BYD continues to outpace Tesla in China

Elon Musk’s Tesla might have seen a sharp improvement in production of electric vehicles (or New Energy Vehicles, as China classifies them, or NEVs) from its huge Shanghai plant in May, but for a third month in a row it has had to cede market leadership in China to the Warren Buffett backed BYD.

According to China Passenger Car Association data issued late Thursday, Tesla sold 32,165 Chinese-made electric vehicles in May, including 22,340 units for export.

That compares with 1,152 vehicles sold and none exported in April.

The Tesla factory halted work for 22 days beginning late March to comply with a city-wide lockdown in Shanghai.

The Association said the improvement by Tesla and BYD (a bit smaller than Tesla’s) came as NEV sales in China leapt more than 90% from depressed April to 360,000 units in May.

The improvement stood out in another weak month of total passenger car sales that nevertheless showed a solid rise from April.

Overall, passenger vehicle sales in China fell 17.3% year-on-year to 1.37 million units in May, the Association’s figures revealed.

Month-on-month, sales rose 29.1%, no surprise considering the dearth of activity in April when sales fell 43% because of the impact of lockdowns.

BYD Co, the automaker backed by Warren Buffett, led NEV sales with 114,183 units, up from just over 105,000 in April and just over 104,000 in March. It is the first time ever BYD has seen NEV sales of 100,000 or more for three consecutive months.

“The industry has witnessed a strong improvement in its supply chain under the current policy of ensuring production in Changchun (one of the first cities to be shut in a lockdown and a major car making centre) and Shanghai,” PCA Secretary General Cui Dongshu said during a briefing Thursday, reported by Reuters.

The PCA said it expects a continued rebound in June, given the pandemic has eased and vehicle production and sales are recovering. Both car production and sales should increase more than 10% in June versus 2021.

The Chinese government has introduced several consumer incentives around automobiles to offset the negative impact from China’s stringent pandemic control policies and waning economy growth.

The purchase tax levied on some low-emission passenger vehicles has been cut by half, and local authorities and automakers have followed with a string of incentives of their own (at the direction of the central government).

Chinese analysts say that BYD had a stockmarket value of more than $US130 billion this week, making it the third most valuable global carmaker after Tesla and Toyota.

Warren Buffett’s Berkshire Hathaway owns 7.9% of BYD, or more than $US10 billion. He paid $US232 million for the holding back in 2008.

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Despite Musk’s protests about the shortage of key green minerals such as lithium, here’s another producer that is not going to be crying with the Tesla CEO.

Chile’s SQM is a global lithium major and it has just revealed a massive, near twelve-fold rise in quarterly profit thanks to the soaring prices for the metal.

Those price rises for lithium have gotten Musk all agitated and blustering – for SQM, it’s music to its balance sheet.

The company said net profit rose to $US796 million in the March quarter after revenue nearly quadrupled to $US2.02 billion.

SQM produces its lithium from brine pools in the north of the country.

The jump came on the back of a 59% surge in lithium sales volume and near seven-fold rise in prices, thanks to the global push towards electric vehicles.

SQM Chief Executive Ricardo Ramos had said in March the company hoped to hit production capacity of 180,000 tonnes of lithium in 2022 and the company said in its report that this year’s sales were now forecast expected to surpass 140,000 metric tonnes.

SQM’s board announced in April the company planned to invest $US900 million this year to increase lithium carbonate and hydroxide production capacity.

SQM and US competitor Albemarle Corp. have major projects in Chile’s Atacam salt flats, which the companies use to extract lithium from below the surface via brine pools.

Albermarle has a growing presence in the Australian lithium industry (produced from mining rather than extracting the metal from brine).

SQM is in Australia in a JV with Wesfarmers in the old Kidman Resources mining and processing Mount Holland project in WA (the JV company as called Covalent).

The boom so far this year in prices has already seen SQM earn more than it did in all of 2021 and 2020 combined, while revenues in the first quarter were six times those for all of 2020.

SQM reported net income in 2021of $US585.5 million, up from US$164.5 million in 2020.

Revenues increased by more than 144% to $US936.1 million in 2021 compared to $US383.4 million in 2020.

The 5th BMX auction from Pilbara Minerals last month helps explain the surge in earnings by SQM.

The auction priced lithium at just under $US6,000 a tonne (and just over $US6,000 adjusted for quality differences).

That price was up more than $US4,700 a tonne in less than a year, which helps explain the complaints from Elon Musk and others about rising costs of battery minerals and a shortage of supply.