EToro Analyst: “Not NIO but especially BYD Tesla opponents”

EToro Analyst: “Not NIO but especially BYD Tesla opponents”


Written by eToro market analyst Jean-Paul van Oudheusden

Tesla and BYD are both the fastest growing manufacturers of electric cars. Although much of the investor’s focus is on startups such as Rivian, Lucid, NIO and Xpeng, it is the Chinese manufacturer BYD that competes with Tesla.

Tesla against BYD

Earlier this week, we wrote that the electric vehicle (EVs) market is projected to grow by 30% per annum over the next ten years. Tesla has been working to fill the gap since 2003, setting a record of 310,000 EVs in the first quarter of 2022. The lesser-known BYD (short stands for Build Your Dreams) reached 286,000 units in a quarter. In stark contrast to Tesla, BYD was originally a battery manufacturer. It took a while, but in EVs, BYD found a product to show its strength. By the end of May, BYD had delivered 507,000 vehicles. There is a chance that the Chinese company, which is still led by founder Wang Chuanfu, will already overtake Tesla by the end of the second quarter.

Where is NIO?

Startup EV maker NIO was launched in 2014. It came to advertise “Chinese Tesla” since CEO William Li told anyone who wanted to hear last year, “We want to offer better products and better services than Tesla at a lower price.” Aided by a solid PR strategy and a well-designed NIO ET7 (Tesla Model S competitor), private investors embraced the story. In the monthly list of brokers, NIO is always very high.

What is often overlooked, however, is that competition in China’s domestic market is fierce. More than 80 car manufacturers (!) Are competing for the market. And it shows in numbers. The NIO reported quarterly statistics last year (Thursday 9 June) and it was not easy. The number of vehicles submitted in 2022 by the end of May was around 38,000 and is still far behind Tesla and BYD. Sadly, NIO, which is still losing money, saw its overall profit margin decline from 17.2% in the fourth quarter of 2021 to 14.6% in the first quarter of 2022. It is a sign that NIO is failing.to pass higher costs. that all EV manufacturers should deal with their customers.

Selling electronic cars

BYD has a strategic position

For mass-produced goods such as cars, it all involves size. It is known that in recent years Tesla has invested heavily in large-scale manufacturing on three continents. BYD has so far focused more on production in China, but also has major expansion plans. If the constraints in the supply chain change, the company expects to have approximately 2 million vehicles this year. That makes it even harder for beginners like NIO.

BYD also has a strategic advantage: they manufacture their own batteries. They do so well that Tesla, NIO and other major EV manufacturers are or will be BYD customers. In early June, it was reported that BYD plans to purchase six lithium mines in Africa. Lithium is a rare raw material and an important component of achieving great diversity. By building indoor batteries, BYD is strategically placed against competition.

Real Chinese Tesla

Tesla and NIO have fans, BYD has a few. BYD has had one big fan from the first proverbial hour. After meeting founder Wang Chuanfu, Charlie Munger persuaded Warren Buffett back in 2009 (!) To invest with Berkshire Hathaway. That will undoubtedly benefit the world’s most famous investment fund by 2022.

Major investors have also discovered BYD in the stock market. Expectations are high: BYD price / revenue forecasts are currently on Tesla. For NIO, which saw its share drop by 7.5 percent after yesterday’s figure, the question is whether it will live independently for the long term. Investors will be wise to keep a close eye on not only Tesla and NIO, but also BYD from now on.