More than half of the total electric vehicles (EVs) sold worldwide last year (including plug-in hybrids) went to buyers in China. So it's understandable why the top automakers have their eyes on this market. In the first quarter of 2022 alone, Tesla (TSLA 12.06%) sold more than 182,000 EVs in China, capturing the largest share of the full EV market in the country.
However, Chinese automaker BYD (BYDDY 2.01%) (BYDD.F 2.05%) is expanding rapidly and challenging Tesla's dominance there.
An electric vehicle market leader
Including plug-in hybrids, BYD sold more than 284,000 electric vehicles in China in the first quarter, more than any other automaker. And even when considering only sales of fully electric vehicles, BYD was only slightly behind Tesla.
Data source: China Passenger Car Association. Chart by author.
The above chart shows BYD's leading position in the Chinese EV market. Including plug-ins, it was the top EV seller in Q1. Excluding plug-ins, BYD sold over 141,000 fully electric vehicles, trailing Tesla. The third-largest EV seller by unit sales was SAIC-GM-Wuling, a joint venture between SAIC, General Motors, and Wuling Motors.
BYD is also a leading manufacturer of electric buses, trucks, and forklifts. More than 95% of BYD's vehicle sales have been electric, with internal combustion engine (ICE) vehicles accounting for the rest. But this month, the company announced that in March, it had ended its production of ICE vehicles completely. It is important to note that BYD derives roughly 60% of its revenue from its other businesses, including mobile handset components, assembly, rechargeable batteries, and photovoltaics.
Is BYD stock a buy?
BYD has been growing its revenue steadily over the years.
BYDDY Revenue (TTM) data by YCharts
As it grows its EV deliveries, its profits should soar, too. And unlike many of the newer EV players, BYD is already profitable.
Finally, BYD stock is trading at a better price-to-sales ratio than most other top EV manufacturers.
BYDDY PS Ratio data by YCharts
BYD stock now trades at a price-to-sales ratio of 2.5, markedly lower than the ratios for Nio, Li Auto, XPeng, or Tesla, but higher than those of traditional automakers like Ford and General Motors. That is reasonable, given that BYD's automotive segment is now entirely devoted to EVs, and EV companies have typically traded at much higher multiples than traditional automakers.
Overall, BYD's leading position in the fast-growing Chinese EV market, its growing sales, and its cheaper valuation compared to its peers make this company an attractive buy right now.
