BYD profit doubles on record EV sales as it closes in on Tesla

Tesla netted record EV sales this past quarter, riding high on the price war that it started earlier in the year. Its jaw-dropping production of nearly 480,000 vehicles was unprecedented, as Elon Musk pegged 1.8 - 2 million units as an achievable goal this year. It also recorded nearly US$25 billion in revenue and beat analysts' profit per share estimates quite handily, even though its gross margin dropped somewhat on account of the price cut and investment expenditures.

Tesla's Q2 operating profit of US$2.4 billion, however, dipped slightly year-on-year, which Wall Street didn't appreciate, even though Elon Musk said that the margin fluctuations may be temporary. The stock crashed in subsequent trading, as many investors initiated profit taking after the hectic share price runup in the past few pre-earning weeks.

Tesla's chief competitor BYD, on the other hand, gave a record US$1.64 billion profit guidance for the quarter, hitting the same 18% gross margin that Tesla managed. What's even more striking is that, unlike Tesla, its operating profit will be up 192% - 225% year-on-year, according to its earnings preview. That's despite Tesla's price war and is mainly due to the drastic rise in sales of "new energy vehicles" which for BYD means mostly battery-powered cars and some hybrids.

At the moment, Tesla still doesn't have BYD's vertical integration as the Buffett-backed company is both the globe's second largest EV maker, and the next biggest manufacturer of batteries for electric vehicles after CATL. Thus, it can benefit from the fall in lithium prices better than Tesla - which in its turn will log nearly $1 billion in savings from lithium's downfall this year - and from the synergies in manufacturing both its cars and their batteries.

Recently, a BYD Seal even got disassembled in Japan in order to learn how the the "future EV leader" made it and take stock as Toyota and other local companies are starting to accept the inevitability of the EV era. BYD also released a mass market Seagull EV with very affordable pricing as a counterpoint to an eventual Tesla Model 2, as well as its BYD Seal refresh meant as a direct Model 3 Highland competitor whenever it lands.

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