BYD Sales Surge As Tesla's Continues To Drop

Good morning! It’s Tuesday, July 2, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

Tesla’s Cybertruck Has Finally Arrived

1st Gear: China’s BYD Is Coming For Tesla’s Ass Again

Chinese vehicle maker BYD just posted a 21 percent rise in second-quarter eclectic vehicle sales. That has effectively closed BYD’s gap with Tesla after it relinquished its crown as the world’s top EV maker in the first quarter.

BYD sold 426,039 EVs in the quarter that spanned April-June. That means it sold only about 12,000 fewer vehicles than Tesla did over the same timeframe. This puts an exclamation point on how Tesla is trending in the wrong direction. From Reuters:

Tesla is expected to report a 6% drop in April-June quarter vehicle deliveries on Tuesday, the first time the U.S. firm is set to post two straight quarters of decline, as it deals with stiff competition in China and slow demand due to a lack of affordable new models.

The company may again cede its EV championship to BYD if the actual results turn out to be softer than estimated, with Barclays predicting an 11% drop in second-quarter deliveries, Tesla’s biggest ever.

Tesla’s China-made EV sales in June fell 24.2% from a year earlier to 71,007, according to data from China Passenger Car Association (CPCA), extending a year-on-year decline for a third month.

Tesla is really going through it right now. After years of astonishing growth, it warned in January that the trend would most likely not continue in 2024. It said deliveries would be “notably lower” as a boost from price cuts waned.

The EV maker has cut output of its best-selling Model Y electric car by a double-digit percentage number at its Shanghai plant since March to address weakening demand for its aged models in China, its second-largest market after the United States, Reuters reported in May.

By comparison, its top Chinese competitor BYD maintained steady growth in EV sales, while EV upstarts such as Nio reported stellar growth last quarter. NIO’s vehicle deliveries in the second quarter more than doubled to 57,300 units.

Price cuts and a growing shift in consumer demand to EVs and hybrids from gasoline-powered vehicles are the main reasons behind Chinese EV makers’ strong sales in recent months, said Cui Dongshu, secretary general at CPCA.

Sales of new energy vehicles including EVs and plug-in hybrids in China made up 46.7% of total car sales in May, a fresh monthly high, as per CPCA data.

If these trends for Tesla and BYD continue, I would not be surprised if Tesla gives up its EV crown once again to the Chinese automaker. I also wouldn’t be surprised if BYD then leaves Tesla in its rearview mirror for a long, long time.

2nd Gear: Teslas Are More Expensive Than The Average EV

Automakers have cut electric vehicle prices to the point that they are now cheaper than Tesla’s average for the first time since February of 2023. The average transaction price for an EV sold by any brand (including Tesla) was $55,235 in April. That’s $433 less than Tesla’s average. That trend continued in May as well, widening even. The industry average transaction price for an EV was $56,648, $721 less than the average Tesla. From Automotive News:

Tesla has been driving EV pricing with a series of cuts that have pushed competitors to reduce prices or offer discounts. “Whenever they do something, it definitely impacts the overall market,” said Stephanie Valdez Streaty, director of industry insights at Cox.

Prices have also dropped as buyers choose from a bigger EV pool. Automakers are using incentives to make their models stand out. The average discount on an EV was 12.4 percent of the average transaction price in May, nearly 6 points higher than the industry average, Cox said.

“We’re going to continue to [see incentives] really make [EVs] more competitive so they can compete against each other in lowering that price,” Valdez Streaty said.EV prices have been volatile over the past six months. They hovered around $57,000 from December to February, then fell to about $53,000 in March, before rising to about $55,000 in April and back to about $57,000 in May.Price differences between Tesla and the industry average were also extreme in that time frame. In December, the average price of an EV was $7,276 more than Tesla’s average, according to Cox data. The gap narrowed to about $5,000 in January and $6,000 in February before sinking to $1,000 in March. By April, EVs were $433 less expensive on average than Tesla models.Tesla has slashed its prices to compete with new EV options. The automaker took $2,000 off three models in April, but the cuts weren’t enough to boost sales. While EV registrations rose 14 percent that month, new Tesla registrations fell 17 percent, marking three consecutive months of declines, according to S&P Global Mobility. Excluding Tesla, EV registrations grew 69 percent in April.

Additionally, used EV sales have grown during this timeframe, mostly because of declining prices.

The gap between the average transaction price of a used EV and a used gasoline-powered vehicle, zero to 5 years old, has mostly fluctuated around $2,000 to $3,000 since mid-March. But it reached a low of about $1,100 the week of May 6, Cox said. That’s compared with a $22,950 price gap in the same week in 2022.

The shrinking cost difference, on top of a federal EV tax credit that can be applied to used vehicles, is putting used EVs in more consumers’ price range, Cox said. Used EV sales surged 84 percent in May.

No matter how you slice it, Tesla is going through a bit of a rough patch right now, and it’s not going to change until its lineup sees meaningful updates.

3rd Gear: CDK Says It’ll Be Up And Running Soon

CDK Global said its dealership management software should be fully back online by Thursday, July 4 at the latest. That’s just over two weeks since cyberattacks forced the company to shut down operations for thousands of customers across North America. From Automotive News:

“We are continuing our phased approach to the restoration process and are rapidly bringing dealers live on the Dealer Management System,” CDK said in a statement issued to Automotive News early July 1. “We anticipate all dealers’ connections will be live by late Wednesday, July 3, or early morning Thursday, July 4.”

If the announcement holds, Independence Day would mean the end of a crisis that began June 19 when two cyberattacks struck CDK, leaving more than 15,000 dealership customers without the software and systems they rely on to do their jobs. They quickly switched to workarounds including pen and paper and third-party vendor assistance to keep selling cars, though the pace slowed and sales for June were expected to take a hit.

[…]

The company made initial progress restoring operations June 26 and 27 when it brought Group 1 Automotive and two small batches of dealership customers back online.

The six largest U.S. publicly traded franchised dealership groups will likely see an average 10 percent drop in their second-quarter earnings per share as a result of the cyberattacks, according to a new J.P. Morgan analysis.

All six dealership groups have disclosed their exposure to the CDK disruption, and June 30 marked the end of their second financial quarters. Five of the six — Asbury Automotive Group, AutoNation, Group 1 Automotive, Lithia Motors and Sonic Automotive — use CDK as their primary DMS provider. Penske Automotive Group said it does not use CDK’s DMS at franchised dealerships in the U.S. or the U.K. but does for its Premier Truck Group.

If the shutdown lasts until the July 4 holiday weekend, CDK’s ongoing outages from its ransomware event could cost dealerships directly affected by the attacks nearly $1 billion, according to estimates from Michigan’s Anderson Economic Group.

Beyond its DMS system, CDK said its Customer Care channels have also been brought back online and “customers can call, chat or submit eCases if they need assistance.” In addition, CDK said it is continuing efforts to bring other applications live including its customer relationship management, ONE-EIGHTY and Service solutions.

Here’s what it’s been like for dealers who are on the receiving end of this outage:

The staff at Beyer Auto Group of Falls Church, Va., realized their core CDK system was back online the morning of July 1, but they did not have any prior notice, said COO John Altman.

Now that the staff’s anxiety about the indefinite outage is dissipating, they hope to be mostly back to normal business after the July 4 holiday.

There’s still a long way to go.

Beyer Auto Group still cannot access their customer relationship management system, and their third-party integrations are not yet working alongside the dealership management system as usual. Beyer employees were also scrambling to make a plan to get all the deals and service orders from the outage into the system and accounted for, Altman said.

The service staff must create each service ticket from scratch, including parts, technician notes and more.

“There is some exasperation,” Altman said. “I can see on their faces that they are just looking at this monumental task. But at least they know where they are at this point.”

This is why I don’t trust those newfangled computers. Pen and paper. That’s the only way to do business if you ask me.

4th Gear: Polestar Is Going Through It

EV maker Polestar says it is going to be taking steps to offset hefty EU and U.S. import tariffs on its Chinese-made electric vehicles while posting a second-quarter operating loss. Sure, Polestar is technically based in Sweden, but it’s controlled by China’s Geely, and all of the cars it currently makes are built in China.

Polestar posted a first-quarter operating loss of $231.7 million while revenue dropped to $345.3 million from $543.4 million a year earlier. From Reuters:

Its new model, the Polestar 3, will be made in the United States from the end of this summer and the Polestar 4 will be produced in South Korea starting in the second half of 2025.

While Polestar has been working to reduce its reliance on Chinese production, its Polestar 2, its biggest seller to date, will continue to be made exclusively in China.

[…]

Steps it plans to announce later this year could include material cost reductions across Polestar’s supply chain or other actions, a spokesperson said, but added the plans do not include further job cuts.

In the meantime, Polestar faces provisional tariffs of 20% proposed by the European Commission on cars it imports into the European Union and duties of more than 100% in the United States.

Polestar told Reuters there would be no customer delays due to tariffs and that it would not be possible to produce the Polestar 4 other than in China or South Korea.

Similarly to other automakers, Polestar is facing a worsening demand outlook for EV makers. A price war started last year by Tesla has left many automakers struggling to sell the cars they have already produced.

In its report, Polestar says it was hit by both low sales and higher discounts, which is not a winning recipe.

Reverse: A Huge Day For Crabs

Neutral: Plug Me In, Baby

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On The Radio: The Rolling Stones – ‘Out Of Time’

Out Of Time