February 18, 2023 5:08 PM | 2 min read
After billionaire investor Charlie Munger all guns came out about Chinese electric vehicle startup BYD Manufacturing Company Limited (OTC: WILL) (OTC: WILL) superiority over Tesla Inc. (NASDAQ:TSLA), Ark Invest Kathie Wood agreed with her view on the matter.
What happened: Munger and many on Wall Street don’t understand that passing on the lower costs associated with tech-enabled innovation, with respect to batteries and powertrains in Tesla’s case, will drive a huge increase in demand for units, Wood said in defense of the top holding company of its flagship Ark Innovation ETF (NYSE:ARKK).
This would discredit the Keynesian/Fed’s Phillips Curve model, she added.
The fund manager’s comments came in response to a CNBC video clip of Munger’s interview shared by a Tesla influencer.
Giving the rationale for his preference for BYD over Tesla, Warren Buffetts trusted business partner said that while Tesla cut prices twice in China last year, BYD has raised its prices. “If you count all the manufacturing space BYD has in China to make cars, that would amount to a large percentage of all the land on Manhattan Island,” he said.
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Why it’s important: Munger’s claims about BYD can be controversial. In 2022, the Chinese company sold 911.40 battery EVs compared to the 1.314 million vehicles Tesla delivered in the same period. If plug-in hybrids are included alone, BYD’s 2022 sales of 1.86 million vehicles will surpass Tesla, which is purely a battery EV.
That said, it should be noted that the majority of BYD’s sales come from China, with only a small portion coming from overseas sales. Tesla’s tally refers to global sales. Lack of a sub-$30,000 car in China could impact Tesla’s volume, according to Future Fund Gary Black.
Tesla generates much better profit per vehicle compared to BYD. Tesla’s profit per vehicle was $9,400 in the April-December period compared to $1,820 for Toyota Motor Corp. (NYSE:TM) and $1,454 for BYD, according to a Nikkei report earlier this year.
The US EV maker’s global scale and its vertically integrated operations provide that cost advantage for the company to tinker with its pricing.
Tesla ended Friday’s session up 3.10% at $208.31, according to data from Benzinga Pro.
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