Who is the strongest leader in the electric vehicle concept stock sector? Investment guide to BYD, Tesla, and Li Auto

The Great Era of the New Energy Industry Has Arrived

Over the past few decades, we have witnessed the entire process of industries like PCs and smartphones from inception to explosion. Today, the electric vehicle industry is reenacting this history. With the advancement of global carbon reduction goals and the confirmation of bans on fuel vehicles in various countries, new energy vehicles have moved from the fringe to the mainstream, becoming the target of capital market pursuits.

Just as Apple surpassed Nokia and Netflix defeated Blockbuster back then, the rise of the electric vehicle industry is reshaping the entire transportation landscape. This is not only a technological advancement but also a shift in commercial civilization—rising environmental awareness, policy tilt, changing consumer habits—all these factors combined create decades of growth dividends for the electric vehicle market.

Who Are the Leaders in the Electric Vehicle Industry?

Tesla: The Pioneer

When it comes to electric vehicle concept stocks, Tesla (TSLA.US) is an unavoidable name. This company has used a carefully designed strategy to become an industry benchmark within just over a decade.

Brand Building: Tesla’s first product was a supercar, with a straightforward goal—to establish a “high-end, tech” brand perception, significantly increasing consumer acceptance of pricing for emerging brands. Subsequently, the company announced the open licensing of all patents, ostensibly to promote industry development but actually to solidify its “industry standard” position.

Profit Model: Tesla fully leverages policy bonuses, profits from carbon credit trading, and has secured substantial subsidies for factory construction in China. By 2020, Tesla turned profitable and was included in the S&P 500 index, with its stock price soaring more than tenfold in the short term, and Elon Musk becoming the world’s richest person.

Competitive Advantage: Currently, Tesla holds a 21% share of the global electric vehicle market, ranking first. The company’s highly automated production results in much lower personnel costs, maintaining a net profit margin of about 15%—nearly three times higher than second-ranked BYD.

BYD: The Complete Supply Chain Dark Horse

China’s leading electric vehicle manufacturer is BYD (1211.HK). Founded in 1995, this company has experienced a typical “industry upgrade” path—from battery manufacturer to mobile phone component supplier, and now to a leader in new energy vehicles.

Key Turning Point: After acquiring Qin Chuan Automobile in 2003, BYD began integrating its lithium battery technology advantages, focusing on new energy vehicles. During the 2008 financial crisis, it successfully attracted Warren Buffett’s investment of HKD 1.8 billion, and has since grown steadily.

Market Position: BYD has risen to become the second-largest global EV manufacturer and the top in China, with consistent annual profits since listing—rare among peers.

Operational Characteristics: The company’s gross profit margin is about 20%, comparable to Tesla, but its operating profit margin is significantly lower, mainly because: 1) Tesla benefits from more global policy incentives, while BYD mainly benefits from the Chinese market; 2) BYD’s business scope is broad, with high personnel costs, making large-scale layoffs difficult.

As a result, BYD’s P/E ratio generally cannot surpass Tesla’s, but its complete supply chain control and expanding overseas markets provide long-term growth guarantees. Plus, Warren Buffett’s recent reduction in holdings has made its stock price relatively cheap, making it attractive for long-term investors.

Li Auto: The Profit Winner Among New Car Makers

Li Auto (LI.US) exemplifies how China’s internet giants are entering the car-making field. Compared to other new entrants like NIO and Xpeng, Li Auto has already achieved profitability, which is a significant competitive advantage.

The Current State of the Electric Vehicle Industry

Supply Side: From Growth Bottleneck to Oversupply

As traditional automakers and internet companies enter the EV space, the new energy vehicle market is experiencing a “hundred flowers bloom” situation. Although overall industry demand remains rapidly growing, supply is increasing even faster, leading the market from a supply shortage to oversupply.

According to Wang Chuanfu, chairman of BYD, the electric vehicle industry has entered a “knockout” stage, with intense competition expected over the next 3 to 5 years. This means that companies with outdated technology or poor cost control will face elimination risks.

Cost Side: The Dilemma of Raw Material Price Hikes

The direct consequence of increasing new entrants is that upstream raw material suppliers take advantage of rising demand to hike prices. However, end consumers have limited tolerance for price increases, and automakers are caught in the middle, with profit margins continually compressed.

In this scenario, only three types of companies can withstand this war: 1) those with complete supply chains (like BYD), 2) those backed by strong capital (such as new forces supported by internet giants), and 3) those capable of rapid cost reduction and efficiency improvement through technology.

Intelligence: The Next Decisive Point

“Smart cars” have become the industry’s focus. Under current regulations, the upper limit of autonomous driving is still Level 2, but the space for vehicle intelligence is far from saturated—interactions with smartphones, charging stations, parking systems, etc., can greatly enhance user experience.

Controlling an intelligent ecosystem platform will be key for future automakers’ competition. This also explains why new car-making forces supported by tech giants like Tencent, Alibaba, and Meituan are receiving significant attention.

Who Will Win in the End? The Three Major Competitions

Tesla vs. BYD: The Global Battle

These two are the largest competitors in EV sales, ranking second and first in global market share respectively.

Based on Q1 2023 data, BYD’s sales increased over 100%, far surpassing Tesla’s nearly 50% growth. Tesla’s global market share is gradually declining, especially in China. It is expected that by 2025, Tesla’s share in North America will significantly decrease, mainly due to low-price competition from emerging brands.

Overall, BYD may have a stronger competitive advantage because it started with battery R&D, controls a more complete supply chain than Tesla, and has a broader market presence. Although its global sales are currently below Tesla’s, the high growth potential in the Chinese market over the next 3 to 5 years remains ample. As long as BYD can steadily expand overseas markets during this period, its long-term prospects are very promising.

NIO vs. Xpeng vs. Li Auto: The Differentiation of New Forces

The three new car-making forces were all established around 2014-2015, backed respectively by Tencent (NIO), Alibaba (Xpeng), and Meituan (Li Auto). Their target customer groups differ: NIO targets over 400,000 RMB, Li Auto around 350,000 RMB, and Xpeng below 200,000 RMB.

The current competitive landscape shows: Only Li Auto has achieved profitability, while the other two are still operating at a loss.

In terms of growth potential, NIO outperforms Xpeng partly because of a lower base, and partly because Tencent, as China’s internet giant, has a clear advantage in intelligent vehicle platforms. In the future, Tencent-backed companies are more likely to lead. NIO focuses on the high-end market and, with ongoing policy subsidies in China, has the opportunity to turn high-priced models into profit.

Xpeng pursues a low-price, market-share strategy, but if low prices cannot win market share, it risks becoming a “loss-making volume seller,” which is concerning for its future.

Why Invest in Electric Vehicle Concept Stocks Now?

The electric vehicle industry differs from the saturated mobile phone and computer markets; it represents a true growth story. From policy, technology, and consumer trends, EVs meet Buffett’s “Snowball Theory” two key elements—“wet enough snow” (large market demand) and “long enough slope” (long growth cycle).

Major countries worldwide have clear bans on fuel vehicle sales, and EV demand will continue to grow. Unlike mobile phones, which only need periodic updates and replacements, the growth space for EVs is much larger. Investing in the EV industry allows you to share in the wealth generated by industry expansion and witness a pivotal moment in business civilization.

What Should Investors Focus on When Investing in Electric Vehicle Stocks?

Charging Infrastructure Remains a Bottleneck

The biggest obstacle to EV industry growth is the insufficient density of charging stations. In many cities, especially in places like Taiwan, parking spaces in apartments and buildings lack charging facilities, resulting in far fewer charging points than traditional gas stations. This directly affects consumer willingness to buy, so accelerating the development of charging networks is essential.

Oil Price Fluctuations Have Limited Impact

The impact of oil price fluctuations on EV development is often overestimated. During the early pandemic, oil prices briefly turned negative, which coincided with a surge in EV sales. Environmental and carbon reduction trends are unstoppable, and government policies are clearly tilted in favor of EVs, making their growth an inevitable trend.

Parent Company Financial Strength and Strategic Intent Are Equally Important

Many new EV companies are still operating at a loss, but they can continue to burn money on R&D thanks to strong backing from parent companies with substantial funds. However, well-funded parent companies may not always continue to invest unless the EV company holds strategic importance for the entire group. Investors should thoroughly understand the overall layout and operational capacity of the parent company.

Overall, over the next 3 to 5 years, the EV industry will maintain rapid growth, but face challenges like “difficult to raise prices” and “rising raw material costs.” The companies that ultimately stand out will be those with complete supply chains, cost control capabilities, dominant market positions, and leading technologies.