Investors looking for an electric vehicle (EV) stock to buy normally turn to Tesla or Rivian. However, BYD (OTC:BYDD.Y) is often overlooked, despite now being the global EV leader.
Here’s why BYD could well be the most lucrative investing option in this space over the next five years.
BYD is going global
I’m sure the brand is no stranger to readers, as the vehicles are starting to flood into the UK. In fact, I’ve seen more new BYDs on the road in the past few weeks than I’ve ever seen before.
This isn’t an illusion. Between January and April, the Chinese company became the UK’s best-selling EV brand, overtaking the likes of Tesla and Volkswagen.
BYD (Build Your Dreams) offers a wide range of pure electric and plug-in hybrids, and it has sold 26,396 of these year to date, giving it a 9.5% market share. March was a record-breaking month, with a 134% surge in vehicle registrations.
Yet sales are set to head even higher as the brand offers a potent combination of high quality and great value at a time when more people are turning to EVs due to soaring fuel prices.
With fuel prices remaining high, more drivers are turning to electric vehicles as a smarter and more economical choice…BYD has become the UK’s leading EV brand in a little over three years.
Bono Ge, Country Manager, BYD UK
Growing pains
However, the vast majority of the company’s sales are still in China, where there’s a brutal EV price war. Geely, for example, is providing stiff competition while a cut in government subsidies for entry-level EVs certainly isn’t helping sales.
As a result, revenue fell 11% to 50.2bn yuan (approximately $20.8bn) in the first quarter, with net profit slumping 55.4% to 4.1bn ($599m). Not great.
According to Reuters, BYD’s vehicle sales fell for an eighth consecutive month in April. So the pain hasn’t subsided just yet, and a shortage in memory chips threatens to increase costs.
Reflecting this, the share price has sunk 30% in the past year.
The bigger picture
Still, it’s worth remembering that BYD navigated a similar downturn in 2019 when the Chinese government slashed EV subsidies. The carmaker managed to come roaring back from that temporary slump and I think it’s likely to again (albeit there’s more competition now).
Plus, while the domestic backdrop remains tricky, BYD’s overseas sales are surging. Management is confident it can sell at least 1.5m vehicles this year, implying about 40% growth.
Looking further ahead, the company wants around 50% of its sales to be outside China by 2030. It has built factories in Indonesia and Hungary to accomplish this and navigate the threat of tariffs.
Recently, it unveiled its Megawatt Flash Charging technology, which delivers roughly 1.2 miles of range per second. BYD drivers in China can add 400 km (249 miles) of range in just 5 minutes!
BYD also uses AI and robotics extensively to keep manufacturing costs very low. So I think the founder-led company has a significant technological edge over almost all other EV makers.
Finally, the stock’s forward-looking price-to-earnings ratio is just 21 versus Tesla’s 208. In other words, it’s 10 times cheaper, making it worth considering buying for the next five years.
