Should We Invest in the Largest Producer of EVs?

January 18. 2024. 6 mins read

“We like BYD, but believe it’s risky to invest in a single Chinese auto firm that happens to be the most accessible to foreign investors.” That’s where we left things this past summer in a piece titled Is Investing in Chinese Autos a Good Idea? that looked at whether BYD could ever find a place in our own tech stock portfolio. Now that our portfolio will soon be down to 35 stocks (pending a few acquisitions) we’re eyeballing some names to add and BYD (1211.HK) came up again as a stock we like.

BYD is a rare Chinese stock that isn’t subject to VIE structure risk as we’re able to purchase H shares on the Hong Kong stock exchange using Interactive Brokers. With our tech portfolio lacking Chinese exposure, adding shares of BYD would provide us with exposure to several compelling growth themes as follows:

  • The country of China: The second-largest economy in the world may see growth slowing, but her far-reaching influence means that future global leadership may be an eventual reality.
  • Chinese automotive sector: China has now surpassed Japan as the largest exporter of automobiles. This is due to improved quality and electrification.
  • Electric vehicles: We’ve been apprehensive about the growth of EVs, but are increasingly believing that their lower total cost of ownership is spurring adoption.

Today, we want to look at how profitable BYD is, what valuation the stock trades at relative to historical values, consider total cost of EV ownership, and tease out the bull thesis a bit more.

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