NEW YORK: BYD Co may eclipse Tesla Inc in annual electric vehicle (EV) sales this year as demand surges in China but stalls in the United States and Europe, according to Bloomberg Intelligence (BI).

That’s a shift from January when BI said it expected Tesla to stay ahead of BYD through the end of the decade.

However, BYD’s reign may be short-lived as punitive US and European Union tariffs limit the Chinese automaker’s growth opportunities to Asia and emerging markets, BI said in a report published yesterday.

Stalling demand for battery EVs means internal combustion engines, including hybrids, will prolong combustion-engine profit at legacy automakers such as General Motors Co, Volkswagen AG and Ford Motor Co and may fuel further share buybacks or takeover activity, BI’s senior European auto analyst Michael Dean said in the report.

Tesla on Tuesday reported its fourth straight quarter of disappointing profits.

The carmaker is far off the pace of the 1.8 million cars it sold last year and again warned it expects to see a “notably lower” growth rate in 2024.

In another sign the hype around EVs is waning, Porsche AG on Monday walked back its goal that battery-powered cars will account for more than 80% of new-vehicle sales by 2030.

“Tesla’s original 50% annual growth target is in tatters,” Dean said.

“Tesla’s longer-term success relies on a cheap high-volume Model 2 which is yet to be unveiled.”

BYD briefly overtook Tesla on pure EV sales in the fourth quarter last year, outselling its US rival 526,409 to 484,507.

It has kept up the momentum this year, shipping almost one million electric and hybrid cars in the second quarter, helped by aggressive discounting in its home market.

However, China’s price war is “unsustainable” and may lead to further exits and consolidation, BI said.

Stalling demand for EVs has rewarded Toyota Motor Corp’s more sceptical - and highly criticised - bet on the longevity of combustion engines and hybrids, with a 50% jump in its shares since mid-2023, the report said.

In the longer run, BYD is forecast to hold its sales lead over Tesla through 2027, before the US automaker regains the crown in 2028, while third-placed VW will slowly close the gap with its bigger rivals.

Tesla is still the biggest carmaker globally by market capitalisation, with a value of US$786bil at Tuesday’s close - before the shares fell 8% in extended trading.

BYD is third at just shy of US$100bil.

 - Bloomberg