On July 24, Tesla released its second quarter financial report. The financial report data showed that Tesla's car revenue was 200 million higher than expected, while the gross profit margin of car sales was 1.6 percentage points lower than market expectations. As Tesla's long-time competitor, BYD has won the trust of consumers with its outstanding performance and high-quality products in the past year. And this year, Tesla has continued to exert its strength in the field of artificial intelligence, and the hyped concept of artificial intelligence has earned enough attention from the market. So who will be better in 2024?

The warning behind Tesla's 2024 second quarter financial report

Tesla's car revenue is 200 million higher than market expectations. Is it really because Tesla cars are selling well? Tesla's car revenue is divided into three sectors: car sales, car rentals and regulatory points. In fact, Tesla's sales in the second quarter just barely met the target and did not achieve ideal growth.

The financial report shows that Tesla had $19.9 billion in automotive revenue in the second quarter, which seems to be 200 million higher than expected. It was mainly due to the regulatory points revenue that was twice as high as market expectations. After excluding the regulatory points, it can be calculated that the unit price of Tesla cars is declining, and the magnitude is large, and profitability has obviously weakened. In addition, the gross profit margin of the truly important automotive sales sector has fallen to 14.6%, far below the market expectation of 16.2%, and a decrease of 1.7 percentage points from the previous month. Obviously, Tesla used interest subsidies to sell cars in June to curb the sharp decline in sales in April and May. Although the quarterly sales exceeded market expectations, it suffered huge economic losses.

In contrast to the automotive business is Tesla's energy business. In the second quarter, Tesla achieved a 160% increase in energy installation volume, a 100% increase in revenue, and a 25% gross profit margin performance, but. Since the scale of the energy business is smaller than that of the automotive business, the energy business only had 3 billion in revenue in the second quarter.

It is worth mentioning that Tesla seems to attach great importance to cash flow this quarter. In addition to laying off employees to reduce costs in the future, in order to maintain cash flow, Tesla deliberately reduced production and consumed inventory in the second quarter, which resulted in an operating cash inflow of more than 3.5 billion in the second quarter. Capital expenditure also fell back to the level of just over 2 billion US dollars in the fourth quarter of last year, resulting in a net increase of nearly 4 billion US dollars in cash and cash equivalents in the second quarter.

The highly anticipated Tesla Robotaxi has been delayed

Morgan Stanley pointed out that 68% of investors regard AI as the main driving force for Tesla's stock price in the next year, and only 33% prefer electric vehicles. After Tesla announced its delivery volume this month, Citi, Mizuho and other investment banks raised their target prices for Tesla and said that Tesla's future growth will mainly come from the execution of AI projects, especially Robotaxi and the humanoid robot Optimus.

However, although Musk has been emphasizing Tesla's future development in areas such as AI and autonomous driving, the second quarter financial report has drawn investors' attention back to the company's fundamentals. At present, profit margins have once again become the focus of the market. Obviously, it may be difficult for Tesla's profit margins to rise significantly.

The much-anticipated Robotaxi also seems to be unable to come to the rescue in time. In the financial report released on Tuesday, Tesla avoided mentioning the specific planned release time of Robotaxi, saying: "The timing of the deployment of Robotaxi depends on technological progress and regulatory approval. Given its huge potential value, we are actively seizing this opportunity." Musk also deliberately avoided several questions about Robotaxi, especially the important question of "whether Tesla's self-driving taxis will have steering wheels and pedals." In theory, vehicles without steering wheels and pedals may take months or even years to be approved for use on public roads. In contrast, vehicles equipped with more traditional controls may be available sooner.

BYD continues to expand globally, with significant growth opportunities?

In early July, Chinese electric vehicle giant BYD announced that it would invest $1 billion to build a factory in Turkey with an annual production capacity of 150,000 electric vehicles, which is expected to be put into production by the end of 2026. In addition to the Turkish factory, BYD's four overseas production bases or vehicle production lines (Thailand, Indonesia, Brazil and Hungary) will also be completed in 2026 and gradually increase production. Among them, the Thai factory will be the first to go into production in the first half of 2025.

Subsequently, JPMorgan analysts pointed out that BYD's global deliveries (including China) are expected to reach 6 million vehicles by 2026, of which about 1.5 million will be delivered in overseas markets and the rest in China. This means that the company's share of the global light vehicle market (including fuel vehicles) will expand from 3% in 2023 to 7% in 2026, and its share of the new energy vehicle market (excluding hybrid vehicles) will remain at around 22% during the same period.

In addition, BYD has performed quite well in the past year. BYD's 2023 annual report shows that during the reporting period, the company achieved operating income of 602.315 billion yuan, a year-on-year increase of 42.04%; net profit attributable to shareholders of listed companies was 30.041 billion yuan, a year-on-year increase of 80.72%. In the first quarter of this year, BYD achieved operating income of 124.94 billion yuan, a year-on-year increase of 3.97%; net profit of 4.569 billion yuan, a year-on-year increase of 10.62%. Despite the increasingly fierce competition in the electric vehicle market, BYD's sales are still far ahead. In the first half of this year, BYD sold a total of 1.613 million electric vehicles, a year-on-year increase of 28.46%. Driven by the impressive sales performance, BYD's Hong Kong stocks have risen by more than 17% so far this year as of Monday, and are currently floating around HK$246 per share.

How to conduct investment transactions on uSMART:

After logging into the uSMART SG APP, click "Search" from the top right of the page, enter the target code, such as "002594", and enter the details page to learn about the transaction details and historical trends. Click "Trade" in the lower right corner, select the "Buy/Sell" function, and finally fill in the transaction conditions and submit the order; the picture operation instructions are as follows:

Follow us

Find us on Twitter, Instagram, YouTube, and TikTok for frequent updates on all things investing.

Have a financial topic you would like to discuss? Head over to the uSMART Community to share your thoughts and insights about the market! Click the picture below to download and explore uSMART app！

Important Notice and Disclaimer:

We have based this article on our internal research and information available to the public from sources we believe to be reliable. While we have taken all reasonable care in preparing this article, we do not represent the information contained in this article is accurate or complete and we accept no responsibility for errors of fact or for any opinion expressed in this article. Opinions, projections and estimates reflect our assessments as of the article date and are subject to change. We have no obligation to notify you or anyone of any such change. You must make your own independent judgment with respect to any matter contained in this article. Neither we or our respective directors, officers or employees will be responsible for any losses or damages which any person may suffer or incur as a result of relying upon anything stated or omitted from this article.

This document should not be construed in any jurisdiction as constituting an offer, solicitation, recommendation, inducement, endorsement, opinion, or guarantee to purchase, sell, or trade any securities, financial products, or instruments or to engage in any investment or any transaction of any kind, nor is there any intention to solicit or invite the purchase or sale of any securities.

The value of these securities and the income from them may fall or rise. Your investment is subject to investment risk, including loss of income and capital invested. Past performance figures as well as any projection or forecast used in this article is not indicative of its future performance.

This advertisement has not been reviewed by the Monetary Authority of Singapore