BYD is the real protagonist in the auto industry, not Tesla

The global auto industry heads into unprecedented times with Q2 financial results showing a new shocking reality. According to the financial statements published by 28 OEMs around the world, both revenue and operating profits fell by 40% and 163% respectively. The most relevant part of this story is that for the first time in history, a Chinese OEMs topped the operating margin ranking.

BYD, the most profitable

BYD, the fourth largest Chinese carmaker*, recorded the highest operating margin among 28 OEMs around the world. With more than €653 million in operating profits, the EV maker registered an increase of 65% in Q2 2020 compared to Q2 2019. Its margin jumped from 11% in Q2 2019 to 14% one year later.

BYD achieved this important milestone despite the fact that it was the 22nd biggest car maker by units sold during the same period. Therefore it is even more remarkable.

BYD has based its rapid recovery on boosting its pure electric cars, which have become more appealing and have grabbed an important piece of this market. They have also helped to improve the profitability.

Tesla sells less, but earns more

Tesla was another protagonist during the second quarter. Its unit sales fell by 5% as a consequence of a shut down in production, but also because of higher competition in Europe and China. Tesla Model 3, Tesla Model S and Tesla Model X are now facing more competitive and appealing rivals than in the past.

Despite the drop in volume, Tesla earned more than €291 million in Q2, improving its profitability margin by 8 percentage points, the highest positive variation among the 28 OEMs. Tesla is rapidly improving its profitability thanks to the new products, better presence in China and Europe, but it will be hard to keep such a positive trend once consumers have more choices from other more popular or premium brands.

Actually, BYD is the best example of this. Financially speaking, it is very similar to Tesla with very similar sales volumes. However, BYD was by far more profitable than Tesla in Q2, with its operating margin more than doubling Tesla’s. The different impact of the pandemic in Q2 between China and the rest of the world explain part of the gap between these two companies.

The industry lost €13.85 billion in Q2

The second quarter was probably the toughest in the history of the motor industry. Combined operations of the 28 OEMs included in this analysis** showed operating loses of €13.85 billion in Q2, compared to €21.97 billion in profits in Q2 2019. Revenue dropped by 40% to €273.42 billion.

The situation was so bad that 17 out of the 28 OEMs reporting results showed loses during the quarter. In Q1 2019 only 6 OEMs lost money. The remaining question is: if many of the car makers did not resist this drop (many of them increased their debt in order to operate), how will they do when the CO2 regulations come into force?

*Excludes all the OEMs that also produced for foreign makers

**The data comes from the financial statements of Aston Martin, BMW, BYD, Daimler, FCA, Ferrari, Ford, GM, Great Wall, Honda, Hyundai, Isuzu, JAC, JLR, Kia, Mazda, McLaren, Mitsubishi, Nissan, PSA, Renault, Subaru, Suzuki, Tata, Tesla, Toyota, Volvo, Volkswagen; Geely doesn’t disclose information by quarters; no data for Mahindra, Ssangyong. This report excludes the Chinese OEMs that don’t disclose their own operations results

***All values in Euro. Exchange rates from GBP, CNY, USD, JPY, KRW, INR, SEK on 30/06/2019 for Q2 2019 and 30/06/2020 for Q2 2020.