Chinese electric car manufacturer BYD is increasingly being seen as a significant challenger to Tesla, earning the moniker ‘the Tesla killer’.
BYD’s Stock Soars as Tesla’s Value Declines
Shares in BYD, a leading Chinese electric vehicle producer, have surged to unprecedented levels, marking a 52% increase this year. Conversely, Tesla has experienced a downturn, with its stock market value decreasing by over 34% during the same period.
Investor Concerns Mount Over Tesla’s Future
This shift in fortunes raises questions for investors: Is it time to divest from Tesla, led by Elon Musk, and invest in BYD instead? Concerns are growing that Musk’s diverse portfolio, encompassing Tesla, social media platform X (formerly Twitter), AI ventures, and satellite communications firm Starlink, may be overextending him, leaving Tesla vulnerable to competitors.
Tesla, Musk’s flagship company, is also contending with consumer boycotts linked to his political stances.
A growing number of consumers are opting for BYD electric vehicles over Tesla.
BYD Sales Outpace Tesla
BYD, whose name stands for Build Your Dreams, achieved record sales of 4.3 million vehicles last year. In contrast, Tesla’s sales saw a slight decrease of 1% to 1.8 million units.
The company is projected to announce revenues exceeding £77 billion ($100 billion) in its upcoming 2024 financial results, surpassing Tesla’s previous year’s revenue of £75.6 billion ($97.7 billion).
This trend is reflected in the stock market, where renowned investor Warren Buffett has notably invested in the Chinese automaker.
Tesla is facing consumer boycotts amidst political controversy surrounding Elon Musk.
Fast-Charging Technology Boosts BYD’s Appeal
Tesla’s stock value has significantly dropped since December. However, BYD shares reached a record high this week, fueled by claims of its electric vehicles possessing rapid charging capabilities, comparable to refueling a traditional petrol car.
Jochen Stanzl, chief market analyst at CMC Markets, notes, “Tesla’s Chinese rival, BYD, is outperforming its competitor with innovative fast-charging technology.”
Analyst Ratings Diverge for Tesla and BYD
Analyst opinions are divided on Tesla’s stock. Out of 54 analysts covering Tesla, 26 recommend a ‘buy’ rating, while 16 suggest ‘hold’, and 12 advise ‘sell’.
Conversely, BYD receives overwhelmingly positive analyst sentiment. Of 30 analysts covering BYD, 27 recommend a ‘buy’ rating, with only two suggesting ‘hold’ and one ‘sell’.
Expert Voices: Tesla’s Long-Term Potential
Despite current trends, some experts remain optimistic about Tesla’s future. Dan Ives, a prominent analyst at Wedbush, believes Tesla will ultimately prevail.
He contends, “While BYD has gained market share against Tesla, Tesla is poised to dominate the autonomous and robotics market in the long run. Tesla possesses unmatched scale and vision, and Elon Musk is unique.”
Investing in BYD
BYD shares are traded in Hong Kong and are also accessible on US markets. For UK investors, platforms like Hargreaves Lansdown and apps such as Trading212 and Etoro provide avenues for investment.
For smaller investors seeking diversification, investment trusts or funds with holdings in BYD can mitigate risk.
The BYD Yangwang U9 showcases the company’s advancements. BYD’s stock has seen a substantial increase, capitalizing on Tesla’s challenges.
Investment options with BYD exposure include the Baillie Gifford China Growth Trust and the Liontrust China Fund, both listed in London.
Investors should also review their portfolios for Tesla exposure, which may exist indirectly through popular funds like the Scottish Mortgage Investment Trust and the Baillie Gifford US Growth Trust.
Tesla’s Market Value Plummets
The decline in Tesla’s share price since mid-December has erased over £570 billion from its market capitalization and £74 billion from Musk’s personal wealth.
Hedge funds anticipating Tesla’s stock decline have profited significantly, reportedly gaining an estimated £12.5 billion in the last three months from short positions against Tesla.
Multiple Challenges for Musk’s Empire
Beyond the intensifying competition in the electric vehicle sector, Musk’s ventures into politics are generating backlash and impacting his businesses.
These challenges coincide with a broader investor interest in markets outside the US, including China, fueled by concerns over trade tensions and the global economic outlook.
BYD is not the sole competitor challenging Tesla. The company faces pressure from both emerging US electric vehicle companies and established international rivals.
Other Chinese firms, such as smartphone manufacturer Xiaomi and Beijing-based Li Auto, are also emerging as potential contenders in the EV market.
Protests against Elon Musk reflect growing public sentiment. Some protests have involved vandalism and arson targeting Tesla vehicles.
Xiaomi and Li Auto are both publicly listed on the Hong Kong Stock Exchange, accessible to investors through trading platforms such as Interactive Investor.
Analysts hold favorable views on both Xiaomi and Li Auto.
Xiaomi receives a ‘buy’ rating from 31 out of 35 analysts, while Li Auto is rated ‘buy’ by 27 of 29 analysts.
Stephen Roberts, fund manager at Orgueil Capital, highlights the attractiveness of Chinese EV companies, noting BYD’s higher sales volume and comparatively lower share valuation than Tesla.
“Tesla’s primary advantage may lie in fully autonomous driving technology,” he observed.
Roberts further commented, “It’s increasingly apparent that China is making significant progress in disrupting established players within the EV market, including industry leaders like Tesla.”
Tesla also faces increasing competition from traditional automotive brands like Ford and General Motors (GM), along with new entrants such as California-based Rivian, specializing in electric trucks and SUVs.
However, Tesla maintains an edge over some US competitors. Only 5 of 26 analysts rate Ford stock as ‘buy’, with another 5 rating it ‘sell’, partly influenced by concerns over potential trade tariffs impacting traditional US automakers.
Rivian receives ‘buy’ ratings from 11 out of 31 analysts, and GM is rated ‘buy’ by 17 out of 29 analysts.
Adding to the challenges, Musk’s broader business empire faces threats across multiple sectors, including from former partners.
SpaceX Faces Rising Competition
SpaceX, Musk’s aerospace venture, is arguably his second most renowned enterprise after Tesla. Its high-profile rocket launches frequently capture global attention.
SpaceX’s valuation has surged in recent years, reaching $350 billion (£270 billion) last December after a funding round, despite not being publicly traded.
Direct investment in SpaceX is not available to the public. However, certain UK funds like the Scottish Mortgage Investment Trust and the Baillie Gifford US Growth Trust hold stakes in the company.
SpaceX is encountering increasing competition from other US-based companies vying for space industry contracts, particularly from NASA.
Key competitors include Blue Origin, founded by Jeff Bezos; United Launch Alliance (ULA), a joint venture between Lockheed Martin and Boeing; and Rocket Lab, established by New Zealand entrepreneur Sir Peter Beck.
While Bezos’ Blue Origin has yet to match SpaceX’s accomplishments, reports suggest he is adopting a more aggressive corporate culture to accelerate progress and close the gap with SpaceX.
Starlink Under Pressure
Starlink, Musk’s satellite internet service, is also facing headwinds partly due to the fallout from his political activities. Starlink provides internet access to remote regions globally.
While Starlink’s subscriber base is expanding, some users are reportedly canceling their subscriptions in protest of Musk’s actions, even at the cost of connectivity.
This backlash is creating opportunities for competitors like French satellite operator Eutelsat, whose share price has jumped 44% on the Paris exchange in the last six months.
Amazon’s Project Kuiper, aiming to deploy 3,000 satellites for broadband services, is another significant rival.
Taara, a laser-based internet technology company spun out from Google’s parent Alphabet, is also entering the market.
X (Formerly Twitter) Experiences User Exodus
Musk’s social media platform X, formerly Twitter, has been significantly impacted by the controversy surrounding his political endorsements and content moderation policies, resulting in a user exodus.
Concerns over relaxed content moderation and Musk’s association with Donald Trump have driven many users away from the platform.
Estimates from December indicated a loss of 2.7 million US users from X in two months, although the platform still maintains a substantial daily active user base of around 300 million.
This user migration is benefiting alternative platforms, including BlueSky, founded by Twitter’s original creator Jack Dorsey. BlueSky has seen its daily active users grow to approximately ten million.
Threads, launched by Meta (Facebook) in 2023, is another X competitor gaining traction, with an estimated 100 million daily active users.
Despite the user departures, X’s valuation appears to be recovering. Recent reports suggest investors have valued X at nearly £34 billion, matching Musk’s acquisition price in 2022.
This represents a considerable rebound from September when Fidelity Investments valued X at just £7.7 billion.
xAI Faces Intense AI Competition
Musk’s artificial intelligence venture, xAI, is operating in an increasingly competitive landscape.
Earlier this year, a public dispute arose between Musk and Sam Altman, CEO of OpenAI (creator of ChatGPT), a company backed by Microsoft.
Musk reportedly made an unsolicited bid of nearly £80 billion for OpenAI last month, which was rejected by Altman.
This led to a public exchange on X, where Musk criticized Altman, labeling him a “swindler” and “Scam Altman.”
These events followed xAI’s exclusion from the Stargate Project, a $500 billion (£385 billion) initiative supported by Trump to develop large-scale AI data centers in the US.
OpenAI is participating in the Stargate Project alongside Oracle and Softbank.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions.