BYD is quickly gaining ground on Tesla as a top seller of electric vehicles (EVs), with soaring profits illustrating its sales prowess amid growing competition in China.
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While Tesla’s shares have risen significantly more than BYD’s this year, the latter is displaying robust momentum. In October, BYD’s Hong Kong-listed shares increased by around 1%, surpassing Tesla’s 17% decline and the fall in other EV companies.
Traders are showing confidence in BYD through bullish options trading, and analysts have raised their earnings projections for the Chinese automaker following its strong performance this month.
Despite intensifying competition and a general slowdown in China’s new-energy vehicle market, BYD achieved record-breaking sales. The company is set to report its third-quarter earnings.
Elon Musk’s recent pessimistic outlook, attributing declining Tesla sales to rising interest rates, has cast a shadow over the global EV sector. Tesla’s results have also been impacted by a months-long price war initiated by the company to stimulate demand. During this period, analysts have been lowering their earnings-per-share estimates for Tesla, while BYD’s outlook has been on an upward trajectory.
Kevin Net, Head of Asian Equities at Tocqueville Finance, has expressed confidence in BYD, highlighting its discipline in balancing volume growth with profitability. He also noted BYD’s growing presence in the hybrid market in China, contributing to higher margins.
In the latest quarter, BYD recorded a record 822,094 vehicle sales, including hybrids, solidifying its position as China’s leading automotive brand. Impressively, BYD seems to be increasing its profitability per vehicle despite price competition. JPMorgan Chase & Co. estimates indicate that profit per vehicle, excluding the impact of the company’s electronics unit, increased by as much as 46% compared to the previous quarter.
Analysts believe that BYD’s profitability will continue into the next year due to strong sales of high-end vehicles and ongoing international expansion. The company is expected to begin deliveries of its high-end Yangwang U8 and Fang Cheng Bao BAO 5 models in the fourth quarter.
While BYD has achieved significant market share in countries like Brazil, it has yet to enter the US passenger-car market, primarily due to tax and political considerations. The positive profit outlook has boosted the attractiveness of BYD’s stock, reducing its forward earnings multiple to about 18 times compared to Tesla’s over 50 times. Furthermore, recent options data suggests a more bullish sentiment compared to a month ago, reinforcing BYD’s position in the competitive EV market.
