Bernstein analysts explored the notable difference in product launch strategies between Tesla (NASDAQ:TSLA) and BYD (OTC:BYDDF).
In their client note, they highlight that over an 11-year span, Tesla has expanded its range with just 5 models since the Model S debut, whereas BYD has aggressively increased its portfolio with 54 battery electric and plug-in hybrid models, including launching 7 new models and conducting 6 major facelifts last year alone.
According to the team of analysts, there are three key factors behind this discrepancy -- philosophy and strategy; resourcing and capabilities; and product planning.
When it comes to philosophy, Tesla “believes its cars have broad appeal, aiming to develop a few models able to drive global leading market share, and upgrading via over-the-air software updates instead of through modifying sheet metal designs,” analysts noted.
Conversely, BYD employs a "car for every purse and purpose" strategy. This involves creating a limited number of platforms but diversifying them into many variants, providing consumers with a wide range of options while still benefiting from economies of scale in production.
Secondly, despite similar R&D expenditure, Tesla operates with approximately 15,000 engineers, significantly fewer than BYD's 90,000.
This disparity partly explains Tesla's limited capacity to develop multiple cars simultaneously compared to its Chinese rival. Further, each Tesla platform introduces substantial innovations in design and manufacturing, from the Model S to the radically different Cybertruck, bringing “significant differences/requirements to design and manufacturing,” the analysts said.
Finally, there’s a notable difference in terms of product planning between the two EV makers. Notably, Tesla seems to have overestimated the sales potential of its Model 3 and Y, leading to a lack of urgency in developing its next-generation platform.
Instead, the automaker redirected its efforts towards the Cybertruck, Tesla Semi, and Roadster, which target narrower markets.
Meanwhile, BYD adopted a notably “more proactive approach,” Bernstein writes.
“BYD launches major platform upgrades or new models every ~3 years, and delivers minor facelifts for its core offerings every year. By contrast, traditional ICE vehicle platform lifecycles typically have been 6-7 years with facelifts introduced after 3 years,” its analysts wrote.
The broker maintains its stance that the valuation difference between TSLA and BYD “is unwarranted,” hence rating them Underperform and Outperform, respectively.