved disruptive innovation through systemic innovation and a major restructuring of its
business system. The study finds that Tesla has systematically innovated at the level of battery tech-
nology and the level of the finished car, resulting in disruptive innovation throughout the company
[3].
BYD, Wang and Zhang analyze the current state of development of cloud innovation in the new
energy vehicle industry and investigate the pattern of cloud innovation in innovation development
models. The study found that cloud innovation has significant advantages of low cost, and high effi-
ciency, and is an open innovation, and BYD has used cloud innovation to create a new operating
system [4]. Huckman and Maccormack use a comparative study to examine the development of
BYD's labor-intensive model in battery manufacturing. The sources of BYD's competitive advantage
in the marketplace are examined. The study finds that BYD has taken advantage of China's low labor
costs and is an industry leader in the integration of battery technology [5]. In the market research,
Pneva used a sample of Chinese consumers to study the level of acceptance of new technologies in
the automotive industry. The study found that while BYD was initially unsuccessful in attracting
Chinese consumers as the country's leader in electric vehicles, consumer acceptance of new energy
electric vehicles is increasing as new energy technologies develop and consumer perceptions change
[6].
According to the new energy vehicle industry policy, Gyrfi used a questionnaire survey of Chinese
consumers to examine the impact of subsidies on consumer purchases of electric vehicles. The study
found that China's mercantilist policy in the new energy vehicle industry, which heavily subsidizes
domestic private sector companies, and the fact that subsidies account for a large proportion of new
energy vehicle revenues, make new energy vehicle companies vulnerable to changes or subsidy pol-
icies [7]. In the government policy support, Zhang examines the Chinese government's support poli-
cies for the initial stages of new energy industry development by analyzing growth models and envi-
ronmental technology R&D decisions. The study finds that the Chinese government's industry sub-
sidy policies for new energy vehicles have stimulated innovation and increased the market share of
new energy vehicle manufacturers [8]. In the new energy vehicle market research, Xu conducted a
questionnaire survey of 285 4S car sales shop customers and driving school students to investigate
the factors that influence the decision-making of mobile buyers of new energy vehicles. The study
found that there are five main factors that consumers focus on after-sales service, cost of ownership,
quality, energy consumption, and peripheral factors. The lack of after-sales service and the lack of
vehicle safety protection are the main reasons why consumers do not choose new energy vehicles [9].
In addition to the factors that affect the purchase of cars, the paper also makes a comparative study
of the development strategies of cars in different countries. Zhang and Zhao investigated the differ-
ences in goal orientation between China and the United States through a comparative study of the
development strategies of the new energy vehicle industry in China and the United States. The study

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found that China develops new energy enterprises to boost total GDP, while the US develops a new
energy vehicle industry to reduce emissions and optimize air quality. The reason for the differences
lies in the different characteristics of the two countries' industrial players, which lead to different
motivations [10].
1.3. Objective
This paper focuses on product analysis of Tesla and BYD, exploring the selling prices of their product
ranges and finding the price strategy and sales gap between the two companies. It also compares the
product ranges of the two companies and compares and analyses the marketing strategies of the two
companies. In terms of investment decisions, this paper analyses the net profit, current assets, current
rate, and return on equity of BYD and Tesla, and compares the data to analyze the profitability and
solvency of the two companies to help investors in their investment decisions.
2. Company Product Perspective
2.1. Product Prices
Tesla currently sells four main types of products are shown in Table 1.

Table 1: Tesla product introduction.

Product Price Speed 0-100 acceleration capability Endurance
Roadster $195,300 402km/h 1.1s 1000km
Model S $120,000 320km/h 2.1s 719km
Model X $126,500 250km/h 3.9s 605km
Model Y $41,990 217km/h 5.1s 660km
Model 3 $98,950 225km/h 5.6s 550km

The first car developed by Tesla was the Tesla Roadster, an all-electric sports car based on the
British Lotus Evora, which was the first car to use lithium-ion batteries and the first electric car to
travel over 200 miles on a charge.
The Model 3 is the world's best-selling new energy vehicle, with 3,124,000 units delivered world-
wide. The Model Y, Tesla's best-selling SUV, is due for release in 2019. The Model X is the world's
fastest SUV, with three electric motors on its body. The Model S, Tesla's main luxury model, was
released in 2009 and caused a worldwide craze for electric cars as soon as it was issued.
BYD sells its products in two series - Dynasty and Ocean are shown in Table 2.

Table 2: BYD dynasty series product introduction.

Product Price Speed 0-100 acceleration capability Endurance
BYD-Tang $43,000 180km/h 4.3s 500km
BYD-Qin $19,830 180km/h 5.9s 400km
BYD-Yuan $19,800 180km/h 8.5s 305km
BYD-Han $38,000 240km/h 3.9s 550km
BYD-Song $19,830 150km/h 9.96s 405km

The BYD Dynasty series, named mainly after Chinese dynasties, was launched with the BYD-
Tang, BYD-Qin, BYD-Yuan, BYD-Han, and BYD-Song. The BYD-Tang and BYD-Han are BYD's

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mid-range models. The BYD-Qin, Yuan, and Song are the three-lower-end BYD models, as shown
in Table 3.

Table 3: BYD ocean series product introduction.

Product Price Speed 0-100 acceleration capability Endurance
BYD-Sea Gull $10,500 130km/h 5.9s 305km
BYD-Sea Seal $36,000 180km/h 3.8s 550km
BYD-Dolphin $18,000 150km/h 7.5s 405km
BYD-destroyer 05 $21,000 200km/h 7.3s 1200km
BYD-frigate 07 $28,500 240km/h 4.7s 1200km

The BYD Marine Series, named primarily after marine animals, is available as BYD-Sea Gull,
BYD-Sea Seal, and BYD-Dolphin.
BYD-Sea Gull and Dolphin are BYD's low-end models. BYD-destroyer 05 and Frigate 07 are
BYD's mid-range models. BYD-Sea Seal is BYD's high-end car.
As can be seen from the product prices, the BYD car price positioning is geared towards the low
to mid-range consumer segment, while Tesla's prices cover a wide range of products that are mainly
geared towards the mid to high-end consumer segment.
Tesla and BYD occupy the first and second places in the global new energy market. However, the
sales gap between BYD and Tesla is huge, with Tesla holding the top spot in the new energy market.
The above comparative analysis shows that Tesla's brand recognition remains the highest in the world
and that its new energy vehicle products are the best sellers in the world.
2.2. Product Marketing Strategy
Tesla's strategy as a leader in new energy vehicles is to first develop high-performance electric sports
cars such as the Roadster to establish a brand effect, followed by mid- to high-end models such as the
Model X and mass production, and eventually by economical models for the mass market such as the
Model S for maximum profit. Tesla Motors has had a very high brand value since its inception, thanks
to the personal charisma and unique aura of CEO Musk. Tesla's brand communication does not rely
on advertising but on social media communication, for example, using social media to discuss the
topic after the launch of the Model 3, with over 300,000 orders booked in the first week.
BYD, a giant in China's new energy vehicle industry, has developed several new vehicles in recent
years with Chinese elements in their names, such as BYD-Qin, Tang, Song, and Yuan. Its objective
has shaped the cultural confidence and brand ethos of the Pinnacle brand. The low-price strategy it
has carried out is an important competitive advantage. The price/performance ratio of the products is
more advantageous in low and mid-range cars. Its brand communication relies heavily on the place-
ment of advertisements and social media, the
There are significant differences between Tesla's and BYD's product marketing approaches. Tes-
la's product and brand effects have entered a mature stage, BYD's competitive strength is in the mid-
dle of the pack, its market influence and product influence perform better, and its market growth
potential is greater, but its sustainability and international influence are slightly inferior compared to
Tesla.

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3. Financial Analyses
3.1. Corporate Profitability
BYD: China's automobile industry will face a series of serious problems in 2022: insufficient supply
of domestic chips, high cost of raw materials, slowing down on the supply side and suppressing de-
mand for cars. In the face of difficulties and hardships, the Chinese authorities have introduced a set
of new measures to promote the consumption of cars. The company has achieved its best performance
since its inception, while BYD has worked with other manufacturers to ensure the production and
delivery of its products. In terms of new energy buses, BYD has achieved a rapid increase in net profit
through technological innovation and application. And technological innovation is the fundamental
driving force to promote the company's high-quality development, led by pure electric and plug-in
hybrid, represented by "blade battery", "DM-i super hybrid system" and "e-platform 3.0", promoting
the company's technological progress in the field of new energy. In the field of secondary batteries,
we will continue to conduct in-depth research to make our technology development at the forefront
of China. This year, the company's product research and development and capacity improvement
have made great progress, helping the company to achieve steady growth in the traditional battery
field, but also helping the company in the field of storage development. as shown in Fig. 1.
3

0
2019 2020 2021 2022
Net Profit 0.23 0.6 0.44 2.38

Figure 1: Net profit-BYD (Unit: Billion).

Tesla: In 2022, Tesla achieved an operating margin of 16.8%, doubled net profit, led the global
automotive industry strongly, and a new delivery record of 1.31 million units was unmatched in the
electric vehicle segment. the fourth quarter of 2022 was Tesla's 14th consecutive profitable quarter,
achieving the highest single-quarter earnings, highest operating income, and highest net profit ever.
In 2022, despite challenges such as increased raw material, commodity, logistics, and warranty
costs, as well as higher 4680 battery production costs and capacity creep at its two new Gigafactory,
Tesla achieved a significant increase in electric vehicle deliveries, as well as growth in its other busi-
nesses, resulting in industry-leading operating margins that stood out in a sluggish car market.
Tesla has invested a lot of money in production and technology, more money than other fuel ve-
hicle companies. The income from R&D investment will reduce production and operating costs.
Thanks to Tesla's innovative production process, which is economical and efficient, Tesla's new gen-
eration of products will be launched at a record price on the Chinese mainland in January 2023, mak-
ing all-electric vehicles more acceptable to the public.
Both Tesla and BYD have seen a spurt of growth in sales in 2022. Although both manufacturers
are facing rising raw material prices and chip shortages, both manufacturers have achieved production
growth through their ability to innovate. Although BYD also achieves significant growth in 2022, its

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production scale and sales volume are a far cry from Tesla. Tesla's brand recognition and profit mar-
gins are much higher than Tesla's, resulting in a gap in profits between the two companies, as shown
in Fig. 2.
15

10 12.59

8.88
5
5.55
3.28
0
2019 2020 2021 2022
Net Profit 3.28 5.55 8.88 12.59

Figure 2: Net profit-Tesla (Unit: Billion).

3.2. Ratio Analysis

Return on Equity: Fig. 3 shows that the profitability of Tesla's ownership interest is weaker in 2019
and 2020, and BYD is in a slow growth position. In 2021, Tesla's ROE metric already exceeds BYD's,
and Tesla's ability to earn net income exceeds BYD's. In 2022 BYD and Tesla see a spurt of growth
and a substantial increase in earnings.
BYD Tesla

40

20

0
2019 2020 2021 2022
-20

Figure 3: ROE comparison (Unit: Percent).

Current ratio: Fig. 4 reveals that Tesla's ability to repay its debt is stronger than BYD's ability to
repay its debt and has higher asset security. BYD's quick ratio, on the other hand, gradually decreases
each year to reach 0.72 in 2022, decreasing the company's ability to repay its debt and decreasing the
safety of investors' assets.
BYD Tesla

0
2019 2020 2021 2022

Figure 4: Current ratio comparison.

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4. Value Investment Judgement

4.1. Research and Development Investment
Fig. 5 shows the R&D investment costs of Tesla and BYD. The comparison shows that Tesla's R&D
investment is much higher than BYD's. This means that Tesla focuses on improving the company's
innovation ability and invests a lot of money and effort to develop new products, technologies, and
services every year, thus improving the company's competitiveness in the market. Tesla spends a lot
of R&D expenses on improving electric vehicle technology as well as battery management systems,
thus reducing production costs and helping the company to expand and achieve profit growth.
The increase in R&D investment can also help Tesla to improve the efficiency of production fac-
tors, reduce expenditure links and gain a larger market share in the new energy vehicle industry. BYD
has a lower level of innovation compared to Tesla, but the growth rate of R&D investment is higher
and still has a strong competitiveness in the market. In contrast, the investment value of Tesla is
higher than that of BYD, and investors can reap more returns through the growth of the company's
innovation capability.
40
30
20
10
0
2019 2020 2021 2022

Tesla BYD

Figure 5: R&D expenses comparison (Unit: Billion).

4.2. Earning Capacity

The profitability of a company is an important indicator for investors to choose an investment. In
2022, the new energy industry is affected by the chip, supply chain, and rising raw materials, Tesla
still achieved 81% year-on-year growth in the first quarter to $18.756 billion; a total gross profit of
$5.460 billion, up 147% from $2.215 billion a year earlier, with a gross margin of 29.1%. This means
that for every Model 3 Tesla sells, it earns a gross profit of more than $13,000. In 2023, the price of
model 3 and model Y in China once fell, further stimulating consumers' desire to buy. Tesla's average
inventory cycle shrinks to three days, which shows that Tesla has almost no inventory, new cars are
delivered upon arrival, and no car company can make more money than Tesla.
BYD's total vehicle sales in 2022 are 1.86 million units. Net profit is $2.426 billion and net profit
per vehicle is $1,284.3 per vehicle. BYD is close in sales compared to Tesla. But the net profit per
vehicle is much different compared to Tesla. BYD's main profit comes not only from car sales but
also from national new energy subsidy income and battery sales. From the perspective of product
profitability, Tesla is more profitable and can bring more returns to investors.
4.3. Future Development Prospects
Tesla is currently the number one manufacturer in the electric vehicle industry. With China's strong
support for the new energy vehicle industry, the outlook for the new energy vehicle market is getting
better and better. The problem Tesla is currently facing is not a lack of demand, but a lack of produc-
tion capacity. In the future, the first point of Tesla's main direction lies in expanding its production

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capacity. With the further increase of Tesla's production capacity, the price of Tesla may be reduced
accordingly in the future, thus creating more demand and consolidating its role as an industry leader.
The second point is to develop new energy technologies and equipment, through the development of
more advanced energy technologies and equipment to improve production efficiency, reduce costs
and improve profit margins. The third point is to adopt a diversified operating model, Tesla plans to
work in 2023 to achieve the transformation and upgrade from a car manufacturer to an integrated
operator in the new energy sector, not only relying on its single-car products, to reduce market risk
and better respond to market changes.
The problem BYD is currently facing is the lack of international market recognition. The compa-
ny's future development will focus on the first point to increase investment in research and develop-
ment of new energy vehicle technology, such as battery technology, drive system, and other aspects
of innovation. The second point is to accelerate the international development process. BYD plans to
form an industrial layout with three major business sectors, namely electric vehicles, rail transporta-
tion, and batteries and will expand and promote its brand in Europe and South America to enhance
the international recognition of its brand.
BYD and Tesla's development prospects are generally in a positive form, which enhances inves-
tors' confidence and helps companies attract more investors.
5. Conclusion
This article has examined the R&D investment, profitability, and prospects of Tesla and BYD for the
period 2019-2022. By comparing the two companies, the study finds that Tesla has a higher share of
R&D investment, higher returns through improved electric vehicle technology, and higher growth in
innovation than BYD. In terms of profitability, Tesla's average profit per vehicle is much higher than
BYD's, but BYD's main sources of profit are national new energy subsidies and battery sales, so from
a product perspective alone, Tesla's profitability is stronger. Tesla is facing a shortage of production
capacity in the future, and Tesla should focus on improving production efficiency in the future to
drive up production capacity. BYD is facing the problem of low brand recognition in the future, and
its future development should focus on promoting its brand and going global to enhance international
recognition.
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