U.S.
electric
vehicle
giant
Tesla
has
long
been
an
investor
darling,
but
its
Chinese
rival
BYD
is
increasingly
coming
into
its
own.
Last
week,
data
from
both
companies
showed
BYD
dethroned
Tesla
in
the
fourth
quarter
as
the
top
EV
maker
globally,
and
also
surpassed
Tesla’s
production
for
a
second
straight
year
in
2023.
BYD
is
now
expanding
aggressively
overseas
after
dominating
its
domestic
market
in
China.
Like
Tesla,
it’s
going
beyond
selling
cars
and
manufacturing
its
own
batteries
and
other
components
to
stay
competitive.
Should
investors
stick
with
long-time
favorite
Tesla
or
buy
into
the
up-and-coming
BYD?
Here’s
what
the
pros
say.
Tesla:
‘2024
looks
tough’
Bernstein
in
a
Jan.
2
report
said
2024
“looks
tough”
for
Tesla,
particular
in
terms
of
profitability.
“We
believe
more
investors
will
begin
to
increasingly
question
the
company’s
growth
narrative,
particularly
since
we
believe
that
Tesla
will
struggle
to
grow
deliveries
20%
in
2024
(and
2025),”
it
said,
noting
that’s
well
below
Tesla’s
target
of
50%.
Bernstein
added
that
Tesla’s
FY2024’s
margins
and
earnings
per
share
is
set
to
be
“materially”
below
consensus
amid
ongoing
cost
cuts.
The
investment
manager
also
pointed
to
the
impact
of
price
cuts
last
September
and
October,
predicting
a
15.7%
potential
downside
to
its
gross
margins,
lower
than
the
consensus
of
17.8%.
“For
FY
24,
we
believe
Tesla
will
likely
see
lower
margins
AND
disappoint
on
volumes
…
We
do
not
believe
that
Tesla
can
further
cut
prices
enough
to
drive
sufficient
demand
elasticity
without
potentially
becoming
[free
cash
flow]
negative,”
Bernstein
analysts
wrote.
It
gave
Tesla
an
underperform
rating
and
a
price
target
of
$150,
implying
36%
downside.
HSBC
in
a
Jan.
3
note
also
gave
Tesla
a
“reduce”
rating,
which
means
the
price
target
is
more
than
20%
below
the
current
share
price.
Its
price
target
of
$146
implies
37.8%
potential
downside.
It
noted
that
EV
demand
appears
to
be
plateauing.
While
Tesla
will
remain
price-competitive,
the
slower
EV
adoption
will
give
other
EV
makers
more
time
to
“ready
themselves”
and
present
Tesla
with
tougher
competition,
said
HSBC
analysts.
“As
good
Tesla
may
be
in
terms
of
an
EV
carmaker
(although
no
longer
#1
for
volumes),
we
don’t
think
this
is
what
is
driving
the
valuation.
Our
concern
relates
to
the
uncertainty
of
timing
and
commercialisation
for
Tesla’s
varied
ideas
(Dojo,
FSD,
Optimus,
etc)
from
which
it
derives
a
significant
share
of
its
valuation,”
they
wrote.
Dojo
is
Tesla’s
supercomputer,
FSD
refers
to
full
self-driving
capabilities,
and
Optimus
is
its
humanoid
robot
in
development.
“We
think
the
timeline
is
likely
to
be
longer
than
the
current
valuation
reflects,”
HSBC
added.
BYD:
‘In
pole
position
in
a
tough
market’
Bernstein
in
a
Jan.
8
report
said
BYD
stands
out
for
having
the
best
cost
structure
in
the
industry.
“We
think
players
with
an
advantageous
cost
structure
and
product
innovation
ability
to
meet
consumer
preference
will
be
better
off,
thriving
in
the
competition,”
it
said.
Bernstein
also
highlighted
BYD’s
ability
to
“quickly
revamp”
products
and
respond
to
the
market,
and
its
“viable”
export
strategy.
It
said
BYD’s
stock
is
currently
trading
at
13.5
times
its
2024
price-to-earnings
ratio
and
10.8
times
for
2025
—
“too
low,”
according
to
Bernstein,
given
BYD’s
earnings
expansion
potential.
Bernstein
gave
BYD
an
outperform
rating
and
a
price
target
of
334
Hong
Kong
dollars
($43),
representing
63%
potential
upside.
HSBC
says
it
“remains
constructive”
on
BYD
in
2024,
pointing
to
rising
exports
which
generate
higher
margins
—
likely
to
be
the
“next
leg
of
growth.”
The
bank
forecast
2024
volume
and
earnings
growth
of
28%
and
30%,
respectively.
“[BYD
is]
in
pole
position
in
a
tough
market,”
HSBC
said.
HSBC
also
gave
BYD
a
buy
rating,
and
a
price
target
of
356
Hong
Kong
dollars,
implying
73.8%
upside.
According
to
FactSet,
analysts
covering
BYD
gave
it
a
94%
buy
rating
and
56.2%
potential
upside
to
average
price
target.
Analysts
covering
Tesla
gave
it
a
42%
buy
rating
and
a
1.8%
potential
upside.
—
CNBC’s
Michael
Bloom
and
Evelyn
Cheng
contributed
to
this
report.
