Better EV Stock: BYD vs. Tesla

Electric vehicle (EV) stocks have certainly drawn interest from investors. Not only could EVs be the future of the automobile sector, but many of these companies are also working on greater technological innovations such as full self-driving (FSD).

Tesla (NASDAQ: TSLA), led by CEO Elon Musk, is considered one of the pioneers of the EV space and has become one of the largest companies in the stock market, with a market cap surpassing $1 trillion.

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BYD (OTC: BYDDY) is making waves in China and has controlling market share with strong technology and vehicles that are more reasonably priced. While BYD does not sell its vehicles in the U.S., it has major expansion plans. Which is the better EV stock right now?

Tesla: It's all about future initiatives

Tesla's stock has been nothing but volatile since President Donald Trump won the election last November. But through it all, it has still seen its price nearly double over the last year (as of May 20). However, its core EV business has struggled in recent years. The company has been ceding U.S. market share and has seen sales plunge globally.

In the first quarter of the year, Tesla reported deliveries of 337,000 cars, the lowest amount in over two years. And recent data does not show things to be improving.

Still, the company has been able to keep investor enthusiasm high with future initiatives. Closest on the horizon is unsupervised full self-driving (FSD). Musk said on the company's previous earnings call that he hopes customers will be able to use FSD technology by the end of the year. An upcoming Robotaxi demonstration in Austin, Texas, next month will be the first public glimpse into the new tech.

The company's FSD has driven more than 1 billion in testing. But there are still many questions over whether FSD is truly ready for commercialization and whether management will be able to hit its timeline.

Investors are also excited about the company's plans to release cheaper EVs and its Optimus robots, which supposedly will be able to complete household chores. Musk believes Tesla can scale up Optimus production quickly and build 1 million units by 2030. But its stock already trades at a massive valuation, making its margin for error slim.

TSLA PE Ratio data by YCharts; PE = price to earnings.

BYD: Impressive execution

U.S. based investors may be less familiar with BYD because it doesn't sell its vehicles in this country. But it's clear that the company has surpassed Tesla in China. In 2024, the company captured 34% of China's new energy vehicle market.

Furthermore, BYD also surpassed Tesla on revenue in 2024, reporting roughly $107 billion, although keep in mind that BYD makes hybrid vehicles in addition to EVs.

The company seems to be winning by producing cheaper EVs (some of its vehicles are priced at less than $10,000) with better technology than Tesla. Its charging capabilities are also superior right now -- its new supercharging tech can recharge for a 250-mile range in just five minutes. (Tesla's supercharger can recharge for a 200-mile range in 15 minutes.)

The company also has big expansion plans. Management reportedly believes that half of the company's sales will be outside of China by 2030.

However, BYD does not appear to be as far along as Tesla in FSD. The company's current tech does offer self-driving capabilities such as assisted parking, adaptive cruising, automatic braking, and the ability to understand a user's driving habits. But it does not appear to have full FSD capabilities, although the company previously said it will spend $14 billion to create "intelligent" vehicles.

Which stock is better?

In my opinion, the decision between Tesla and BYD boils down to whether Tesla can pull off FSD and its Optimus robot development, and make these programs as successful as it claims. Musk has a history of developing disruptive technology in several sectors, so there's a good chance Tesla can succeed.

But I'm not quite convinced the company is there yet, and I would rather not buy a stock trading at a massive valuation based on a lot of speculation. Meanwhile, BYD looks to have developed better EVs and is executing on its core business. The stock trades just under 27 times earnings. I like that bet better.

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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.