Tesla, GM and BYD: Three China Strategies

Mike Smitka

SeekingAlph published an article by yours truly today comparing the stategies of Tesla, BYD and GM in the Chinese market. As you may know, GM has far and away the best-selling EV in China in the Wuling Hongguang MINI EV, which sold over 40,000 units in August 2021, and has held the top slot since launching in September 2020.

In the article, I noted that GM has a long history of leveraging successful inexpensive vehicles to sell more up-scale and profitable models, going back to the formative period of the 1920s under Alfred Sloan and his "a car for every pocket" product portfolio. But when I wrote the article, there was as yet no evidence on how they would do that for the Hongguang, which is made by the SAIC GM Wuling joint venture, but did not carry the GM logo.

Now we know: Wuling has a new logo, with GM at the center.

In my mind, that puts GM in a strong sales position in China, as the market for EVs expands by leaps and bounds. In contrast, Tesla has no coherent strategy, with only one "fresh" model (the Model Y) and an uncertain future for the Model 3. (We won't know until September EV sales data are out, because Tesla bunches sales in the last month of the quarter.) As a firm, they seem to be in no rush to build a product portfolio, and instead are placing a huge bet that the Model 3 and Model Y will remain strong sellers indefinitely. They amplify that with a US-centric product strategy: their next vehicle will be the CyberTruck, singularly unsuited to the Chinese market, where pickups are an unstylish niche. Worse, over 50% of Tesla's sales are in China's 10 largest cities, where the CyberTruck is an even worse fit. As a firm, their stock price depends on rapid expansion, which is only possible if they can gain share in China and Europe. With everyone but them launching product aimed squarely at the core market segments in China and Europe, that is not going to happen.

In contrast, BYD ticks all the boxes for success. They have a broad product portfolio, and a regular cadence of renewing old models. They have commercial vehicles (thanks to SeekingAlpha comments by MaxedOutMomma for the link to BYD's commercial products). They have broad geographic coverage. And they're currently the #2 EV producer in the world's largest market.

All for now, to not abuse SeekingAlpha's exclusivity. Look for a long, detailed article there in about a month. Note that my most consistent COVID lockdown project [alongside caring for 2 young granddaughters] has been to learn to read Chinese. I've progressed enough to follow Chinese-language automotive news on a regular basis. Well, the news output there is huge, so far my focus has been the new energy vehicle passenger car market – I've bookmarked about 30 sites, and look at a half-dozen almost daily. I'll be expanding my purview to include commercial vehicles. Consistent with that, let give a plug for Richard Doner, Gregory Noble and John Ravenhill's The Political Economy of Automotive Industrialization in East Asia, which includes a really nice chapter on China. Of course Peter Warrian and I also have a chapter on the Chinese auto industry in our 2017 book, link here.