The electric vehicle market is changing
The electric vehicle market is changing dramatically right now.
That gives us an opportunity to pick up one of the best EV companies in the world at its lowest price since 2023.
And this company isn’t just a car maker. It’s also the second largest battery maker in the world. That combination will create a tremendous moat. It will allow this company to dominate the EV market in the future.
Before we get into the company details, lets do a quick dive into the EV industry today.
Maturity Brings Change for the EV Market
It’s a period of change for the EV industry today. It’s transitioning from unbridled growth to consolidation.
In 2024, analysts project China’s EVs and plug-in hybrid sales to grow 22% in 2024 to reach 11 million vehicles. In 2023, EV sales grew by 36% and stood at 7.7 million EVs. As sales slow, the industry faces several new challenges:
- Declining Prices – Several major EV makers are cutting prices to increase sales.
- Intensifying Competition – The number of EV makers exploded over the past decade.
- Market Consolidation – larger companies should acquire smaller EV makers.
- Protectionism and Tariffs – Governments like the U.S. and the E.U. are levying tariffs to protect domestic EVs from Chinese manufacturers.
These issues led to a selloff in EV makers.
You can see what I mean by the Global X Autonomous & Electric Vehicle ETF chart:
The fund is down 21% from its high in 2021. That’s where we get our opportunity. There will be casualties from this. Companies will merge, others will go bankrupt. Others will grow massively. And this month, we are looking at one of the winners.
EV Makers with In-House Battery Manufacturing Will Dominate the Market
This is a truth that Tesla understands – EV makers must control their battery costs. Today the battery makes up as much as 40% of the cost of an EV. That’s too much of the cost of manufacturing, and too big an opportunity to profit.
Right now, the entire value of a used EV is in the battery. That second-hand market is rapidly emerging, as the fleet of EVs ages. That’s a market that few car makers can participate in because they don’t make the batteries.
However, few EV makers also make batteries. Daimler, General Motors, and Tesla are on that short list. But this month we are looking at a world-dominating EV and battery brand. It’s so popular that Europe proposed a controversial tariff on imports.
This month’s feature is BYD Co. (OTCPK: BYDDY).
Buying the World’s Most Popular EV Maker – What to Know
BYD Co. is a large $96.7 billion market-cap Chinese EV maker. In 2023, BYD’s cars accounted for 35% of the domestic Chinese new EV market.
It’s the only car maker over 10% of the market. Tesla ranks second at 7.8%.
Globally, the company accounts for 17.1%, second only after Tesla’s 19.9%. Analysts anticipate BYD beating Tesla for the #1 spot globally in 2024.
The company’s success can be traced to five factors:
- Vertical Integration
- Cost
- Diversification
- Global Market Expansion
- Leading Battery Technology
BYD’s manufacturing is all done within the company. It avoids third party suppliers, which helps keep its costs low.
The company also created a range of EVs, to appeal to all customers. It offers buses, trucks, sedans, and SUVs.
The company offers these EVs in over 60 countries. Because it sources all its own materials, it can be nimble in its products. The company adapts its EV offerings to match the market in each country.
This strategy led to the company growing its revenue by 49% from 2022 to 2023. Its gross profit margin was 23%.
That’s not the most profitable EV maker, but it’s outstanding for a new car company.
Here are some other gross profit numbers for EV makers:
- Tesla 17.6% (Q4, 2023)
- GM 7.7% (Q4, 2023)
- Ford 5.5% (Q4, 2023)
- Rivian -46% (Q4, 2023)
The image shows the dollar figure comparisons.
The in-house sourcing of materials is crucial to the success and profitability of BYD. And it not only supplies its own batteries, it’s an industry leader in EV batteries.
In 2023, the company build 115,917 megawatt-hours MWh of batteries, about 16% of total production. Tesla (which isn’t in the table below), built 14,724 MWh, just above Farasis Energy.
That’s what helped propel BYD to such incredible success. That’s why it can keep its costs low and price its EVs below most others in the industry. The company has a reputation for low cost EVs like the Dolphin, the Atto 3, and the Seal sedan.
However, the new four-door, all-electric Qin Plus can get 316 miles per charge. The price starts at $15,200.
That’s a sharp car with a shockingly low price. Unfortunately, in the U.S., you’d pay twice that. That’s because the U.S. now levies a 100% tariff on Chinese EVs. That’s insane.
But here’s the thing. Even paying $15,200 in tax to the U.S. government, the Qin Plus still costs less than the base model Tesla ($42,990).
Unfortunately, the European Union followed suit. It plans to add a 38% tariff onto imported Chinese EVs. This is simple protectionism, brought to you by western car makers and anti-Chinese politicians.
Sadly, it will hurt BYD in the short term. It also hurt the company’s share price, as you can see here:
This is a company whose revenue grew 49% from 2022 to 2023. It’s the world’s second largest EV battery maker. It makes 23% profit on every car it sells…Yet it’s priced like it’s going to fail. That’s a direct result of the market’s perception of the impact of the western tariffs.
The secret is that China is the world’s largest EV market by nearly 9 million vehicles. Western tariffs my hinder growth, but it won’t impact BYD as much as we see here. And with this much negative sentiment, if BYD does successfully pass Tesla for world’s #1 EV seller, we could see a massive move into the stock.
Frankly, BYD is either wildly inexpensive or Tesla is wildly overvalued.
To put this into perspective, let’s compare Tesla to BYD:
To summarize, BYD generates 88% of the revenue and 99% of the profits as Tesla. It has 1/3rd the debt…but trades for 17% of the price. That’s just nuts. But it shows just how much potential BYD has to move higher. Even if it gets recognized at 25% of Tesla’s value, that would be a nearly 50% gain.
That’s not only crazy, but it’s also an opportunity. Oh, and BYD isn’t paying its CEO $57 billion.
Action to Take: BYD Co. (OTCPK: BYDDY) shares and use a 25% trailing stop. We expect the current uptrend to continue.
There are two ways to buy BYD Co. on the OTCPK market.
The one we recommend – BYDDY – represents the company’s American Depository Receipts (ADRs).
It tends to be more liquid, which means we can buy and sell much more easily. It’s also a higher price because it is actually 2 ADRs per share.
The other version – BYDDF – trades fewer shares. It’s less expensive because it is one ADR per share. Either one works, but we recommend the higher liquidity of BYDDY.
For the Good,
The Mangrove Investor Team
