BYD may surpass Tesla to become the new king of BEV in 2023

$Tesla Motors(TSLA)$ and Buffett-backed Chinese company $BYD Co., Ltd.(BYDDY)$ are the world's largest makers of electric vehicles, and the two companies are increasingly competing directly in China and many parts of the world.

In the field of electric vehicles, start-ups such as $NIO Inc.(NIO)$, $Li Auto(LI)$ , $XPeng Inc.(XPEV)$, $Rivian Automotive, Inc.(RIVN)$ and $Lucid Group Inc(LCID)$ have attracted a lot of attention. However, the electric vehicle strategies of traditional automakers such as $General Motors(GM)$ , $Ford(F)$ and $Volkswagen AG(VWAGY)$ have also attracted media attention.

In the increasingly competitive electric vehicle market, Tesla and BYD who can take the EV throne?

In 2022, BYD sold more cars than Tesla. However, in terms of Battery Electrical Vehicle (BEV), $Tesla Motors(TSLA)$ is still the leader, but the gap is rapidly narrowing.

By the end of 2023, BYD may surpass Tesla to become the new king of BEV. In September, BYD's electric vehicle sales (151,193) were already higher than Tesla's delivery level in the third quarter (435,059, amortized to about 145,000 per month).

In addition, BYD's gross margin is significantly higher than that of Tesla, while the gap between net income and revenue has narrowed significantly. $Tesla Motors(TSLA)$ 's gross margin fell to 17.9% in the third quarter, down from 18.2% in the second quarter and 25.1% a year earlier, while its operating margin fell to 7.6% from 17.2% a year earlier.

In contrast, BYD's gross margin in the third quarter was 22.1%, the highest level since the third quarter of 2020, up from 18.72% in the Q2 and 18.96% in the same period last year.

On October 18th, $Tesla Motors(TSLA)$ reported its worst financial results in two years, and fell far short of analysts' expectations, which had been downgraded. To make matters worse, Tesla CEO Elon Musk also poured cold water on the high expectations of markets such as the upcoming electric pickup truck Cybertruck and a future Mexican factory.

$BYD Co., Ltd.(BYDDY)$ , by contrast, reported strong year-on-year growth in earnings and sales in the third quarter. Gross profit margin has risen sharply and is now much higher than Tesla.

Tesla's stock price soared in 2023, but it fell sharply after the latest earnings release and has now fallen below key levels. The stock is trading well below the 200DMA, and at its lowest level in five months.

Tesla's profit margins are already in line with traditional cars, and growth is sluggish. Still, even with the recent drop in its stock price, Tesla's market value remains far higher than that of traditional automakers.

BYD's share price has also done well in 2023, and is now approaching a potential buying point. However, Buffett's Berkshire Hathaway has been reducing its stake in BYD since August, halving its stake to about 5%.

As of October 30, Tesla's market value was $627.3 billion, far below the peak of more than $1 trillion, but still far higher than BYD's $85.7 billion.

From the electric vehicle business, Tesla has a high valuation, which is at risk of a downgrade if Mr Musk fails to make a breakthrough in self-driving, robotics and AI.