"Cheaper and Faster: Chinese EVs Overtake the Market... Leadership in Electric Vehicles Reversed [Global Focus]"

"BYD is not that impressive"... A complete turnaround in evaluation
While Musk focused on politics, BYD caught up to Tesla
Autonomous driving and AI... Who will win the second round of the EV battle?

Chinese electric vehicle company BYD is moving to solidify its position as the global leader. After surpassing Tesla in revenue last year, forecasts now predict that BYD will also lead in sales volume this year. As the electric vehicle industry expands into autonomous driving and artificial intelligence (AI), the competition between Tesla and BYD is no longer just a rivalry between individual companies; it has become a new chapter in the US-China technology war.

Elon Musk Tesla CEO. Photo by AFP Yonhap News

"BYD is not that impressive"... A complete turnaround in evaluation

According to S&P Global Market Intelligence, BYD is expected to surpass Tesla in battery electric vehicle (BEV) sales this year. Last year, Tesla sold 1.79 million vehicles, narrowly outpacing BYD’s 1.76 million, but this is expected to be reversed.

Looking only at electric vehicle sales (excluding hybrids) in this year’s performance, BYD sold 416,000 units in the first quarter, while Tesla sold only 336,700 units.

In terms of revenue, BYD already surpassed Tesla last year. In 2024, BYD posted revenue of 777 billion yuan (approximately 150.47 trillion won), a 29% increase from the previous year. In dollar terms, this exceeded $100 billion. In contrast, Tesla’s revenue was $97.7 billion (about 135.87 trillion won). While BYD’s revenue growth last year was partly driven by increased hybrid vehicle sales, BYD has now overtaken Tesla in sales volume even when considering only battery electric vehicles.

"Have you seen that car? I don’t think it’s that impressive. It’s not particularly attractive, and the technology isn’t very strong." In a 2011 interview with Bloomberg, Tesla CEO Elon Musk responded this way when asked about BYD. However, Musk’s attitude seems to have changed. A former Tesla executive told the Financial Times (FT) that after visiting China in 2024, Musk directly witnessed BYD’s factories, costs, and technological capabilities, and concluded that China is winning the electric vehicle race.

Just a few years ago, the prevailing belief was that BYD could never catch up to Tesla. In the past, the only perceived advantage of Chinese electric vehicles over Tesla was their lower price. However, while Musk focused on political activities, BYD surpassed Tesla. Business Insider commented, "Musk is lucky that Americans can’t buy BYD cars."

While Musk focused on politics, BYD caught up to Tesla

The atmosphere shifted especially in February this year, when BYD unveiled its autonomous driving system, "God’s Eye." At the time, BYD Chairman Wang Chuanfu introduced God’s Eye, stating, "It can drive autonomously for over 1,000 km without driver intervention, and the parking success rate reaches 99%." Just a month later, BYD shocked the world again by introducing an ultra-fast charging system that enables 470 km of driving after only five minutes of charging.

Mark Greeven, a professor at IMD (International Institute for Management Development) and expert on China, pointed out that Musk failed to properly monitor BYD’s progress as he shifted from battery technology to software and semiconductor development. Greeven said, "Tesla has actually fallen behind. BYD used that time to catch up and decided to invest in the capabilities needed for long-term competitiveness."

Dan Levy, an analyst at Barclays, said, "In the West, Tesla still dominates the electric vehicle market and maintains a clear lead in software-based vehicles. However, the situation is different in China. From a technological perspective, it’s hard to say Tesla is ahead, and even if it is, the gap is very small."

BYD electric vehicles waiting for export at Yantai Port, Shandong Province, China. Photo by AFP

Autonomous driving and AI... Who will win the second round of the EV battle?

The electric vehicle competition is shifting to a new stage centered on autonomous driving and AI. In May, CEO Musk stepped down from the Trump administration to focus on Tesla’s new growth businesses. He is now concentrating on autonomous driving, AI, robotaxi, and humanoid robot development. His goal is to grow Tesla into a company with a market capitalization of several trillion dollars.

Tesla still holds a significant advantage over Chinese companies in areas such as automation technology, AI infrastructure, access to the latest Nvidia chips, and driving video data. A Tesla official explained, "It is relatively easy to steal or copy hardware intellectual property (IP), but reverse-engineering software is nearly impossible." While Tesla has been caught up in hardware, it is expected to maintain its lead in software.

However, various regulations in China, which is both the largest electric vehicle market and Tesla’s key market, are holding Tesla back. According to Automobility Analysis, BYD’s market share in China from January to May this year reached 28.9%, while Tesla’s was only 4.6%. Analysts attribute this to China’s policy of prioritizing domestic products.

Most notably, Tesla is struggling because its autonomous driving software, Full Self-Driving (FSD), has not received regulatory approval. Due to restrictions on external transmission of data within China, Tesla cannot use local driving data for AI training, making it difficult to improve FSD’s driving capabilities in China. Although Tesla has decided to integrate Baidu’s mapping data, it is considered insufficient compared to real driving data. In contrast, BYD benefits from government subsidies and policy support. Tu Le, founder of Sino Auto Insights, pointed out that the key is not the services BYD currently offers, but the sheer volume of data it collects. BYD vehicles gather data for algorithm training, which could enable them to win the autonomous vehicle race.

However, BYD’s future is not guaranteed to be smooth. While it has the advantage of having its largest market as its home ground, the fierce price competition among Chinese automakers is raising concerns about sustainability. Since early 2023, BYD has implemented an average price cut of 32%. The price war has become so intense that last month, Chinese authorities summoned executives from major electric vehicle manufacturers, including BYD, to urge them to refrain from excessive discounts.

While Tesla is struggling with regulatory approval for FSD, BYD faces its own obstacle with Nvidia chips. Since God’s Eye uses Nvidia chips, any expansion of US semiconductor export restrictions could hinder the system’s rollout. Raymond Chang, an automotive technology expert at Bain & Company, said, "Given the geopolitical environment, no company wants to invest in high-risk technologies that still rely on foreign technology."

The contest between Tesla and BYD can be seen as a proxy battle in the US-China technology war, rather than just corporate competition. However, the current market seems to be placing its hopes on Tesla’s future. FT noted that Tesla’s market capitalization, which is close to $1 trillion, reflects investors’ trust in CEO Musk, while BYD, not being recognized as a software-centric company, has a market cap of only about $140 billion, reflecting this perception.