Lemonade Economics: A Fresh Perspective on the EV Landscape
A no-nonsense explanation of how BYD and Tesla stack up
It is now clear that China is dominating the transition to an electric vehicle future, and observers outside of China are struggling to understand the market. The world does not benefit from downplaying and misunderstanding macro changes, and people learn about these mostly from the media. There is an increasingly gaping hole in the way Western media covers the Chinese EV transition, and that’s going to blindside a disturbing number of people as this transition has massive economic implications. Alarmingly, even the most reputable business media outlets are publishing with errors ranging from underreporting EV sales to misinterpreting the Chinese auto market’s seasonality. It’s even reached the point where figures like Elon Musk are quoting these inaccurate reports.
In some ways, I get it.
It’s hard to cover China when you’re not in China.
It’s convenient for journalists, analysts, investors, etc. to compare everything to Tesla.
People really want to read about Tesla.
You can’t buy a Chinese EV in most English-speaking countries yet.
This is too important not to understand, so here’s a more digestible way to understand the Chinese EV market.
Imagine New York City’s parks as different auto markets, with carts and stands (auto OEMs) offering various drinks (vehicles). Among these, lemonade (EVs) has emerged as the trendy choice, particularly in Bryant Park (the US market) and Columbus Park (the Chinese market). In this analogy, Wang (BYD) and Elon (Tesla) represent the leading lemonade vendors, with Wang predominantly operating in Columbus Park and Elon in both Bryant and Columbus Park, among others. While Elon’s premium lemonade initially seized the spotlight in both locales with his classic flavors, Wang’s homemade variety—boasting a broader range of flavors, sizes, and prices—better caters to Columbus Park’s tastes, including sweet lemonade (BEVs), hard lemonade (PHEVs), and the newly introduced ultra-premium sparkling lemonade (BYD's Yangwang brand). Elon now even buys some of his lemonade mix from Wang.
Most journalists only frequent Bryant Park and often struggle to grasp the fundamental aspects of the lemonade business (I don’t even know if most of them drink lemonade?) in pursuit of catchy headlines and stories. Their stories often omit the seasonal nuances of Columbus Park, which closes for a few weeks every first quarter for a festival (Lunar New Year), or the seasonality of lemonade demand (think of Q4 as summer and Q1 as winter). Many fail to acknowledge that different types of lemonade, such as hard lemonade and sparkling lemonade, are still part of the same market, which shows a lack of understanding of well-defined and consistent industry terminology.
This time of year, a more accurate market analysis requires year-over-year sales comparisons, which reveal that despite quarter-over-quarter declines for Wang and Elon’s lemonade sales (-33.8% and -20.2%, respectively) in Q1, Wang’s year-over-year sales grew by 14%, while Elon's dipped by 8.5%. This discrepancy underscores Wang's burgeoning dominance, especially as almost all of his sales occurred during a shorter Q1 in one market, as opposed to Elon's more evenly distributed sales.
Wang's lemonade sales are now close to double those of Elon. Wang now sells one in three cups of lemonade in Columbus Park, and he is continuously adding to his menu. As lemonade prices in Columbus Park decrease due to increasing ubiquity, Wang’s ability to make his lemonade from scratch gives him a significant advantage over his competitors.
It is time for the media to provide a more comprehensive and accurate representation of the lemonade market, particularly in Columbus Park. By doing so, they can help the public better understand the significant economic implications of this rapidly evolving industry and the key players shaping its future.
Observers outside of Columbus Park need to quickly wake up to the fact that while soda (ICE vehicles) remains the most popular beverage in most parks, Columbus Park is becoming famous for its lemonade. People are increasingly recognizing lemonade as a healthier and tastier alternative to soda, even if it isn’t yet sold in their park. They already were blindsided by Ren’s (Huawei) fruit stand in Columbus Park; they can’t miss this one.
Note 1: If a true comparison of total lemonade sales wanted to be made, BYD could include its lemonade products sold in various sizes to businesses and government organizations (BYD’s commercial vehicles) and its lemonade mix (BYD’s batteries) sold in stores and in bulk (grid energy storage). Tesla only has a prototype lemonade dispenser (Tesla Semi) in a soup kitchen (Frito-Lay), which has required frequent servicing. There has been hundreds of times more media attention devoted to Tesla’s lemonade dispenser pilot compared to BYD’s years of successful commercial sales.
Note 2: Please keep comments and replies in lemonade economic terms.
Americans are some of the least internationally travelled people on the planet. Hence, no surprise they are some of the most internationally ignorant. Add in "China Bad" "Commie Commie" type tropes & expect ignorance to be amplified.
Cute perspective. Can you do a hard analysis on the Global South market for Chinese EVs?