Tesla trumps BYD in China sales efficiency with real-time strategy
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[January 05, 2024] SHANGHAI
(Reuters) - Tesla's strategy in China of real-time, aggressive
management of its sales staff is giving its stores an edge over
dealerships offering BYD and other brands in the world's largest auto
market, according to three people with knowledge of the matter.
The U.S. company in the fourth quarter lost its crown as the world's
biggest electric vehicle seller to China's BYD, but during the first 10
months of 2023 both companies grew their share of a slowing and highly
competitive Chinese EV market.
Tesla sold more than 1,500 EVs in each of its Chinese stores on average
in the first 10 months of 2023, up from 1,300 in 2022, data from China
Merchants Bank International (CMBI) showed.
BYD in comparison sold under 600 cars per store in the same 2023 period
including plug-in hybrids, similar to its 2022 performance, although
overall it sold far more EVs than Tesla given its best-selling models
cost half as much and it has 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.
Tesla's China EV market share grew to 12% in the first 10 months of
2023, up from 10% in 2022, while BYD's share rose to 27% from 21% over
the same period as its lower-end rivals stumbled, according to data from
Automobility and the China Passenger Car Association.
Tesla's solid sales performance in China, its second-biggest market,
provides a rare bright spot for the EV maker, which has warned of the
impact of high interest rates on car buyers in other key markets like
the U.S. and slowed plans to construct a factory in Mexico.
The automaker, which pioneered a direct sales model worldwide, monitors
its 2,800 sales staff across its 314 stores in China on an hourly basis,
assessing how effective and efficient they are in persuading potential
consumers to visit stores, arrange test drives and place orders, the
three people said.
They declined to be identified because such information about its China
sales strategy, which has not been previously reported, is deemed
confidential. Tesla did not respond to a request for comment.
The people said this real-time collection of data informs the company's
pricing strategy, which allows it to influence demand for some model
versions and resulted in seven price hikes and three cuts in China last
year. The company can then make cost-effective production plans based on
raw material prices and supplies.
It manages its staff similarly to Chinese food delivery giant Meituan,
which measures delivery times by the minute and second, one of the
people said.
Tesla salespeople seen to have failed to be active enough have been let
go the same day, the person added.
The company incentivises its staff by offering a base salary higher than
EV rivals and allowing the best performers to earn up to 30,000 yuan
($4,203.56) a month including bonuses, drawing workers from industries
such as English tutoring and insurance known for aggressive sales
tactics, the people said.
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A Tesla car is driven past a store of the electric vehicle (EV)
maker in Beijing, China January 4, 2024. REUTERS/Florence Lo
OTHER SALES MODELS
BYD takes a more conventional approach to dealerships with its 3,400
stores and sells plug-in hybrids alongside battery EVs. It promised
dealers up to 2 billion yuan ($279.52 million) in rewards to reach a
3 million unit global sales target in 2023.
BYD did not respond to a request to provide further details.
Yale Zhang, managing director at Shanghai-based consultancy
Automotive Foresight, said Tesla's success with its cost-effective
and efficient direct sales model was not easily copied given its
leadership in products, technology and reputation.
The U.S. automaker's smaller EV rival Xpeng has been rejigging its
sales strategy after initially following Tesla into launching direct
sales networks.
But as Tesla's model lineup ages, it remains unclear whether it will
be able to sustain its selling efficiency, especially as it enters
lower-tier cities and towns where Chinese brands have a bigger
presence with dealers, Zhang said.
In 2022, Tesla closed a Beijing store that had been its flagship
showroom in China. It also shut four stores in Guangzhou in the
final quarter of 2023.
It has been expanding in second-tier cities like Chengdu and
Tianjin, where per-store vehicle sales average 163 per month,
according to CMBI, higher than that in first-tier and third-tier
cities. Tesla opened about 30 new stores in second-tier cities in
2023, a nearly 20% increase.
STIFFENING COMPETITION
While Tesla has pulled ahead of rivals in sales efficiency, analysts
have cautioned it faces growing headwinds amid stiffening
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.
Any attempt by Tesla to catch up with BYD in overall sales will be
affected by production capacity constraints at its Shanghai factory,
its biggest globally that is capable of making 1.1 million cars a
year.
Tesla has signalled it wants to expand the plant but the plan still
hinges on approvals from Chinese regulators reluctant to add new EV
production facilities amid a capacity glut.
The company plans to expand its Berlin factory and build a new plant
in Mexico. But BYD has been far more aggressive, having built EV
factories in nine cities in China with an annual capacity of more
than 4 million units and adding plants overseas.
Tesla's global capacity was 2 million vehicles a year, its global
production chief Tom Zhu said last March.
CMBI analysts predict the growing gap with BYD could force Tesla to
further focus on margin improvement in 2024, with price hikes on
revamped models and additional expansion into lower-tier Chinese
cities, even as its rivals scramble to price their new EVs lower.
($1 = 7.1368 Chinese yuan renminbi)
(Reporting by Zhang Yan and Brenda Goh; Editing by Jamie Freed)
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