BYD CEO better at making cars than Elon Musk as it beats Tesla profit margins now
Tesla's main competitor BYD has managed to outwit it in terms of electric vehicle specs for the price and has now recorded a much higher gross profit margin, too. According to Charlie Munger, that's simply because its CEO is better than Elon Musk at "making things," cars and batteries included.
The VC of Berkshire Hathaway, which was an early investor in BYD's automotive efforts and saw its stock holdings rise 35 times, pegged the CEO Wang Chuanfu as "a fanatic who knows how to actually make things with his hands."
"He's closer to ground zero in other words... the guy at BYD is better at actually making things than Elon is," added Munger, while admitting that there is too much risk in the auto industry right now because of unions and the uncertainty about the EV transition pace.
Still, he continued to heap praise at Wang, saying that "he can look at somebody else's auto part and he can figure how to make the goddamn thing," then adding that BYD has "put the foot right to the floorboard" despite the adverse industry conditions.
BYD's bets seem to be paying off, as it just reported a gross profit margin north of 25%, much higher than Tesla's 17% in Q3. Tesla still commands the industry highest profit per vehicle numbers, yet that important metric has now shrunk in half from its peak, all the while BYD logged record profits per unit produced, and nearly matched Tesla's electric vehicle sales numbers.
According to a local analyst, BYD's manufacturing acumen and vertical integration as an EV battery maker were the main culprits behind its record profits. "Volume growth resulted in more significant economies of scale and significantly lowered average depreciation and amortization per vehicle," writes Xu Huixiong from Essence Securities, while the "price of battery-grade lithium carbonate declined by 5.5 percent to RMB 241,000 ($32,940) per ton in the third quarter compared to the second quarter, resulting in a lower average cost per vehicle."
In addition, BYD managed to steer customers towards its vehicle models that command the highest gross margins, selling 27% more of those than in the previous quarter.