Tesla‘s Chief Executive Officer Elon Musk commented on BYD‘s sixth consecutive month of sales decline on Monday, calling it “tough sledding.”
Musk replied on X to a post by user ‘alojoh’ that showed a monthly sales chart tracking the Shenzhen-based group’s performance over the past five years.
“I’ve never seen a more rapid sales collapse outside a severe economic recession. BYD is currently running at below 50% capacity and sales dropped 36% on an apples-to-apples basis,” the user wrote.
Musk then commented on the financial reality of running auto plants below full utilization.
“Factories do great above 80% capacity, marginal at 60% and mega pain below 50%,” he wrote without naming BYD directly.
Running a factory below 50% capacity punish the economics as fixed costs such as equipment, facilities and salaried workers are spread across fewer vehicles, eroding margins on each unit produced.
BYD reported on Sunday a 41% year-over-year drop in vehicle sales last month, with only 187,782 passenger cars registered. It was the largest decline in six years, since the global economy contracted during the COVID-19 pandemic.
For the first time, the company’s sales outside China exceeded domestic ones, representing around 100,000 units — which could signal a structural shift away from the domestic market, where sales plummeted by 65% last month.
BYD has been expanding into an increasing number of international markets as competition intensifies at home.
Even after accounting for the Chinese New Year holiday — which shifts every year and this time left only 16 working days in February — combined sales for January and February totaled 400,241 vehicles, a 35.8% decline from 623,384 units in the same period last year.
As the price war in the world’s largest NEV market continues, BYD has joined other domestic and foreign automakers in offering a seven-year low-interest financing plan, a strategy first introduced by Tesla in January.
Production and Capacity
BYD reported on Sunday that it produced 175,280 vehicles in February, nearly halving from a year ago.
In January, production had also dropped 29.1% year over year to 232,358 units.
The Shenzhen-based company operates nine major vehicle production bases in China with a combined annual capacity of 5.82 million vehicles.
Outside China, it has operational plants in Thailand and Uzbekistan, and began assembling vehicles from semi-knock-down kits at its Camaçari plant in Brazil in July 2025 — its first passenger vehicle production facility outside China.
The Brazilian plant, built on a former Ford site in Bahia state, has an initial annual capacity of 150,000 units and has assembled more than 10,000 vehicles. Full local production is expected in the second half of 2026.
In Europe, BYD began trial production at its plant in Szeged, Hungary in January 2026, with series production expected in the second quarter.
The facility has a planned capacity of 200,000 vehicles per year but is expected to operate well below that for at least the first two years.
A second European plant in Manisa, Turkey — where labor costs are significantly lower — is scheduled to open later this year.
Both plants would allow BYD to sell into the EU without the 27% combined tariff applied to its China-made imports since October 2024.
The mismatch between BYD’s installed capacity and current demand — compounded by a price war that has compressed margins across the Chinese auto industry.
The company has been aggressively pursuing international markets to absorb excess production.
BYD is not alone in facing production constraints.
Lucid Motors said late last year it was building some Gravity SUVs in limited configurations based on parts availability to avoid losing production slots.
The Elon Musk-led company manufactures battery electric vehicles only, while BYD produces both plug-in hybrids and fully electric models.
Tesla Sales
Tesla‘s vehicle registrations in China are expected to be published later this week in the monthly registration report by the China Passenger Car Association (CPCA).
Last month, Tesla registered 69,129 wholesale units in China, which includes both domestic sales and vehicles produced at GigaShanghai and shipped overseas.
Of that total, only 18,485 were sold in the Chinese market, a 45% year-over-year decline.
The company’s retail sales in China were the lowest since November 2022.
Tesla‘s Shanghai plant typically prioritizes exports at the beginning of each quarter before focusing on domestic deliveries.
