Is Tesla in Trouble? Should Musk be Worried About BYD?
Shares are down about 7.0% for the week, are flat for the month and down by nearly 15% over the past six months. What happened to the hyper-growth stock we all love? Well, falling margins happened. Lowering prices happened. Elon Musk buying Twitter happened. And finally, this past quarter, BYD happened.
What is BYD? It is China’s largest EV maker and after the fourth quarter of 2023, it is the world’s largest EV maker by total deliveries. That’s right, BYD surpassed Tesla with 500,000 BEV deliveries in the quarter. This brought its annual deliveries to more than 3.0 million compared to Tesla’s 1.8 million.
It has been said that Elon Musk once laughed off BYD as a threat. The company began as a business making cell phone batteries and is now the largest EV maker on the planet. So here’s a question: why doesn’t anyone want to invest in BYD’s stock? I’ve looked at it, and I think there are a couple of problems with investing in BYD compared to Tesla.
Buy Tesla? Or BYD?
First of all, let’s get the elephant in the room out of the way. American investors simply do not trust Chinese stocks. BYD trades on the OTC Markets and for most casual investors, it’s not an exchange that they trust or want to buy stocks from. People don’t even trust investing in ADRs like Alibaba (NYSE: BABA), let alone stocks like BYD.
So that’s the first bias. The second bias is that I truly think a lot of casual investors don’t even know what BYD is. I think more investors know what Nio (NYSE: NIO) is than BYD. Nio gets more coverage in the United States even though it is a fraction of the size of BYD right now.
There is another caveat with BYD’s numbers: the company includes hybrid or battery vehicles in its BEV delivery count. As we know, Tesla is all completely electric vehicles but BYD still sells a combination of both.
One problem for Tesla is that BYD Is finally expanding globally, whereas Tesla has been aggressively doing so for years now. It’s not in the US yet but it is making moves into Europe and is already the largest EV maker in Southeast Asia.
So is Tesla in trouble? The stock seems to be stuck in quicksand lately and is fast approaching its 200-day moving average which ironically, is the final line in the sand for many charts. It has already lost support at all of its short-term averages and we’re still in a slight downtrend according to the weekly chart.
If you ask me, I’m choosing Tesla over BYD any day of the week and maybe that’s going to be my downfall. Tesla is accepted in China but Chinese automakers are largely unaccepted in the United States. I think that’s going to make a difference in the long run. Maybe I have the same bias that other American investors have and just can’t bring myself to trust BYD over Tesla. Right now, neither stock looks terribly appealing. I don’t think Tesla is in trouble, but I do think it needs to stop taking its competition so lightly.