Electric vehicle (EV) companies like Tesla (TSLA 2.00%) and BYD (BYDDY -2.62%) have captivated the minds of investors everywhere, as many view EVs as a viable new transportation option in a world that badly needs to reduce carbon emissions. In Tesla’s case, investors are also betting heavily on future innovations in tech and artificial intelligence (AI) that they believe will significantly increase shareholder value in the coming years.
While both companies could have significant upside, Tesla and BYD are at different stages in their journeys, and each is prioritizing different initiatives within their businesses. Let’s take a look at which stock is the better buy right now.
Tesla: Looking toward the future
Tesla has long been a leader in the EV space and is credited with commercializing EVs. CEO Elon Musk is widely seen as an innovator, having helped launch multiple groundbreaking and successful companies. However, ever since Musk got involved with politics and the Department of Government Efficiency (DOGE), his brand has seemingly alienated many, including current and potential Tesla customers. Increased competition in the EV space also seems to be taking market share from Tesla.
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In the first quarter of 2025, Tesla reported 337,000 vehicle deliveries, the lowest amount seen in over two years. Reports about Tesla sales in the second quarter of the year haven’t improved either. Wells Fargo analyst Colin Langan recently said in a research note that he’s expecting the weakness to continue. Langan said deliveries fell roughly 23% in May on a year-over-year basis and were down 21% on a quarter-to-date basis. Langan reiterated a sell rating on the stock, which he said is at risk of falling 60%.
Tesla doesn’t really trade on fundamentals, which is why it’s become a battleground stock among analysts and investors. The bulls are banking on future initiatives such as Tesla’s robotaxi service and the humanoid Optimus robots to hold the valuation up and propel Tesla’s stock higher. The company recently began rolling out its first full self-driving (FSD) robotaxis in Austin, Texas, in a highly anticipated event for the company. Musk and management have previously said they think they can get 1,000 vehicles on the road by the end of this year and begin generating revenue. Musk has also said that the company expects to build 50,000 Optimus robots by the end of next year.
BYD: Executing on the core EV business
Many U.S. investors had probably never heard of BYD until recently, primarily because the company doesn’t sell any of its hybrid vehicles or fully electric vehicles in the United States. But the company has made waves in China and quickly usurped Tesla.
In 2024, BYD surpassed Tesla’s revenue, generating $107 billion and also $5.6 billion in profits. Tesla, by comparison, generated $7.1 billion in profits. BYD also crushed Tesla in terms of market share, capturing over 30% of the EV market in China, compared to Tesla’s 6%.
How are they doing this? Simple: BYD is reportedly building cheaper EVs that work better and have better charging capabilities than Tesla. The company is also planning significant expansion, with plans to generate half of its sales outside China by 2030. In the first quarter of 2025, BYD kept the momentum going by nearly doubling net income on a year-over-year basis. Meanwhile, revenue reached nearly $24 billion, up 36% year over year. Analysts also expect BYD to grow earnings in 2025 by nearly 24%, according to data provided by Visible Alpha.
Better buy
Obviously, if Tesla can succeed with robotaxis and Optimus robots, then perhaps its valuation is justified and the stock can keep moving higher. However, I still think the market is baking in a lot of success already from these initiatives, meaning if Tesla doesn’t live up to the hype, the stock could take a hit. Additionally, the company’s core EV business is also struggling.
BYD, on the other hand, may not have the same upside as a company like Tesla because the company isn’t planning on rolling out robots or FSD technology, although it is investing heavily in driver-assisted and artificial intelligence technology for its vehicles. However, BYD is demonstrating strong growth, and its core products are outperforming. BYD trades at 25 times earnings, compared to Tesla at 179. I think BYD is the more sensible play here.
Wells Fargo is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.
