The BYD Opportunity: Tesla-Like Growth at a Fraction of the Price
Within the electric vehicle (EV) landscape, two companies stand head and shoulders above the rest. Elon Musk’s Tesla (NASDAQ: TSLA) needs little introduction; the company is the dominant EV player in the U.S. and is one of the world’s top ten most valuable stocks. However, on the other side of the Pacific Ocean, Chinese automaker BYD (OTCMKTS: BYDDY) has become a huge force in its own right. It is the world's third most valuable automotive stock and is one of only three EV companies that have achieved profitability.
Tesla and Li Auto (NASDAQ: LI) are the other two. However, Li’s $20 billion in the last 12 months (LTM) sales pale compared to the $92 billion and $118 billion in revenue Tesla and BYD generated, respectively. This positions the companies in a league of their own.
With this dynamic established, let’s get down to the fundamental question investors should ask: Is BYD a stock worth considering?
Tesla vs. BYD: Similar Financials, Stark Valuation Differences
Looking at Tesla and BYD's valuations in relation to their sales provides an important starting point for analyzing BYD. Year-to-date, Tesla's market capitalization is approximately $1.4 trillion, while BYD's stands at $130 billion—less than one-tenth of Tesla's value.
However, as stated above, BYD generated $118 billion in LTM sales, around $26 billion more than Tesla.
This difference signals a significant dislocation in value between the two companies right off the bat. However, for the sake of argument, let’s exclude BYD’s mobile handset business, isolating its automotive business.
Even then, BYD’s automotive revenue of $96 billion exceeds Tesla’s $92 billion LTM revenue. This supports a bullish case for BYD versus Tesla, with the firm having higher revenues but a fraction of its market cap.
Tesla and BYD are also fairly similar when it comes to profitability. In the first half of 2025, BYD’s gross margin in its automotive business was approximately 20%.
That’s moderately higher than Tesla's 18% automotive gross margin over the same period. BYD also had an earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of around 15.5%.
That’s very similar to the 14.8% adjusted EBITDA margin Tesla saw.
BYD’s automotive net income in H1 2025 was $1.4 billion for a net income margin of 4.2%. Meanwhile, Tesla was moderately more profitable, achieving non-adjusted net income of around $1.6 billion for a margin of 5.2%.
With all these numbers being so close together, it isn't easy to reconcile why Tesla’s valuation is so much higher than BYD's. However, BYD is facing a key problem that may worry investors.
Chinese Government Influence Complicates BYD’s Outlook
Much of BYD’s rise results from Chinese EV subsidies, which have caused overproduction and oversupply in China. This has led companies to slash prices to attract consumers.
Price wars and the Chinese government's attempt to limit them contributed to BYD’s net profit falling 30% last quarter. Despite this, the company’s profit in the first half of the year is still up 14%.
On the other hand, things are going well for BYD outside of China. The company’s international revenue increased by 50% in H1 2025.
In April, the company also outpaced Tesla in EV registrations for the first time ever. BYD extended its gains on Tesla significantly in July.
Despite this, China continues to be the company's most vital market, representing approximately 73% of automotive revenue. This situation adds complexity when evaluating an investment in the stock. Although China is the largest EV market globally, substantial government intervention creates uncertainty about future developments.
Buffett Sells BYD, But the Stock’s Valuation Is Hard to Ignore
Warren Buffett’s Berkshire Hathaway recently completely sold out of its stake in BYD. However, the company has been selling its stake in BYD at a fairly routine pace since Q4 2022 while achieving a massive return on the stock.
This makes it difficult to say that recent events caused the firm to hit the panic button.
Overall, it seems clear that BYD is trading at a depressed valuation compared to Tesla. Even if the stock doubled in price, it still wouldn’t be near Tesla’s market cap. This, combined with BYD’s international strength, sets up a favorable risk-reward opportunity in the stock.
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