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Tesla's Real-Time Strategy Surpasses BYD's In Terms Of Sales Efficiency In China

Tesla's Real-Time Strategy Surpasses BYD's In Terms Of Sales Efficiency In China
Tesla's aggressive, real-time supervision of its sales personnel in China is giving its stores a competitive advantage against dealerships offering BYD and other brands in the largest car market in the world, according to report quoting information from sources with knowledge of the situation.
China's BYD overtook the American corporation in the fourth quarter as the world's largest seller of electric vehicles, but both businesses increased their market share in the first ten months of 2023 despite the slowing and fiercely competitive Chinese EV market.
According to data from China Merchants Bank International (CMBI), Tesla sold an average of more than 1,500 electric vehicles (EVs) in each of its Chinese outlets in the first ten months of 2023, an increase from 1,300 in 2022.
Comparatively, BYD sold fewer than 600 vehicles per shop in 2023, including plug-in hybrids, which is comparable to its performance in 2022. Nevertheless, altogether, BYD sold a lot more EVs than Tesla considering that its best-selling models are half as expensive and have 11 times as many local distributors.
"Tesla may have more throughput per store, but their growth is limited, especially when compared with BYD," said Bill Russo, CEO of Shanghai-based advisory firm Automobility.
According to data from Automobility and the China Passenger Car Association, while its lower-end competitors faltered, BYD's share of the China EV market increased to 27% from 21% during the same period, while Tesla's share increased to 12% in the first ten months of 2023 from 10% in 2022.
A rare bright light for the electric vehicle manufacturer, which has halted plans to build a factory in Mexico and issued warnings about the effects of rising loan rates on consumers in other important areas like the U.S., is its strong sales performance in China, its second-biggest market.
The carmaker, which established the direct sales model globally, tracks the effectiveness and efficiency of its 2,800 sales representatives in each of its 314 stores in China on an hourly basis, evaluating their ability to convince prospective customers to visit the stores, schedule test drives, and place orders, according to the three individuals.
They chose not to reveal their identity since such information is considered secret and has not been previously disclosed regarding its China sales strategy. An inquiry for comment from Tesla was not answered.
According to the people, the company's pricing strategy is informed by this real-time data collecting, which enables it to affect demand for specific model versions and led to seven price increases and three decreases in China last year.
Based on the costs and availability of raw materials, the business can then create cost-effective production schedules.
According to one of the people, it treats its employees like Meituan (3690.HK), a massive Chinese meal delivery company that tracks delivery timings down to the minute and second.
The source further stated that Tesla salespeople who were deemed to have not been engaged enough were fired that same day.
The company recruits employees from industries like English tutoring and insurance known for aggressive sales tactics by offering a base salary higher than EV competitors and allowing the best performers to earn up to 30,000 yuan ($4,203.56) a month including bonuses, the people said.
With its 3,400 locations, BYD approaches dealerships in a more traditional manner and offers plug-in hybrids in addition to battery electric vehicles. In order for dealers to meet a 3 million unit global sales target in 2023, the company offered awards of up to 2 billion yuan ($279.52 million).
An inquiry for more information was not answered by BYD.
Given its superiority in products, technology, and reputation, Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight, stated that Tesla's success with its economical and successful direct sales model was difficult to replicate.
After originally following Tesla into establishing direct sales networks, the smaller EV competitor of the American manufacturer, Xpeng, has been modifying its sales approach.
However, Zhang said that it is still unknown if Tesla will be able to maintain its sales efficiency as its model portfolio ages, particularly as it moves into lower-class cities and towns where Chinese brands are more prevalent among dealers.
Tesla's flagship showroom in Beijing, which had been open until 2022, was closed. In Guangzhou, it closed four outlets in the latter quarter of 2023.
As per CMBI, per-store car sales in second-tier cities like Chengdu and Tianjin average 163 each month, which is greater than in first- and third-tier cities. These cities are where it has been growing. In 2023, Tesla added over 30 new locations in tier-two cities, an almost 20% rise.
Even if Tesla's sales efficiency has surpassed that of its competitors, analysts have warned that the company is facing increasing challenges due to fierce competition.
"Boasting about efficiency is a way of building up a smokescreen to explain away the fact that they're not growing at the rate of some of their competitors," Automobility's Russo said.
Production capacity restrictions at Tesla's largest facility worldwide, in Shanghai, which can produce 1.1 million cars annually, will hinder any attempt by the company to overtake BYD in total sales.
Despite Tesla's indications of intent to grow the factory, the strategy is still dependent on Chinese regulators' approval, who are hesitant to allow the addition of additional EV manufacturing facilities in the face of a glut of available capacity.
The business intends to develop a new plant in Mexico in addition to expanding existing Berlin facility. However, BYD has been much more active, constructing EV facilities with an annual capacity of over 4 million units in nine Chinese cities in addition to new operations abroad.
As of late March, Tom Zhu, the company's global production leader, stated that Tesla could produce two million cars annually.
According to CMBI analysts, as rivals rush to decrease the price of their new EVs, Tesla may be forced to concentrate further more on margin improvement in 2024 as a result of the widening gap with BYD. This may involve price increases on redesigned models and more growth into lower-class Chinese cities.

Christopher J. Mitchell

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