BYD and Toyota new cars puts Tesla, VinFast, Nio stocks on edge

Electric vehicle stocks have come under intense pressure this year, and the situation could get ugly in the coming months. Most EV stocks like Tesla (TSLA), Rivian (RIVN), Nio (NIO), Lucid Motors (LCID), and VinFast (VFS) have crashed by double digits this year. Altogether, EV investors have lost over $1 trillion from their peak in 2021.

Toyota vs Rivian vs Nio vs VinFast vs Li Auto

Why EV stocks have plunged

These stocks are battling three main risks. First, competition in the industry has intensified, with the world having hundreds of EV companies. China has over 100 EV companies, including well-known brands like BYD, Nio, XPeng, Li Auto, and Lotus Technology. 

Europe has brands like Volkswagen, Ampere, and BMW while the US has the likes of Rivian, Tesla, Mullen, and Lucid. Countries like Japan, India, and Indonesia also have their own electric vehicle brands.

Second, the soaring competition has led to thinner margins as most companies have been forced to slash prices. Most recently, Tesla slashed prices of most brands in the US and China. Similarly, XPeng’s gross margin has dropped from almost 30% in 2022 to 1.47% while Nio’s margin dropped from 18.3% to minus 15.3%.

Third, EV companies are struggling because of the increased overcapacity, especially in China. As a result, there are concerns that China could do to the industry what it did for the other sectors like solar panels and steel.

New risks from Toyota and BYD

The other important reason why companies like Tesla, VinFast, Nio, and Lucid Motors have slumped is the ongoing demand for hybrid vehicles. 

In a statement on Tuesday, Toyota Motors announced that it was working on newer engines that will combine hydrogen alongside alternative fuels. These engines will be available in Toyota branded vehicles and those of its partners like Subaru and Mazda. 

Toyota has long believed that the transition to EVs will not work out as planned. For a long time, the company has argued that EVs will comprise about 30% of total vehicle sales in the future. It believes that the world is not ready for a fully-electric industry. 

As a result, Toyota has become the biggest seller of hybrid vehicles and it aims to continue growing market share. Most analysts now believe that hybrid vehicles are better positioned in the future, which explains why its stock has surged by over 58% in the past 12 months.

Remember that Toyota has also made a breakthrough in the electric vehicle industry by building a highly efficient solid-state battery. It hopes to start manufacturing vehicles using this battery in the next two years.

The other risk for these pureplay EV companies is that BYD is now working on a vehicle that will have a 2,000 kilometre range. That means that the vehicle can move from New York to Miami on a single charge or fuel. It can also move from Munich to Madrid.

The new vehicle’s 2,000km range is longer than vehicles from other brands. Geely Galaxy L6 Hybrid has a 1,370km range while Toyota Camry Hybrid and Tesla Model 3 have a range of 1,100km and 630km.

Most notably, BYD’s new vehicle will sell for a cheaper price than companies by other EVs. It will start selling for just $13,800, making it highly affordable to most people. As such, even a 100% tariff in the US would make it cheaper than the average car price in the country, which stands at $47,401.

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