Buffett-Backed BYD Gains After Extending EV Lead Over Tesla

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Shares of EV maker BYD (SZ:) (OTC:) closed China’s trading session 5% higher on Tuesday after the company that Q3 net profit likely grew by more than fourfold. The Chinese giant continues to lead Tesla (NASDAQ:) in the world’s biggest car market.

BYD’s strong EV sales come just several months after the carmaker removed gasoline vehicles from its lineup as the company cashed in on a myriad of incentives for EV production provided by the Chinese government. Exceptional sales and a wide product range also substantially reduced BYD’s costs per vehicle.

Another Strong Performance

The EV company expects its net profit for the July-September quarter to range between 5.5 billion yuan and 5.9 billion yuan ($765 million – $820 million), which would represent a surge of 333% to 365% from the same quarter last year.

Further, the Warren Buffett-backed automaker’s combined sales of all-electric and hybrid cars soared by 250% in the first nine months to 1.2 million vehicles, beating a 110% increase in the overall EV market.

This compares to the world’s biggest EV maker Tesla which sold just about 318,000 EVs in China during the same period. Other prominent Chinese EV startups, like Xpeng (NYSE:) and Nio (NYSE:), sold just over 98,500 and 31,600, respectively.

Earlier this year, BYD overtook Tesla as the world’s biggest EV maker by sales, underscoring China’s dominance in the rapidly-growing market. The company sold 641,000 cars in the first half of 2022, marking a 300% surge relative to the same period in 2021.

During that period, Tesla sold 564,000 cars, a somewhat disappointing performance after Elon Musk’s automaker grappled with supply chain and sales constraints in China due to the lockdowns in the country.

Tesla remains a popular investment, however, with a 65-day trading volume average of over 74M. BYD has also dethroned South Korea’s LG as the second-biggest EV battery maker in the world, behind China-based Contemporary Amperex Technology (CATL).

Sino Auto Insights’s managing director, Tu Le, praised BYD’s recent growth saying the company is “firing on all cylinders,” with its products addressing several key EV market segments. Le also expects BYD to compete with other carmakers on their home turf, particularly those in the U.S. He thinks the company will “make some really aggressive moves to go international.”

BYD Preparing To Expand Globally

Last week, BYD’s ATTO 3 SUV was awarded a five-star Euro NCAP safety rating, marking the latest Chinese car manufacturer to receive the yearned rating as it looks to foray into the European car market.

While the NCAP rating does not license vehicles for road use, European car buyers keep an eye on Euro NCAP’s safety tests and strong ratings. In September, BYD’s local rival Great Wall Motor also received top marks for its WEY brand Coffee 01 hybrid SUV and ORA brand Funky Cat electric sedan.

The top-ranked Atto 3 was also launched in India last week, representing BYD’s expansion into the third-largest car market in the world. The carmaker unveiled the Atto 3 electric SUV intending to capture 40% of India’s EV market by 2030. Sanjay Gopalakrishnan, senior VP of BYD India, said:

“India will be one of the key markets in BYD’s global portfolio.”

The company plans to sell 15,000 Atto 3 units in India over the following year and eventually establish a manufacturing plant in the country. The move comes as a part of BYD’s broader expansion plans following multiple EV and hybrid car launches in Norway, Singapore, Brazil, New Zealand, Colombia, and Costa Rica.

Buffett Slightly Trims His Stake

In September, Warren Buffer’s Berkshire Hathaway (NYSE:) reduced its stake in BYD, sending the carmaker’s shares down over 5%. The conglomerate reported it offloaded 1.72 million shares in BYD, trimming its stake in the company to 18.87%. The filing came just days after Berkshire sold 1.33 million BYD shares, the first time it reduced its stake in 14 years.

The stake cuts raised concerns among investors, prompting fears that Berkshire might be looking to exit from BYD completely. Kelvin Lau, Head of Auto, Transportation & Industrial Research at Daiwa Capital Markets Hong Kong, said:

“We do expect Berkshire Hathaway to completely exit its position.”

Buffett’s Berkshire has been one of the biggest stakeholders in BYD since the conglomerate bought 225 million shares for $230 million 14 years ago.

Final Thoughts

BYD shares are now trading in the green year-to-end despite the massive underperformance of the stock market given a difficult macro backdrop. The latest business update from BYD showed a widening gap to Tesla in China as the Buffett-backed EV company continues to ramp production and global expansion.



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