Scottish Mortgage Investment Trust (LSE: SMT) has been a long-time backer of electric vehicle (EV) trailblazer Tesla (NASDAQ: TSLA). It first bought shares in 2013 and has made billions from that lucrative stake over the years.
However, the FTSE 100 trust has recently been selling its once-massive holding. At the end of February, it made up just 0.8% of the portfolio. By now, it might even have dumped it altogether.
Investing in Tesla’s rival
By contrast, Scottish Mortgage has been buying shares of BYD (OTC: BYDD.Y) in recent months. At the end of March, the Chinese EV firm accounted for 1.8% of assets.
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BYD’s become a bit of nightmare for Tesla. It’s the top-selling EV brand in China, the world’s largest EV market, and is quickly taking market share in Europe, Latin America, and South East Asia.
In 2024, BYD reported revenue of approximately $107bn (29% year-on-year growth), surpassing Tesla’s $97.7bn (up just 1%). BYD’s Q4 revenue and profits surged 53 and 73% respectively. In Q1, Tesla’s vehicle deliveries declined 13%.
BYD had 27% market share in China in January, compared to Tesla on 4.5%.
Foot on the gas
The Chinese firm is vertically integrated, even more so than Tesla, enabling in to churn out high-quality EVs and hybrids at very affordable prices. Its Seagull model starts at just $7,800 in China!
Moreover, it’s making major advances in battery technology. For example, it recently announced that its new systems can add 249 miles of range in just five minutes.
Then there’s its advanced driver-assistance technology, called ‘God’s Eye’. While this isn’t autonomous and seemingly not a threat to Tesla’s global robotaxi ambitions, BYD’s fitting it for free in most models in China.
At a time when its US rival’s sales and margins are under pressure, BYD’s aggressively stepping on the accelerator and taking market share. Indeed, with rising revenue, various innovations and a well-oiled manufacturing base, it looks like the EV firm’s beating Tesla at its own game.
Valuation
Yet, as is often the way with Chinese stocks, BYD’s cheaper. Right now, the forward price-to-earnings (P/E) ratio is around 20. This compares favourably with Tesla, which is trading at a sky-high forward P/E multiple of 90.
Given BYD’s strong growth rates, I see quite a lot of value in its stock, certainly relative to Tesla.
| Tesla | BYD | |
| Market cap | $765bn | $145bn |
| Price-to-sales (P/S) ratio | 9 | 1.3 |
| P/E ratio (trailing) | 120 | 25 |
Risks
Naturally, there are risks with both. An economic downturn in Asia, caused by the US-China trade war, could put huge pressure on BYD’s sales across the region.
As for Tesla, reports say it has halted new orders in China for its US-made Model S and Model X cars due to the extreme reciprocal tariffs in place. This has the potential to further weaken Tesla’s competitive position in China.
According to Reuters, Tesla has also suspended plans to source components from China for its robotaxis. This may lead to even more delays launching its long-awaited robotaxi network.
Taken together, these issues could also impact the value of Scottish Mortgage’s holdings in BYD and — if it still owns it — Tesla.
However, I would personally rather buy shares of the FTSE 100 trust rather than either EV maker. Especially while it’s trading at a 9.5% discount to net asset value.
