This Thursday morning, the numbers displayed on the screen revealed an odd little tale. On a chart that has otherwise been bleeding for months, BYD’s A-shares in Shenzhen saw a slight green candle, rising 0.73% to 94.04 yuan. 116.59 is the 52-week high. 58.81 is the low. The whole debate over whether BYD is a wounded giant or a deal lurking in plain sight exists somewhere between those two numbers.
Larifariblabla, a user on the r/BYD subreddit, posed the question that practically every retail investor seems to be asking at the moment: why is the stock plummeting when the news continues to sound so positive? The chart continues to decline despite record export figures, a second-generation Blade Battery that can charge from 10 to 70 percent in nine minutes, and rumors of plant takeovers in Dresden. In that very specific Reddit style, the comments below were thoughtful. Half-laughing, someone bought the dip once more. Another person brought up the debt, the quick growth, and the price war, which recently intensified after Nio and Li Auto lowered their prices once more.
The market seems to be unable to determine which of the two BYDs is genuine. The domestic story is one, and it’s not a pretty one. Sales decreased for eight consecutive months until April. Revenue for the first quarter was 150.23 billion yuan, a decrease of almost 12% year over year. In Q1, profits fell by over 55%, which would have led to a much harsher response at practically any other company. For the time being, analysts are likely correct when they warn that margins will continue to be under pressure.
In a single month, the other BYD shipped 135,000 cars overseas, a 35% increase. The company whose high-end brand Denza is starting vehicles at 115,000 euros to compete with Porsche and Audi. The rumored takeover of a portion of Volkswagen’s Dresden location, which, if it materializes, would be one of those subtly significant events that are only fully recognized years later. Inside what was once the unchallenged cathedral of German automotive engineering, a Chinese automaker is manufacturing high-end electric vehicles. Years ago, Tesla encountered similar skepticism, and the similarities are becoming more difficult to overlook.
Just the fact that Warren Buffett has been cutting has alarmed some of the retail base. When Buffett sells anything, it usually feels like a verdict, even if it isn’t. Taking some chips off the table is hardly an indictment, as Berkshire’s initial 2008 bet on BYD has proven to be one of the most lucrative foreign investments in the company’s history. However, optics are important. Investors appear to think that the obvious gains are lost when Oracle leaves.
The way Western analysts continue to frame the BYD vs. Tesla controversy is intriguing. With pricing in robotaxis, Optimus, and an autonomy story that might or might not materialize, Tesla is trading at a forward P/E above 200. For the most part, BYD is trading at about 31 times earnings and prices in what it already does: produce cars at a lower cost, sell more of them, and control the entire battery supply chain. The pitch is not as thrilling. Perhaps that’s precisely why it’s superior.
The mood shift on Chinese EV forums over the last few weeks is difficult to ignore. More patience, less swagger. The European tariffs are a true wild card, the price war is brutal, and the debt load is real. However, the export figures, the Hungarian factory, and the Blade Battery 2.0 may be overlooked by anyone obsessing over monthly sales figures from China. Whether that patience will be rewarded or punished over the next year is still up in the air. As this develops, it’s unlikely that a single quarter will provide the solution. It will depend on whether the world outside of China continues to make purchases and whether BYD, having incurred significant debt in order to pursue that market, can maintain its profit margins before its export engine completely takes over.
