Tesla has been knocked off the top spot as the world’s best-selling electric vehicle maker for the first time by BYD after recording fewer deliveries than its Chinese rival in the past quarter.

The U.S. group handed over 484,000 cars in the fourth quarter, more than the 473,000 anticipated by analysts but not enough to hold on to its title after BYD reported record sales of battery-only vehicles of 526,000 for the same period.

According to Financial Times, Tesla’s dethroning by BYD reflects the rise of what was a little-known Chinese group only a decade ago, which Musk himself has publicly dismissed. While growth at the Warren Buffett-backed Chinese company has been mostly achieved on its home turf, BYD is sharpening its focus on finding new foreign markets including in Europe.

Danni Hewson, head of financial analysis at AJ Bell, said BYD’s electric cars were “becoming increasingly visible on European roads thanks to keen pricing”.

BYD’s success in chasing down Tesla also underlines the struggle of legacy automakers from the U.S., Europe, Japan and Korea to adapt to fast-changing consumer preferences for cheaper, smarter electric vehicles.

In a statement published in China, the Shenzhen-based group called itself the “world champion” for “new energy vehicles” after notching total annual sales of more than 3 million for 2023 across its vehicles — which also include plug-in hybrid cars.

Tesla’s annual sales were 1.81 million vehicles in 2023, while BYD delivered 1.58 million fully electric cars.

Through much of the past 12 months, BYD benefited from price cuts sparked by Tesla’s attempt to chase market share, pushing consumers to consider China’s lower-cost models, according to analysts.

“For any doubters left in the west, I hope this is the final data point that points to BYD’s strength and, as importantly, how ‘China EV Inc’ has bullied its way onto the global stage,” said Tu Le, founder of Beijing-based advisory company Sino Auto Insights.

He added that while both companies cut prices on some cars over the past year, Tesla did so “much more dramatically”, signalling that BYD could distance itself further from the US group over the coming year.

Still, Wedbush Securities analyst Dan Ives said it was an important quarter for Tesla to show strong deliveries and momentum heading into 2024.

Tesla’s annual sales of 1.8mn last year was a “major achievement in a choppy macro [economic environment]” for the electric vehicles sector, he added.

BYD was founded by Wang Chuanfu, a former university professor, in the mid-1990s. After focusing on manufacturing rechargeable batteries, including for mobile phones, the company expanded into the car industry in the early 2000s.

The Chinese group’s early success prompted Buffett’s Berkshire Hathaway to invest in the company in 2008. Despite relying on existing industry technology for many years, BYD has focused on stripping out costs from the production process.

Following years of state support and careful industrial planning by Beijing, China’s automakers now leverage their country’s control over the production of almost every resource, material and component used to make electric vehicles.

BYD’s vertically integrated structure — it controls mines and produces batteries and chips — has made it the envy of foreign rivals as the global car industry transitions away from the combustion engine.

At the end of last year six out of the top-selling EV models in China, the world’s largest car market, were BYD cars, according to Automobility, a Shanghai-based consultancy. While BYD’s share of sales has expanded to more than 35 per cent, Tesla has “struggled” to keep up with the cadence of product launches by Chinese rivals, the consultancy added.