He may not have invented the all-electric, battery-powered vehicle. But, there's certainly no denying that Tesla's (TSLA +0.82%) founder, Elon Musk, ushered them out of the fringe of the automobile business and into the mainstream. By making them look stylish, the eccentric Musk arguably made the industry viable, in turn making Tesla the $1.4 trillion behemoth that it is today.
As could have been expected, though, once profits finally started flowing for Tesla, competitors' interest in this business dramatically ramped up. Although not every newcomer to the industry is thriving, enough of them are doing well enough to force the industry's leader into offering profit-pinching price breaks.
There's one name in particular, however, that's causing particular trouble for Tesla. Indeed, technically speaking, this rival is already bigger than Tesla in one important regard.
That company? China's BYD (BYDDY +4.41%). Here's what you need to know.
Comparing and contrasting the EV industry's two top competitors
Based on nothing more than market capitalization, as the Motley Fool's own research arm points out, Tesla is still king compared to BYD's much smaller market cap of a little less than $140 billion.
If you're talking about the total number of electric vehicles being manufactured and delivered, however, BYD is already on top. It sold over 2.25 million EVs last year versus Tesla's deliveries of just over 1.63 million units.
And that's just battery-powered vehicles. Counting hybrids, BYD's number has more than doubled, underscoring the growing appeal of cars that combine the flexibility of combustion power with the cost-effectiveness of rechargeable lithium batteries.
OTC: BYDDY
Key Data Points
BYD isn't a major competitor to Tesla everywhere, for the record, at least not yet. For instance, BYD doesn't sell cars in the United States, where Tesla produces about half of its revenue.
It is being stymied pretty much everywhere else, though. For example, while Tesla was technically the EV market leader in China shortly after its Shanghai gigafactory was completed in 2020, the nation's electric vehicle industry -- led by BYD -- has exploded without bringing Tesla along for the ride. This competition has arguably prevented China from becoming a major profit center for Tesla, even though it's the world's single biggest EV market.
Perhaps the most alarming market where Tesla is losing ground to BYD, however, is in Europe, where neither company enjoys the proverbial home-field advantage. BYD began regularly outselling Tesla there in the middle of last year, and has held that lead for most of the time since then.
That being said, perhaps Tesla shareholders should be even more concerned than they currently are. Although BYD has long indicated it's got no immediate plans to enter the U.S. market, it's now shopping around for as many as 20 dealership locations in Canada, where the company's also said it's willing to consider establishing production facilities. Shipping some of those vehicles south of Canada's southern border wouldn't prove too much of a hurdle, if and when the opportunity surfaces.
Too disruptive to ignore
What's bad for Tesla isn't necessarily good for shareholders of its top competitor, mind you. Much like Tesla has within the United States (and elsewhere), BYD is experiencing a margin-crimping price war of its own. For the first time since 2021, for instance, China's electric vehicle powerhouse reported a 19% year-over-year decline in 2025's profits despite revenue growth of 3.5% to $116 billion. For comparison, Tesla's top line reached nearly $95 billion last year.
Now take a step back and look at the bigger picture. While last year was a lackluster one, analysts are still calling for double-digit revenue and earnings growth this year as well as next, boosted by what the company expects to be international sales of 1.5 million units. That's 15% more automobiles than it had been planning on shipping overseas in 2026, underscoring growing demand as well as the company's ability to ship them from China using its own fleet of eight massive car-carrying ships. That's more than enough capacity to ferry over one million vehicles across the ocean every year.
Image source: Getty Images.
Then there's the other thing. That's the fact that BYD doesn't just make electric vehicles. It also makes the high-performance lithium batteries found in them, including for other EV makers like Toyota, Ford, and yes, even Tesla. It's also leading the charge on the next-generation battery front, indicating it will begin producing faster-charging, longer-lived solid-state batteries next year, with mass production and commercialization likely by 2030. This tech puts BYD at the forefront of a solution to a problem that's arguably been holding sales of EVs back.
Whatever the future holds for BYD, current and future Tesla shareholders can't afford to ignore this competitor even if its market cap is markedly smaller than Tesla's. China's EV powerhouse is already creating some pretty significant disruption for the EV industry's most familiar name. If Tesla's expensive and distracting foray into AI-powered robots ends up being misguided, it will only leave the company even more vulnerable.
