Under the Spotlight Wall St: BYD (BYDDY)

Will 2025 be the year that BYD ($BYDDY) zooms past Tesla ($TSLA) to steal the crown as the world’s largest maker and seller of electric vehicles?

It was a close contest in 2024. Tesla just pipped BYD at the post to deliver more EV sales, while the Chinese auto giant secured top spot for EV production for the first time. Taking first place in both production and sales would be a great gift to celebrate BYD’s 30th anniversary this year. That’s right, it was founded as a battery company all the way back in 1995.

However, BYD is lagging where it counts most for investors: share price. Tesla shares are up 68% over the past year compared to BYD’s 24% gain. At least BYD has outpaced other U.S.-listed Chinese car makers: Nio ($NIO) is down 42% and XPeng ($XPEV) has fallen 4%.

Drag race

BYD sales have strong momentum coming into 2025 – Q4 smashed it thanks to end of year promotions and discounts. The Chinese car maker sold around 595,000 EVs in the quarter, or 100,000 more than Tesla. And while Tesla sold a total of 1.78m EVs in 2024, that’s down from 1.8m in 2023 – the first annual decline in Tesla sales. 

That’s not to say BYD will have it easy in 2025, as Tesla launches its new Model Y to invigorate interest. BYD’s answer could be its next generation ‘blade battery’, to be released in 2025, which will extend the driving range of its cars. The company’s battery expertise is key to its success, and its low-cost battery manufacturing has largely driven the rise in production. 

There were 1,777,965 BYD EVs built in 2024 vs Tesla’s 1,773,443. While that win may have been narrow, the real story is BYD’s ability to close the gap in the space of a year. In 2023, the firms had built 1,589,571 and 1,845,985 EVs respectively.

EVs are only part of the BYD story; it also sells other cars like plug-in hybrids. It all falls under ‘new energy vehicles’ (NEV), of which total sales rose 41% year-on-year to 4.27m, exceeding a 4m target. BYD has been a beneficiary of Chinese government policy to drive NEV adoption. Strong sales growth is expected to see revenues top US$100b for the first time in 2024, possibly outpacing Ford ($F) and Honda ($HMC). 

BYD is targeting further growth through overseas production. However, construction of a plant in Brazil – its first EV plant outside of Asia – was halted amid claims of ‘slavery-like conditions.’ A factory in Thailand was opened in 2024 and a new one in Hungary is planned for this year. Investment bank Citi named BYD its best EV play given its forecast for global international sales to average around 60,000 units a month from now on. More Australian sales are targeted, with BYD offering a $3,000 discount and an EV charger in a new year’s promotion.  

Trade wars

BYD’s drive for global EV supremacy faces resistance from western governments, keen to profit from a growing industry. The International Energy Agency forecasts the number of EVs will grow from 45m in 2023 to 250m in 2030 and then 525m in 2035. That scenario averages 23% annual growth over 12 years. 

The U.S. has been openly hostile. Donald Trump’s tough talk on China is preceded by president Joe Biden’s 100% tariff on Chinese EVs in 2024. The focus will be on BYD’s plans to build a factory in Mexico given Trump’s threats to increase tariffs. BYD claims it has no plans to export cars to the U.S. from Mexico, which is part of the US-Mexico-Canada Agreement on free trade. 

Meanwhile, the European Union last year raised tariffs on Chinese EVs from 10% to 45% for five years, aiming to protect the region’s car makers from the lower-priced competitors.

For now, BYD sells around 90% of its cars in China.  

Buffett reverses gear

BYD may snare the EV crown this year, but one person who won’t be along for the ride is famed investor Warren Buffett.

Buffett’s Berkshire Hathaway ($BRK.B) has slashed its BYD holdings over the past few years. The Oracle of Omaha first bought the Hong Kong-listed stock in 2008, and held as much as 21% in 2021. That figure went down to less than 5% after the last sale of shares in July last year. 

When quizzed in 2023 on selling BYD, Buffett said ‘we don’t want to compete with Elon in a lot of things.’ Buffett mentioned Tesla’s self-driving technology at Berkshire’s annual meeting last year, prompting Elon Musk to write on X that Berkshire ‘should take a position in Tesla’. Given $TSLA trades at more than 100x forecast 2025 earnings, compared to BYD at around 17x, that seems unlikely for the renowned value investor. 

BYD starts 2025 in top gear as it looks to overtake Tesla in the EV race. Deft steering will be needed amid the twists and turns of increased tariffs and new models from Musk’s company.   

This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.