Author: ED CARSON
Source
Tesla (TSLA) and BYD (BYDDF) are the world’s largest electric-vehicle makers. Which one is No. 1 depends on your EV definition.
X
A lot of attention is focused on EV startups such as Nio (NIO), Li Auto (LI), Xpeng (XPEV), Rivian (RIVN) and Lucid (LCID). Efforts by traditional automakers such as General Motors (GM) and Ford Motor (F) also get coverage. However, Tesla and BYD stand apart.
In 2022, BYD vehicle sales raced far past Tesla’s. Among all-battery electric vehicles, or BEVs, Tesla still leads, though BYD is rapidly closing the gap.
Tesla announced big price cuts in China and key Asian markets on Jan. 6, followed by sweeping discounts in the U.S. and Europe. Many other China EV makers have cut prices in turn, with BYD doing so in late February.
Tesla earnings topped Q4 views on Jan. 25, with Elon Musk bullish on production and demand for 2023. Tesla Investor Day on March 1 is expected to unveil upcoming and planned advances in vehicles, self-driving and batteries.
BYD’s preliminary results suggest Q4 net profit rose as much as 1,179% vs. a year earlier. BYD will launch a slew of vehicles across the price scale in the next few months, while massively expanding at home and abroad.
Despite their similarities and size, Tesla and BYD historically haven’t competed much directly. That’s starting to change, with more BYD models vying for the same segments as Tesla.
Tesla stock had a terrible 2022, plunging sharply in December and to start 2023. But shares have nearly doubled since Jan. 6, when the latest China price cuts were announced. BYD stock is up in 2023 but has pulled back in recent weeks.
Let’s take a look at BYD vs. Tesla, as well as BYDDF stock vs. TSLA stock.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Tesla Vs. BYD: Does BYD Sell More EVs Than Tesla?
Tesla unit sales came in at 1,313,851 for 2022, up 40% vs. 2021 but below the 50% target. The Model 3 sedan and Model Y crossover accounted for the vast majority of sales. The high-end Model S and X vehicles accounted for the rest.
Fourth-quarter Tesla deliveries came in at 405,278, up 31% vs. a year earlier and 18% above Tesla’s old record of 343,830 in the third quarter. Tesla cut prices and offered big year-end discounts in its major markets to boost sales. But that still well short of lowered estimates around 420,000.
Q4 production swelled to 439,701, exceeding deliveries by more than 34,000. That’s even with Tesla Shanghai curbing production on Dec. 12 and suspending output on Dec. 24 through Jan. 1.
Perhaps the biggest concern is that Tesla’s new orders appear to be well below the current delivery pace. Tesla may need price cuts or other incentives that greatly exceed late 2022 offers just to maintain deliveries, let alone increase.
BYD sales surged 209% to 1,863,494 in 2022. Of the personal vehicles — excluding big rigs, buses and heavy equipment — some 911,140 were BEV vehicles and 946,239 plug-in hybrid (PHEV) vehicles. BYD’s hybrids offer at least 50 miles of battery range.
Q4 sales came in at 683,440, up 157% vs. a year earlier and 27% higher than Q3. Of the personal vehicles, 329,011 were BEV.
On Feb. 1, BYD reported January sales of 151,341 all-electric BEVs and plug-in hybrids, up 62% vs. a year earlier but down 36% vs. December’s record 235,197 vehicles. Covid production impacts in late December continued into early January. Meanwhile, the China New Year holiday also impacted output and sales.
In January, BYD sold 71,338 BEVs and 78,826 PHEVs.
But in many ways, BYD’s year starts with the China new year. Production and deliveries are starting to ramp up strongly yet again.
BYD will release February sales in a few days.
Tesla Price Cuts
Tesla slashed prices in China and Asia on Jan. 6, followe by sweeping cuts in the U.S. and Europe on Jan. 13. That was in response to weakening demand. The U.S. move also made most Model 3 and Model Y vehicles eligible for new U.S. tax credits of up to $7,500, subject to a variety of conditions.
The Tesla Model 3 price is now much closer to the BYD Seal, which starts at 225,800 yuan ($32,857). When the Seal first launched, the Model 3’s China price was roughly $10,000 more.
The global price cuts sparked demand for Tesla Model 3 and Y vehicles, but there are indications that orders are slumping again, at least outside the Model Y in the U.S. Tesla is offering big discounts on Model S and X inventory in the U.S., and slashed prices yet again in Denmark.
In China, a slew of rivals have slashed prices, muting the impact of Tesla’s discounts, including BYD as of late February. BYD and rivals also will launch a bevy of new models in the next few months, many of which will target Tesla directly.
Tesla Cybertruck, Other Models
Meanwhile, the Cybertruck is slated to arrive in summer 2023, which would be Tesla’s first new model since the Model Y launched in early 2020. The oft-delayed truck, with its love-it-or-hate-it design, may not begin “volume” production until 2024.
A big question is what the Cybertruck’s prices and specs will be.
The Cybertruck, when it arrives, is likely to be largely a North American vehicle. So Tesla may not have a new vehicle for most of its markets until 2024 at the earliest.
Tesla has handed over a few dozen Semi trucks to Pepsi, but didn’t declare anyas deliveries in Q4. It’s unclear how many Semi trucks will be produced in 2023, with key prices and specs unclear.
Tesla Investor Day
Tesla said it will offer details of a new vehicle platform at a March 1 Investor Day event. There’s speculation that it’ll be a lower-priced model, which would open a huge market opportunities. But it’s unclear when this new vehicle would enter product. But even now, a cheaper Tesla would face a slew of rival models, including several from BYD.
Tesla also could confirmed a Model 3 revamp, with a focus on lowering production costs. The so-called “Highland” project has not been confirmed. But Tesla Shanghai reportedly has halted Model 3 output yet again to make production line improvements for a Model 3 upgrade later this year.
The EV giant is sure to discuss its own battery production efforts, including a big Nevada plant expansion to make 4680 cells.
Tesla Investor Day also will likely tout its energy storage plans, which are set to ramp up.
Tesla could announce new EV plants, with Mexico and Indonesia being the latest sites floated. But it’s unclear that more production capacity is what Tesla needs now, at least without new models.
Elon Musk has hinted that he may reveal his “Master Plan 3,” outlining his latest vision statement for Tesla. His Master Plan 2 from 2016, which included robotaxis and offering a full lineup of EV models, is still largely a “to do” list.
Anticipation about Tesla Investor Day and “Master Plan” hints have helped fuel Tesla stock’s big rebound in 2023.
Other Tesla Growth Drivers
Tesla Austin is ramping up Model Y production, with reports that the EV giant already plans a significant expansion.
Tesla Berlin also is picking up production. But that’s a mixed blessing. Tesla Shanghai exports the Model 3 and some Model Y vehicles to Europe, as well as many other markets outside of North America. But as Berlin production increases, Shanghai needs to export fewer Model Ys to Europe.
Shanghai, which ramped up capacity in Q3 2022, didn’t have enough demand in China and its export markets in Q4, slowing and then suspending production at year-end despite an October price cut in China, generous year-end incentives and expiring EV subsidies.
Tesla is entering Thailand, a few months after BYD. It’ll be a test to see how much demand Tesla can have in middle-income countries besides China. A cheaper Tesla model would likely be helpful in such markets.
The Best EV Stocks To Buy And Watch
BYD 2023 Growth Drivers
BYD continues to rapidly expand its EV and battery production, with more plants in China coming on line in 2023.
BYD is building an EV assembly plant in Thailand and will do so in Brazil. It says it’ll have at least one EV plant in Europe, with reports that it may buy a Ford plant in Germany. But none of those would be 2023 growth drivers.
BYD reportedly eyeing another EV plant, perhaps Indonesia. That would open a new market for its models and likely gain more access to Indonesia’s raw materials.
The EV and battery giant resisted the China price war to start 2023, actually raising some prices on Jan. 1. But in late February it announced cuts to its Dynasty line, including the Han and Yuan Plus, but not the Seal and other Ocean EVs.
BYD will introduce a large number of BEVs and PHEVs across a variety of brands in the coming months.
The BYD Seal, which offers essentially the same dimensions and specs as a Model 3, is ramping up sales. In 2023, BYD is expected to introduced the Sea Lion to take on the Model Y.
BYD’s 90%-owned Denza unit, with prices starting around $50,000, will introduce multiple EV and PHEV vehicles in 2023, including a crossover that will compete with higher-end Model Y trims. They will join a premium D9 minivan.
On Jan. 5, BYD formally launched the super-premium brand Yangwang, which means “look up.” Yangwang also unveiled its the U8 off-road vehicle and U9 sports car. super car, the U9. No word was given on when they may launch. Yangwang may not drive many sales, but could boost the broader BYD brand image and test out advanced technologies that will filter down to Denza and BYD.
BYD also plans another “personalized” premium brand in 2023, perhaps starting with a pickup.
BYD hasn’t forgotten its affordable roots. It’s moving toward launching the Seagull by mid-year. It’s a small EV that likely will start below $9,000.
BYD also launched the 2023 Qin+ DM-i sedan, with a starting price just below 100,000 yuan ($14,650), the first time it’s offered a DM-i PHEV below that key level. BYD touted huge initial orders for the Qin+ DM-i, which is targeting all-gas vehicles.
BYD is in the midst of a massive international expansion. In late 2022, it entered several European countries, as well as Australia, New Zealand, Singapore and Thailand. BYD has begun Atto 3 deliveries in Malaysia and India, with the EV giant entering Japan on Jan. 31, along with several new European countries in early 2023. BYD also is entering Mexico this year, as part of a big push throughout Latin America.
BYD also will introduce additional models, including the Seal, to many new markets during the year.
Exports are still a small share of sales, reaching 11,320 in December. But it’s growing rapidly from almost nothing in mid-2022.
The U.S. is not in BYD’s sights yet for personal vehicles, though it does build EV buses in Lancaster, California.
Five Best Chinese Stocks To Watch Now
Tesla Vs. BYD Batteries
Tesla doesn’t mass produce its own batteries. For lithium-ion batteries, its joint venture partner Panasonic makes the cells and Tesla packages them, as well as from South Korea’s LG. Tesla also buys lithium iron phosphate (LFP) batteries from China’s CATL, as well as buying some batteries from BYD.
Tesla is working on 4680 batteries, first touted on the late 2020 Battery Day. The 4680 batteries are standard lithium-ion chemistry, but the larger form factor offers the potential for various benefits and cost savings. Tesla’s 4680 pilot program has picked up output in recent months.
But it’s unclear if Tesla has solved key technical hurdles to allow for mass production and cost savings for the 4680 battery. It’s also not clear if some of the battery benefits are coming to fruition.
BYD, meanwhile, is one of the world’s largest EV battery makers. Its Blade batteries, a specialized LFP, are seen as among the safest available. BYD is ramping up battery plants to supply third-party EV makers as well as storage, above and beyond its own EV needs.
BYD, like CATL and some others, is working on sodium-ion batteries. Those could be useful in smaller EV vehicles as well as energy storage.
Both Tesla and BYD are expanding fast in battery storage for home or business applications or utility-scale projects.
Tesla deployed 6.5 gigawatt hours worth of energy storage in 2022, up 64%. Storage spiked 154% in Q4 to 2.46 GWh. BYD said in mid-December that it had deployed 6.5 gigawatts’ worth of battery storage at that point in 2022.
With Tesla’s auto margins falling, bulls are betting on huge profits from a booming storage business.
Tesla now uses LFP batteries from CATL for battery storage, while BYD uses its own.
Musk has discussed Tesla getting involved in lithium mining, but hasn’t done so. Tesla has proposed a lithium processing plant in Texas.
Tesla reportedly is in talks to buy Sigma Lithium (SGML), which is poised to begin commercial production to secure more battery metal supplies.
BYD is involved in several lithium mining projects already.
Tesla, BYD Other Businesses
Tesla has its own Supercharger network in its markets. That’s especially important in the U.S. and countries like Australia, where third-party charging facilities are limited.
Tesla has agreed to open up 7,500 Superchargers in the U.S. to other EVs.
Tesla also has a solar installation business.
Tesla’s self-driving ambitions continue. Autopilot and Full Self-Driving help bolster Tesla’s image of cutting-edge technology, while the $15,000 FSD is a key revenue and profit driver, especially in the U.S. However, even FSD Beta remains a Level 2 driver-assistance system vs. a Level 4 or 5 fully autonomous system.
GM’s Cruise and Google unit Waymo are among those rolling out Level 4 robotaxis in some big U.S. cities, while a large number of Chinese firms are doing the same in China.
Tesla is recalling more than 362,000 vehicles for FSD flaws that can cause accidents. The EV giant plans on an over-the-air software patch.
U.S. regulators are investigating dozens of crashes involving Tesla Autopilot or FSD, with civilian and criminal probes. The SEC is now probing Musk’s role in crafting Tesla’s self-driving claims, Bloomberg reported Jan. 28. It’s part of an ongoing investigation into the company’s statements on Autopilot, according to a source.
BYD, notably, makes its own chips. That, along with the in-house batteries and other vertical integrations, helped BYD expand rapidly in the past two years as many rivals struggled from chip and other supply shortages.
The EV and battery giant also has solar operations.
BYD’s chairman has said driver-assist systems will be introduced in 2023. But BYD has various autonomous driving initiatives, with Baidu (BIDU), Nvidia (NVDA) and China’s Momenta. BYD says it will use chips from Horizon Robotics in some 2023 models and has a stake in Lidar supplier RoboSense. BYD reportedly is working on in-house Lidar and self-driving chips as well.
BYD Co. is largely known for its BYD Auto operations. BYD Electronics, which accounts for an increasingly smaller share of overall revenue, is involved in mostly low-margin business such as smartphone components and assembly.
Tesla Vs. BYD Earnings
Tesla earnings more than tripled to $2.26 a share in 2021, vs. 75 cents in 2020 and just 1 cent in 2019.
Tesla earnings rose 40% in Q4. That modestly topped analyst views, which were shaved heading into the announcement. Revenue grew 37% beating some forecasts and missing others. Both were robust gains, but the slowest in several quarters.
Tesla’s gross margin slipped to 23.8% from 25.1% in Q3 and 27.4% in Q4 2022. Its automotive gross margin fell to 25.9% from 27.9% in Q3 and 30.6% a year earlier. That was below consensus. Gross margins are expected to fall significantly in 2023 due to the sweeping price cuts. Tesla excludes R&D costs and service center overhead from its gross margin calculations, unlike most automakers. Tesla’s overall gross margin, factoring in only the R&D, would have been 20.4% in Q4.
Tesla said it expects to produce 1.8 million vehicles in 2023, up 37% from last year. But Musk said on the conference call that the internal target is about two million.
BYD earnings are booming again after falling in 2021 amid massive investments.
On Jan. 30, BYD said full-year 2022 net profit was 16 billion yuan-17 billion yuan ($2.37 billion-$2.52 billion), up 425%-458% in local currency terms. That implies Q4 net profit of 6.7 billion yuan-7.7 billion yuan ($990 million-$1.17 billion), up 1,013%-1,179% in local currency.
Annual revenue should exceed 420 billion yuan ($62.2 billion), BYD said. That implies Q4 revenue exceeding 152.3 billion yuan ($22.6 billion), suggesting at least 115% year-over-year growth.
Third-quarter net income jumped 350% vs. a year earlier in local currency terms, with revenue up 116%. Adjusted earnings spiked 923%.
With preliminary profit skyrocketing in Q4, BYD gross margins almost certainly improved vs. Q3.
BYD’s gross margin was 18.96% in Q3, up from 14.39% in Q2 and 13.33% a year earlier. BYD Auto gross margin was 22.77% vs. 17.82% in Q2 and 17.31% vs. a year earlier.
Tesla Stock Technicals
Tesla stock plunged 65% in 2022, including a 37% dive in December alone, according to MarketSmith analysis. Shares are now up 59.8% in 2023. TSLA has nearly doubled from its Jan. 6 low of 101.81,
Shares have vaulted above their 50-day moving average and closing in on their 200-day line. TSLA stock is now pausing just below the 200-day line. A decisive move above the 200-day line could offer some sort of entry for TSLA stock. But it would be aggressive, especially given the current shaky overall market. A longer consolidation, or one that largely forms above the 200-day line, would be less risky.
Investors are looking past margin impacts and betting that Tesla’s price cuts are spurring sustained demand. If demand wanes, perhaps spurring further price cuts, that could definitely derail the rosy scenario. Keep in mind that strong or weak demand in one major market may not carry over in other regions.
BYD Stock Technicals
BYD stock slumped 27.7% in 2022, but is up 13.1% in 2023.
The stock hit a bear market low on Nov. 25. Shares bounced with other China EV makers on reopening hopes.
BYD stock rebounded above its 200-day moving average on Jan. 26 and kept climbing for a few days, But shares have retreated back below the 200-day line and the 50-day line. BYD needs to rebound back above those key levels, forging a new base.
Warren Buffett’s Berkshire Hathaway (BRKB) has been a longtime major investor in BYD. But Berkshire has sold slices of its H-shares in BYD in nine moves, starting in late August. The latest was disclosed on Feb. 9. Berkshire still owns about 6% of BYD, based on all share classes, but has cut its stake by more than 40%.
Tesla Vs. BYD Market Cap
In terms of market cap, Tesla stock vs. BYD stock is still lopsided.
Tesla is worth nearly $623 billion as of Feb. 25, off its peak valuation above $1 trillion but well above early January lows. That’s far above BYD’s $75.8 billion.
An S&P 500 giant, Tesla stock has an array of institutional sponsors, including many IBD-style mutual funds and other A+ funds. TSLA stock remains a major holding across Ark Invest’s ETFs.
BYD stock has far-less big sponsorship, though Buffett’s Berkshire has been a notable investor for years. Cathie Wood’s Ark also owns a small stake. Very few stocks can boast both Buffett and Wood as investors.
BYD stock is listed in Hong Kong and Shenzhen, and only trades over the counter in the U.S. That also means the BYDDF stock chart shows a lot of minigaps.
Tesla Stock Vs. BYD Stock
BYD is still the upstart vs. Tesla in terms of pure electric vehicles and premium pricing, but the “BEV” title is in sight while the price gap is narrowing. More broadly, BYD in many ways is the EV maker Tesla has claimed or aspired to be. BYD makes its own batteries and chips, and sells those batteries to third parties such as Tesla. Musk has talked about making a $25,000 Tesla; BYD makes EVs profitably at $25,000 — and far less.
With Tesla no longer “production constrained,” it’s shifting to price cuts and incentives to support demand. But it calls into question the super-bull hopes for 20 million EVs sold in 2030. Likewise, skepticism has grown about Tesla’s self-driving efforts.
BYD has expanded in several big markets, with many more planned in the next few months. Its model lineup continues to expand dramatically, and moving upscale
Tesla Investor Day could be a catalyst for TSLA stock. Tesla may introduce its Cybertruck pickup in 2023, its first new passenger model in over three years, but with a lot of unknowns.
Tesla stock had a horrible 2022, while BYD stock fared badly too. Tesla has skyrocketed in 2023 and could offer an aggressive entry. BYD is up modestly for the year but has fallen back below key levels.
Both EV giants are delivering far more electric vehicles than rivals. Both have been growing fast with strong profits, though 2023 could see a greater divergence.
So keep your eyes on BYD and Tesla in 2023, as well as Tesla stock vs. BYD stock.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MAY ALSO LIKE:
Why This IBD Tool Simplifies The Search For Top Stocks
IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today
Futures: What To Do As Market Rally Suffers More Damage
The post Tesla Stock Vs. BYD Stock: Tesla Investor Day Looms; BYD Joins China EV Price War appeared first on Investor’s Business Daily.