BYD vs Tesla Stock: Which Is Best?

BYD vs Tesla Stock: Electric vehicles (EVs) have finally become powerful enough to meet the needs of mainstream consumers, and demand for alternatives to gas and diesel has skyrocketed.

The combination of improved battery technology, expanded charging infrastructure, and lower prices prompted drivers to rethink their dependence on traditional gasoline vehicles – a trend that was strengthened by the sudden sharp rise in gas and diesel prices in 2022.

In 2021, electric vehicles made up nine percent of total automotive sales. That’s approximately 6.6 million units – nearly double 2020’s EV sales.

Industry analyst Allied Market Research calculated the global electric vehicle market at a value of $163.01 billion for 2020, and the firm predicts a compound annual growth rate (CAGR) of 18.2 percent over the next ten years. If correct, that would put the total value of the electric vehicle market at $823.75 billion by 2030.

Clearly, there are massive profits to be made for the electric vehicle makers that exceed expectations in engineering, safety, and reliability – and there are plenty of companies scrambling to capture a piece of the growing market.

However, two stand out from the crowd of contenders. By any measure, BYD and Tesla are leading the way when it comes to EV technology.

It’s a battle of the titans because these two companies aren’t just competitors in the EV marketplace. They are backed by two of the wealthiest and most powerful businessmen in the world – Warren Buffett and Elon Musk. The contrast between Buffett’s and Musk’s business strategies is striking, and the two occasionally exchange words on the merits (or lack thereof) of the other’s general approach.

In the EV market, it appears the previously mild rivalry between Buffett and Musk is getting a bit more heated. Warren Buffett’s Berkshire Hathaway has a large position in BYD, while Tesla is synonymous with CEO Elon Musk.

Until recently, most EV aficionados put their faith in Tesla technology, but changes are coming. Can BYD overtake Tesla in the electric vehicle wars? According to Berkshire Hathaway, the answer is emphatically yes.

Is BYD A Tesla Competitor?

BYD, a maker of hybrid and electric vehicles, is barely on the radar outside of China, its home country. Though it has been in business longer than Tesla – 1995 vs. Tesla’s 2003 inception – very few international consumers are familiar with the brand.

In fact, BYD sells electric buses in other parts of the world besides China, however it hasn’t invested in marketing cars to international consumers until now.

In 2022, BYD announced that it is exploring sales opportunities for hybrid and fully electric models on multiple continents, including Australia and parts of Europe.

For years, Elon Musk made it clear that he did not believe BYD was a realistic threat to Tesla. He pointed out that his sleek, fully electric line of luxury vehicles had significant advantages over BYD.

For example, in a 2011 interview with Bloomberg, Musk remarked, “Have you seen their car? I don’t think they make a good product.” He went on to make a bold prediction that BYD would never be capable of competing with Tesla.

Then, in the first six months of 2022, BYD did the unthinkable. It outsold Tesla with deliveries totaling 641,000 – a full 80,000 more than Tesla. Its affordable price and brand recognition in China, the world’s largest EV and hybrid market, put it in a leadership position domestically.

Now BYD is coming for a piece of the international market, and Berkshire Hathaway’s Charlie Munger, Warren Buffett’s partner and closest advisor, is confident that BYD will emerge victorious over Tesla.

How Does BYD Compare to Tesla?

Charlie Munger isn’t one to brag about his accomplishments, but he couldn’t help sharing his pride in picking BYD stock. Back in 2008, he was the biggest proponent of adding BYD stock to Berkshire Hathaway’s portfolio. He recently commented, “I have never helped do anything at Berkshire [Hathaway] that was as good as BYD and I only did it once.”

While Munger, like Warren Buffett, admires Elon Musk’s accomplishments, neither has enough confidence in Musk nor Tesla to buy Tesla stock. Both have indicated that they have concerns about Musk’s methods when it comes to decision-making, and neither is impressed by his indiscreet posts on Twitter.

When Munger was asked whether he remains convinced that BYD stock is a better choice than Tesla, Munger said, “Tesla last year reduced its prices in China twice. BYD increased its prices. We are direct competitors. BYD is so much ahead of Tesla in China … it’s almost ridiculous.”

It’s true that in China, it comes down to BYD vs Tesla, but the same can’t be said of the US market. Tesla controls a substantial portion of the US EV market, and to date, BYD hasn’t shared any plans to introduce its vehicles to US consumers.

Given the complexities of trade between the US and China, that’s no surprise – but there is reason for Tesla to be concerned if BYD eventually enters the US market. The vehicles are priced far more competitively, so they are likely to attract middle-class consumers interested in making the switch to electric.

Of course, tariffs and other measures may even out the pricing and protect US EV manufacturers like Tesla, General Motors, and Ford. For example, vehicles built outside of the US are not eligible for the $7,500 tax credit, which makes a big difference in the total out-of-pocket expense for an alternative fuel car.

For his part, Elon Musk hasn’t admitted that any Chinese car company can overtake Tesla, but he has said that he believes a Chinese automaker will come in second to Tesla. During the last Tesla earnings call, Musk said, “We have a lot of respect for the car companies in China. They are the most competitive in the world … They work the hardest and they work the smartest.”

Tesla vs BYD Stock: Which Is Best?

In the end, it may not matter which company sells more cars from the perspective of investors. The bigger question is which company is better able to translate sales into profits, then return those profits to shareholders.

Tesla has been on a roller coaster ride over the past three years, and shareholders are struggling to hang on. In 2020, the company’s value increased by 743 percent, then added another 50 percent in 2021.

However, Tesla lost a significant portion of its value in 2022, partly due to the same factors that put pressure on all tech and innovation stocks. But at least some part of the decline in Tesla stock prices has also been attributed to Elon Musk’s Twitter distractions.

Musk spent a good portion of 2022 negotiating the purchase of Twitter, and he sold off billions in Tesla stock to do it. The transaction was anything but smooth, and once he took ownership of the social media company, Musk made a series of decisions that impacted Twitter’s advertising revenue.

Tesla shareholders, customers, and prospective investors suggested that Musk’s handling of the Twitter takeover damaged Tesla’s reputation and contributed to Tesla shareholders’ losses.

Just as the lawsuit over Musk’s 2018 tweet about taking Tesla private was coming to an end, Tesla’s shareholders filed new suits related to the relationship between Musk’s behavior around the Twitter deal and the decline in Tesla stock prices.

There is no way to predict what will happen next with those lawsuits or anything else related to Tesla’s future. In short, investors who choose to buy Tesla stock now are taking on a gambit that fundamental successes will trump leadership unpredictability. They could realize substantial rewards if Musk is able to turn things around.

Meanwhile, BYD is generating steady, reliable growth – exactly the sort of progress Warren Buffett looks for in any stock. Berkshire Hathaway has earned a fortune on its initial 2008 investment, and there is every reason to believe BYD share prices will continue to go up as demand for electric vehicles increases.

The bottom line is that in a contest between Tesla stock vs. BYD, investors who prefer to stay away from dizzying highs and precipitous drops are better off with BYD stock. Those who enjoy the excitement that comes along with Elon Musk may prefer to buy Tesla stock in hopes of another dramatic rise.

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