BYD Just Announced 5-Minute EV Charging. Should Tesla Investors Be Concerned?

Waiting around for an electric vehicle (EV) to charge can be irritating. But that irritation might have just been greatly reduced by Chinese EV and hybrid maker BYD (OTC: BYDDY). Earlier this month, it revealed its Blade Battery 2.0 and Flash Charging system. Used together, the company claims, they can bring a compatible vehicle from a 10% charge to 70% in roughly five minutes and from 20% to 97% in approximately 12.

This would suggest BYD has a game-changing EV product on its hands. Is it reasonable for Tesla (NASDAQ: TSLA) investors to be worried, and maybe even consider selling their stock?

BYD's charging aims to be quick as lightning

First, a note. Tesla and BYD are not direct competitors in the U.S., where the former is prominent and the latter is effectively unavailable. That's mainly because our government has slapped a 100% tariff on EVs built in the Asian country.

Image source: Tesla.

The two are actually collaborators in some respects. Like BYD, Tesla is working hard to develop its in-house battery unit, but its strategy differs substantially from its vertically integrated Chinese peer. The American auto maker manufactures some batteries in-house, supplementing them with products from outside manufacturers -- including BYD. All of BYD's cars, meanwhile, use BYD batteries.

Tesla's latest battery cell, the 4680, is extremely reliable and has a relatively long range when charged. Its charging time is slower than that of Blade Battery 2.0. However, in contrast to the 12 minutes it takes for BYD's power pack to charge from 10% to 97%, Tesla batteries need 20 to 25 minutes.

Will most EV owners prefer a battery that offers plenty of range, even if it means longer charging times? Or will they favor a lower-range product that charges more quickly and gets them on the road before they finish their takeout coffee?

It's got the power

I'd imagine the average consumer would go for No. 2. Americans, in particular, don't like to wait.

I think, then, Blade Battery 2.0 could be a meaningful threat to Tesla's battery-making efforts. But that's the catch; since Tesla is open to components from outside manufacturers, if a competing battery technology proves too competitively powerful, the company could try to adopt it (albeit at the expense of its vaunted Supercharger network). Tesla doesn't sell its batteries to others, so it doesn't have business to lose with such goods.

The threat might turn out to be more reputational. Assuming Blade Battery 2.0 does what BYD claims, the company's reputation as a cutting-edge EV maker will be enhanced. Already very competitive on price in the markets where it and Tesla square off, this could drain business from the U.S. company and boost BYD's share.

One item to note here: Infrastructure is currently a roadblock for Blade Battery 2.0 internationally. In China, BYD is building out a network of 1,500-kilowatt charging hubs needed for the product's fast charging. However, there are precious few in other markets, and such a build-out would cost time and capital.

So, if I were a Tesla investor, I wouldn't worry about BYD's battery putting a heavy zap on the company's business, at least not for some time. I'd be more concerned about Tesla's other headwinds; its clumsy pivot to more modestly priced models, for one, and the endless distractions of CEO Elon Musk at a time when managerial focus seems essential.

Eric Volkman 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.