Tesla Motors Inc (TSLA) shares have had an incredible run, and now one firm says there’s a Chinese EV maker that’s being overlooked. Longboard CEO Cole Wilcox says BYD Company Limited (HKG:1211)’s story is under told and that it’s time investors sat up and took notice. If you remember, Longboard is the firm which said prior to the run-up in Tesla’s share price—about a year ago, in fact—that shares would rocket upward. The firm recently shared its thesis regarding BYD with ValueWalk.
Longboard predicts that shares of BYD Company Limited (HKG:1211) will trade over $100 within the next 18 months and $200 within the next five years. Interestingly enough, that’s exactly the same prediction the firm made regarding Tesla last year. Of course even Longboard’s bullish forecast for Tesla Motors Inc (NASDAQ:TSLA) last year turned out to be conservative. The stock is already over $200 a share and shows no signs of plummeting—at least for now.
Warren Buffett owns BYD
What’s especially interesting this time around though is that BYD Company Limited (HKG:1211) has attracted at least one major investor from the Western world. Warren Buffett, called the “Oracle of Omaha” for his visionary insights into the markets, owns 10% of BYD. In fact, Charlie Munger, vice chairman of Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) is quoted as calling BYD CEO Wang Chuanfu “a combination of Henry Ford, Thomas Edison and Bill Gates.” Clearly, Buffett and Munger see something exciting in the Chinese automaker.
So exactly what is BYD Company Limited (HKG:1211)’s story? It’s one that’s surprisingly similar to Tesla’s story.
Analysts negative on BYD now… just like Tesla in the past
Currently analysts are actually pretty negative on BYD Company Limited (HKG:1211). According to Wilcox, there’s a neutral to negative sentiment on the Chinese automaker in the analyst community. In fact, he said the way they see BYD now is similar to the way they saw Tesla Motors Inc (NASDAQ:TSLA) for quite some time. Of course they’ve changed their tune on Tesla now, and he believes they will change their view of BYD in the future.
Wilcox told ValueWalk in an interview that while what Tesla Motors Inc (NASDAQ:TSLA) has achieved so far has been “miraculous,” what BYD Company Limited (HKG:1211) has done so far is even more amazing.
“So this was like a miracle squared in how BYD got to where they’re at today going forward,” Wilcox said. “And it’s not a good idea to bet against people who are able to do miracles squared.”
Analysts at Wilcox’s firm gave similar advice regarding Tesla Motors Inc (NASDAQ:TSLA) last year when so many investors had sold shares of the automaker short.
What BYD is all about
One big difference between Tesla Motors Inc (NASDAQ:TSLA) and BYD Company Limited (HKG:1211) is the fact that right now, Tesla is only producing one vehicle. BYD, on the other hand, is already producing vehicles in mass scale. The company also already does much more than electric cars. It is the largest rechargeable battery manufacturer in the world and the number one electric bus manufacturer in the world. BYD wants to make every bus in the world electric, which would tremendously cut down vehicle emissions.
BYD Company Limited (HKG:1211) is also the fastest growing Chinese automaker and the number one hybrid and pure electric carmaker in China. The company is also already making waves in the energy storage systems industry, which is where analysts are hoping Tesla Motors Inc (NASDAQ:TSLA) will go, although the possibility of that even happening is still years away.
Here’s a look at BYD Company Limited (HKG:1211)’s long term strategy (graphic courtesy: Longboard)
BYD already winning in energy storage
BYD Company Limited (HKG:1211) is a vertically integrated company which has essentially proven that it’s possible to do what many hope Tesla Motors Inc (NASDAQ:TSLA) will do one day. BYD owns and controls every aspect of producing its vehicles—right down to the lithium mines where they get the lithium for their batteries.
Unlike Tesla Motors Inc (NASDAQ:TSLA), the company is already producing energy storage systems at industrial scale. In addition, BYD Company Limited (HKG:1211)’s existing energy storage systems make up the biggest completed energy storage products on the planet. The company stands to gain tremendously from the market opportunities in energy storage, as analysts estimate major growth over the next few years (image courtesy: Longboard):
Why Tesla captured our imagination
So if electric cars and energy storage are the next big things, why has Tesla Motors Inc (NASDAQ:TSLA) gotten so much attention, while BYD Company Limited (HKG:1211) has been largely left in the cold?
“One big primary thing is that [Tesla CEO] Elon Musk is extremely good at PR,” Wilcox said. “He’s very good at telling a story. They also have a very sexy story and a very high end vehicle. They’ve created this sort of social and global zeitgeist around the car, which people are going gaga for.”
Wilcox believes BYD Company Limited (HKG:1211) will benefit greatly because Tesla Motors Inc (NASDAQ:TSLA) has essentially gotten the conversation regarding electric vehicles started. He believes now that Tesla has gotten the ball rolling, people will start seeking other companies which are doing the same thing and then discover BYD. From there, he sees more comparisons and contrasts between the two companies and suggests that the valuation gap which exists between their share prices will begin to close.
Tesla is to Apple as BYD is to Android
Tesla Motors Inc (NASDAQ:TSLA) has already said it has big plans for China, so if BYD Company Limited (HKG:1211) really is going to be the next Tesla, it’s worth wondering what a competition between the two companies will look like. In reality though, Wilcox doesn’t see them competing head to head. While it’s true that both make electric cars, he says they’re targeting different sets of consumers.
He notes that Tesla Motors In (NASDAQ:TSLA)’s vehicles are much more expensive than those made by BYD Company Limited (HKG:1211), mostly because of the high import taxes Tesla has to face. Aside from that, he said BYD purposely designed its car for the cultural tastes of the Chinese consumer. He basically said that if Tesla’s Model S is Apple Inc. (NASDAQ:AAPL)’s iPhone, then BYD’s car would be like an Android phone.
Wilcox emphasized that there’s room for both companies in the market, as they address two different segments of it.
BYD CEO Wang Chuanfu is China’s Elon Musk
And finally, no comparison of two companies would be complete with a comparison of their CEOs. Both BYD Company Limited (HKG:1211) CEO Wang Chuanfu and Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk have created companies which are doing things people said couldn’t be done. Chuanfu is the son of farmers, and he went to school, going on to become a battery engineer for the Chinese government. He decided to start his own company from nothing, transforming himself from a member of China’s lower class into one of the country’s wealthiest men.
Musk, however, isn’t still with his first company. He has since moved on, and Tesla Motors Inc (TSLA) is simply his latest venture. He taught himself