BYD Overtakes Tesla: What to Know About China’s Leading EV Maker

About BYD (SGX: HYDD)

Founded in 1995 as a rechargeable battery maker, BYD, which stands for “Build Your Dreams,” has grown into the world’s second-largest electric vehicle (EV) manufacturer by sales volume in 2023. 

The company now operates in 77 countries and regions and has sold over 8 million EVs as of July 2024. 

BYD has recently begun expanding production outside China, with new plants in Thailand and Uzbekistan to support its international growth.

BYD Surpasses Tesla in Sales Volume and Revenue

As of September 2024, BYD has sold 2.7 million EVs during the first three quarters, reflecting a 32% increase over the previous year. 

Meanwhile, Tesla, the current EV leader, sold 1.3 million vehicles in the same period. BYD’s overseas sales now contribute 13% of its total revenue, with an impressive annual growth rate of nearly 90%. 

This momentum puts BYD on track to become the world’s largest EV manufacturer in 2024, with its sales volume and revenue already surpassing Tesla’s.

Dominance in China Amid Rising Competition

In China, BYD holds a dominant 35% share of the EV market, with six of its models ranking in the country’s top 10 best-selling cars for the first nine months of 2024. 

However, smaller competitors, such as Li Auto, which holds a 4.8% market share, are also gaining popularity, with a 45% increase in sales volume in 2024.

Non-automotive companies like Xiaomi have entered the EV market as well, launching the SU7 in March to a strong initial response.

Government Support Boosts Demand for EVs in China

In July 2024, China introduced a trade-in subsidy of RMB 20,000  or consumers scrapping old cars for EVs, doubling the previous incentive. This policy led to a 56% year-over-year growth in EV sales in October 2024. 

As the market leader in China, BYD is expected to benefit from ongoing government support, which is part of a broader stimulus program to boost consumer spending.

Strong Sales Volume But Lower Prices Affect Profit Growth

In its latest half-year earnings report, BYD posted a net profit of 14.1 billion RMB, a 23% year-over-year increase, with revenue rising 16%. 

This growth comes on the back of a 28% increase in EV sales volume. However, profit growth was tempered by lower average selling prices in China due to competitive pressures from both local and foreign brands like Tesla. 

The launch of BYD’s budget-friendly Seagull (Honor edition) in March 2024, which is priced lower than most of its other models, contributed to the reduced average selling price. 

Nevertheless, BYD has implemented cost-control measures that have helped partially offset the impact of lower vehicle prices.

Key Risks

#1 - Tariffs on Chinese EV Imports

As BYD expands internationally, it faces risks from protectionist policies in foreign markets. In October 2024, the European Union imposed tariffs of up to 45% on Chinese-made EVs, which could impact BYD’s export strategy.

#2 - Rising Competition in China

Rising Competition in China: Intensifying competition in China may drive down EV prices, pressuring BYD’s profit margins even as sales volumes grow.

Price-to-Sales Ratio at Discount to Peers

BYD is one of the few profitable EV manufacturers, while many of its competitors are still unprofitable. 

Comparing companies using the price-to-sales (P/S) ratio, BYD is attractively valued, trading at a low 1.2x P/S ratio.

You can now trade BYD through Hong Kong Singapore Depository Receipts (SDRs).

These HK SDRs offer investors a more accessible way to invest in five Hong Kong-listed companies, including BYD.

In particular, BYD can now be purchased with a lower minimum outlay through SDRs. These SDRs will also be custodised in your CDP account. 

Join our upcoming SGX Academy webinar on 12 November, where we will share more about HK SDRs.

If you would like to gain broad-based exposure to the China EV sector, learn more about how to do so through an exchange traded fund (ETF). 

Join the Beansprout Telegram group for the latest insights on Singapore stocks, REITs, bonds and ETFs. 

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