Keep an eye on ‘the sleeping electric vehicle giant of China,’ Evercore ISI says
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The electric vehicle industry used to be “Tesla and everyone else.” In the last few years, however, this outlook has changed to “Tesla, BYD , and everyone else,” according to Evercore. Chinese EV-manufacturer BYD sold more NEVs, or neighborhood electric vehicles, in 2022 than Tesla. Evercore noted that BYD’s sales guidance for China in 2023 could potentially exceed the total EV sales in the U.S. and EU combined from 2022. BYD also offers a diversified product range, including performance sports cars and luxury models. “To put it simply, if you are bullish [on] EVs or believe that large-scale electrification is the future, you NEED to be familiar with BYD,” analyst Chris McNally wrote in a Monday note. “In many respects, such as battery and commercial vehicle platforms, BYD is already leading TSLA & others. What the company doesn’t yet have is ‘western brand value.'” On Monday, its U.S.-traded shares were up 2%. Warren Buffett and Charlie Munger’s Berkshire Hathaway is a notable investor in BYD. Munger previously praised the company, saying: “The companies that survive are the ones that improve better and faster than the competition. That is the essence of BYD.” As of May 30 , Berkshire held a 9.9% stake in BYD. However, the “Oracle of Omaha” has reduced his stake in the company by more than 50% since he purchased it in 2008. Evercore noted that BYD has undergone “massive growth” over the last five years, with total company revenue tripling from approximately $20 billion in 2018 to roughly $63 billion this past year. “Furthermore, BYD has been able to grow profitably, with auto gross margins in ’22 rivaling TSLA’s industry leading post-price cut level of ~20%,” said McNally. The analyst said BYD’s success is also “equally attributable” to its strong supply side of its business. “BYD may be the most vertically integrated original equipment manufacturer on the planet,” McNally said. The company does everything in-house, from chips and software to manufacturing buses and passenger cars. The firm is also bullish on BYD’s global expansion prospects. BYD began selling in Europe in 2022 and has already begun to put pressure on the European rental and fleet market, said McNally. “Outside of China/EU, BYD has what we believe is the most compelling EV offering for emerging markets, where low-cost vehicles present a significant opportunity,” McNally added. “While most OEMs have higher-end EV options that won’t work in developing countries, ($40k+ ASPs), BYD’s sub-$20k cars can address these first time EV markets (for example, while it took China 10 years to get to 1% EV penetration, it has taken Thailand only a year to reach a similar level),” the analyst continued. —CNBC’s Michael Bloom contributed to this report.
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