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Tesla Motors Inc (TSLA) Chinese Competition: BYD

Tesla Motors Inc (NASDAQ:TSLA) has enjoyed tremendous success this year as investors respond to the potential that lies in the future of electric vehicles, as it’s not the only one. Abheek Bhattacharya of The Wall Street Journal calls Chinese electric-car maker BYD (HKG:1211) China’s Tesla. However, there are some differences between the two automakers which could make it more difficult for BYD to succeed in the electric car business.

Tesla motors
BYD vs. Tesla

The biggest difference between BYD (HKG:1211) and Tesla is that the former doesn’t just make electric vehicles. The company gets 47% of its revenue from other electric items like components for handsets, rechargeable batteries and solar cells. As Bhattacharya notes, those businesses are very competitive and not as profitable as the electric car business could be. Also this means that BYD’s focus is not entirely on electric vehicles, which gives Tesla a leg up.

Just 1% of the vehicles BYD sells are actually electric. Its low-end vehicles with internal combustion engines far outsell its electric models. This year shares of BYD (HKG:1211) have climbed 153%, mostly on hopes fueled by electric vehicle sales—despite the fact that the automaker sells so few electric vehicles. Currently the biggest buyers of BYD’s electric vehicles are local governments. The company’s business also hangs on government subsidies, making up 57% of its pretax profits for the first nine months of the year. Without those subsidies, BYD’s net profit fell 123% year over year.


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