BYD (OTC:BYDDY) has rocketed to the top of China’s booming market for electric vehicles. With far more vehicle deliveries than Tesla last year, BYD appears to be gaining a strong lead in the EV world.
As a Chinese company, however, BYD is susceptible to both the risks of China’s ongoing economic challenges and the new difficulties imposed by the trade war between China and the US. Is BYD a buy today, or do the risks around its home market make a wait-and-see investment approach more sensible?
BYD’s Is Not Widely Known In US But a Real Threat
BYD has been characterized by consistent innovation, especially where battery technology is concerned. The company’s Blade batteries have helped its vehicles achieve enhanced range and charging times, and a new version that’s launching this year even offers a 15% reduction in cost compared to older generations.
More recently, management even unveiled a new charging system that can add hundreds of kilometers of range to one of its vehicles in as little as five minutes.
Newer and better EV technologies have allowed BYD to rack up some extremely impressive growth. Last year it delivered 3.7 million vehicles, handily beating out its own target of 3.6 million. For reference, Tesla delivered just 1.8 million vehicles last year.
BYD is also pursuing a fresh start in the European market. While it faltered early on due to logistical problems, the leadership team hopes to build a large presence in Europe’s fast-growing EV market. The opportunity for BYD in Europe could be particularly large as a result of Tesla’s collapse on the continent.
With Tesla sales down more than 50% in several European countries due in part to the fallout of Elon Musk’s association with the second Trump administration, there’s a large gap to be filled in the European EV market. If its new push in Europe is successful, BYD has the very real potential to scoop up the sales that are no longer going to Tesla.
How Much Room Does BYD Have Left to Run?
With new opportunities for international expansion, BYD is likely to keep growing at a rapid pace for quite some time.
This year, the management team aims to sell 800,000 vehicles outside of China, about double the number it did in 2024.
With the Chinese government still setting ambitious goals for 40% of vehicles to be electric by 2030, BYD and other leading Chinese EV makers will also likely continue to see strong demand in their home market.
Right now, BYD isn’t planning to enter the US market, which is still largely dominated by Tesla. Americans have been a bit slower to adopt EVs than much of the rest of the world.
Only about 8% of the new cars sold in the US are electric. As such, BYD could still do very well by focusing on markets in Asia and Europe where EV growth is proceeding at a faster pace.
Over the next five years, analysts foresee BYD’s earnings per share rising at a rate of about 18% annually. Forward revenue growth is also expected to come in at about 24%, reflecting continued demand for the company’s vehicles and continued expansion internationally.
Will China’s Slowing Economy Weigh BYD Down?
Despite BYD’s own stunning production volumes, the state of the Chinese economy may very well weigh on the company going forward.
While Chinese consumer sentiment is beginning to recover on the back of government stimulus measures, an ongoing trade war with the United States could undo much of the progress that has been made.
A downturn in China is likely to trigger a sales slump, especially if the trade war with the United States drags on for very long.
The same factors could put China at risk of a deflationary spiral. With goods meant for the US market increasingly being redirected to China’s domestic consumers, an abundance of supply and a race to the bottom for price among manufacturers could have drastic impacts on the country’s economic growth.
Though it’s far from certain that such a deflationary spiral will materialize, the risk is worth being aware of before deciding to invest in Chinese companies.
Is BYD Stock a Buy Now?
With a long growth runway and several impressive advantages, BYD looks to be a decent choice for long-term investors hoping to profit from the adoption of EVs in Asia and Europe.
Even though the company has no immediate plans to break into the US market, its strength in China and new opportunities in Europe could keep it growing well for many more years.
BYD also trades at a fairly appealing earnings price for a high-growth EV company. So is BYD a threat to Tesla stock? BYD stock is priced at 23.4x earnings and 1.3x sales whereas TSLA shares are still priced at about 154x earnings and 10.3x sales in spite of the selloff the stock has seen so far this year.
While Tesla is almost certainly overvalued, the disparity also suggests that BYD is a bit undervalued at its current valuation.
A final point that’s worth taking into account is the fact that BYD behaves more like a traditional auto major than an EV startup in the sense that it pays a dividend. Though BYD’s dividend is only paid once annually, the rate at which it has grown in the last few years is fairly remarkable.
The annual dividend in 2021 was just $0.05 per share, but by 2024 the distribution had increased to $0.87. As earnings continue to grow in the future, it’s likely that shareholders will see progressively more income from their BYD shares.
Taking all of this into account, BYD appears to be both a highly appealing company and one that trades at a price value investors could find appealing. Though the risks presented by the Chinese economy itself and America’s ongoing trade disputes are very real, BYD could prove strong enough to ride out these challenges. As such, the stock looks like it could be a reasonably good one to buy now and hold for the long run.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.