Stella

April

Elon Musk

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 Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our&nbsp;<a href="https://tokenist.com/terms-of-service/" style="text-decoration:underline;color:#3c7b7b" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">website policy</a>&nbsp;prior to making financial decisions.
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<p class="has-drop-cap">During the <a aria-label=" (opens in a new tab)" href="https://www.youtube.com/watch?v=BgbF4ZqTxTc" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">earnings call</a> in January 2023, Elon Musk had no qualms about Tesla’s challengers. Noting that Chinese automakers work the “hardest and they work they smartest,” Musk correctly identified the unfolding global EV landscape:</p>
<blockquote class="wp-block-quote">
 <p>“If I were to guess, it would probably be some company out of China as the most likely to be second to Tesla,”</p>
</blockquote>
<p>Tesla’s main counterparts in China are BYD and <a href="https://tokenist.com/tesla-vs-li-auto-which-ev-stock-to-back-in-2024/" rel="noopener noreferrer nofollow" class="deco-link">Li Auto</a>, with the former steadily rising to global EV dominance. Warren Buffett’s Berkshire Hathaway saw BYD’s prospects early on in 2008, purchasing $232 million worth of BYD shares, representing a 9.9% stake in the company.</p>
<p>As of <a aria-label=" (opens in a new tab)" href="https://www.sec.gov/Archives/edgar/data/1067983/000095012324002518/0000950123-24-002518-index.htm" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">February’s filing</a>, Berkshire Hathaway’s portfolio is exposed to 8% of BYD Co. Ltd (BYDDF) stake, at present market price of $25.51 per share, totaling to $2.23 billion. Although this is only 0.6% of the portfolio, it is greater than Buffett’s zero exposure to Tesla (NASDAQ: TSLA).</p>
<p>Given that the legendary investor is known for its <a href="https://tokenist.com/investing/value-stocks/" rel="noopener noreferrer nofollow" class="deco-link">value-oriented approach</a>, will Mr. Musk be proven wrong? Instead of having a Chinese EV company being second to Tesla, could it be the other way around?</p>
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<h3 id="byd-s-ev-bid-which-company-produces-more-cars-in-which-markets">BYD’s EV Bid: Which Company Produces More Cars in Which Markets?</h3>
<p>On April 1st, BYD Company Limited (BYDDF) delivered its year-to-date <a aria-label=" (opens in a new tab)" href="https://www.bydglobal.com/sitesresources/common/tools/generic/web/viewer.html?file=%2Fsites%2FSatellite%2FBYD%20PDF%20Viewer%3Fblobcol%3Durldata%26blobheader%3Dapplication%252Fpdf%26blobkey%3Did%26blobtable%3DMungoBlobs%26blobwhere%3D1638928467135%26ssbinary%3Dtrue" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">March production and sales volume</a> as a non-mandatory report. Combining hybrid and pure EV vehicles, the company sold 626,263 cars, of which 48% were battery-only. This is a 13.44% year-over-year uptick.</p>
<p>For comparison, in Q4 2023, Tesla delivered 484,507 vehicles. This is a 38% YoY delivery increase to 1.81 million for the full year. During the same period, China’s BYD managed to outpace Tesla to 3.02 million, accounting for both plug-in hybrids and pure electric. For Q1 2024, Telsa’s delivery number was significantly <a href="https://tokenist.com/teslas-deliveries-in-q1-short-of-expectations-stock-opens-5-2-lower/" rel="noopener noreferrer nofollow" class="deco-link">lower than expected</a>, with approximately 387,000 vehicles.</p>
<p>Moreover, BYD’s hybrid approach, <a href="https://tokenist.com/three-ev-stocks-to-hold-long-term-as-market-gets-tough/" rel="noopener noreferrer nofollow" class="deco-link">similar to Toyota’s</a>, has a broader market appeal due to lower pricing and less reliance on supercharging infrastructure. That said, BYD’s market is primarily confined to mainland China, accounting for only 8% of deliveries overseas in 2023.</p>
<h3 id="byd-lagging-behind-tesla-in-europe-while-tesla-s-us-market-share-secured">BYD Lagging Behind Tesla in Europe, While Tesla’s US Market Share Secured</h3>
<p>In Europe, BYD’s EV market share is only 1.1%, with plans to expand this stake to 5% on the back of the new plant in Szeged, Hungary. This milestone BYD entry into the EU will have a production capacity of 150,000 cars per year when it goes online by the end of 2025.&nbsp;</p>
<p>Depending on market demands, its capacity could double to 300,000 EVs. On the other hand, Tesla’s Gigafactory Berlin-Brandenburg aims for 1 million EVs per year and millions of battery cells.&nbsp;</p>
<p>In the meantime, Tesla is dominating the EV market share in Europe, with Model Y and Model 3 occupying the top two sales spots, followed by the Audi Q4 e-Tron.&nbsp;</p>
<div class="wp-block-image">
 <figure class="aligncenter size-full"><img decoding="async" width="1009" height="583" src="https://tokenist.com/wp-content/uploads/2024/04/Screenshot-2024-04-02-165602.png" alt="" class="wp-image-204051" srcset="https://tokenist.com/wp-content/uploads/2024/04/Screenshot-2024-04-02-165602.png 1009w, https://tokenist.com/wp-content/uploads/2024/04/Screenshot-2024-04-02-165602-300x173.png 300w, https://tokenist.com/wp-content/uploads/2024/04/Screenshot-2024-04-02-165602-768x444.png 768w, https://tokenist.com/wp-content/uploads/2024/04/Screenshot-2024-04-02-165602-650x376.png 650w" sizes="(max-width: 1009px) 100vw, 1009px">
  <figcaption class="wp-element-caption"><em>Top twenty EV sales in Europe as of January 2024. Image credit: Autovista24 via EV-volumes.com data.</em>
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 </figure>
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<p>Moreover, Tesla’s EV market dominance in the US seems secure. BYD’s CEO of BYD Americas, Stella Li, confirmed to <a aria-label=" (opens in a new tab)" href="https://finance.yahoo.com/video/byd-not-interested-united-states-182445977.html" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">Yahoo Finance</a> in February that the company has no plans to enter the US market. Instead, it will support its efforts in Mexico.</p>
<p>Li also noted that the EV market in the US is insufficiently developed, contrasting its 7% adoption to 35% in China. Biden’s Inflation Reduction Act erected barriers to Chinese EV automakers by limiting eligibility for green tax credits if the materials and components are sourced in China.</p>
<p>Overall, with Tesla US market share fluctuating between 65% – 55%, this translates to more Tesla tailwinds in the future despite being one of the <a href="https://tokenist.com/tesla-one-of-the-most-shorted-us-stocks-in-2023-report/" rel="noopener noreferrer nofollow" class="deco-link">most shorted stocks</a> in 2023. Notably, Tesla’s “Redwood” priced at $25,000 should be the next EV adoption milestone in 2025. If this launch succeeds, the US could significantly ramp up its EV adoption and align with China’s.</p>
<h3 id="tsla-and-byddf-price-targets">TSLA and BYDDF Price Targets</h3>
<p>Over a one-year period, TSLA and BYDDF shares are relatively on equal footing at -15.5% and -12.6%, respectively. The two stocks underwent more significant divergence this year, with TSLA going down -33.7% vs BYDDF rallying up to -4.1%.</p>
<p>From its 52-week low price of $152.37, TSLA stock is now 8% above at $164.84. The average TSLA price over that period was $222.82. Twelve months ahead, 32 analyst inputs pulled by Nasdaq position the average TSLA price target at $201.09, a potential 22% boost.</p>
<p>For BYDDF, the average price target is $33 vs. the current $25.51 per share. Since BYDDF is more cheaply priced and, therefore, easier to move, this would give investors a potential 29% return.</p> <iframe src="https://tokenist.substack.com/embed" width="100%" height="320" style="border:1px solid #EEE; background:white;" frameborder="0" scrolling="no"></iframe>
<p><strong><em>Do you have a price ceiling for EVs outside consideration in favor of petrol cars? Let us know in the comments below.&nbsp;</em></strong></p>
<p><em>Disclaimer: The author does not hold or have a position in any securities discussed in the article.</em></p>
<p>The post <a rel="noopener noreferrer nofollow" href="https://tokenist.com/this-buffet-backed-stock-cannot-compete-with-tesla-in-the-us-but-can-threaten-it-globally/">This Buffet-Backed Stock Cannot Compete with Tesla in the US But Can Threaten it Globally</a> appeared first on <a rel="noopener noreferrer nofollow" href="https://tokenist.com">Tokenist</a>.</p>

This Buffet-Backed Stock Cannot Compete with Tesla in the US But Can Threaten it Globally

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