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The year is not starting off well for Tesla. The reported losses were larger than expected and most investors are prepared to take hits in Q2 as well. That being said, BYD Auto, the Chinese electric car producer and Tesla’s rival, reported the opposite.

BYD Auto reported the incredible 632% growth during Q1 of 2019. The company is backed by Warren Buffett and by all accounts is giving Tesla a run for its money.

One interesting factor to note however, is that the company’s stock seems to be completely unaffected by the great earnings. The majority of BYD Auto’s clients are Chinese.

There is a very large and growing demand in China for electric cars. China’s Association of Automobile Manufacturers believes that over 1.5 million electric vehicles will be bought in China this year alone.

According to Bloomberg, this is just the beginning and the electric car market in China will be the biggest in the world. If BYD Auto is moving in the same direction, a very large portion of that market might belong to the company.

Over the last year, BYD Auto’s electric car sales grew from nearly 30 000 to more than 73 000. At the current time, the company’s electric vehicles account for more sales than the company’s oil versions. This trend shows no signs of stopping and the company might fully move over to electric cars manufacturing in the very near future.

BYD Auto is not all sunshine and flowers

Despite the 632% growth, the stock seems relatively unaffected and was even down 1% when the news went public.

The biggest reason for that is the not-so-secret government subsidies on both national and local level. These subsidies will disappear completely by 2020 and the stock might head south quickly. The company has allegedly received more than $1 billion in subsidies in 2016 alone.

There is also the issue of competition. Last year, the electric car manufacturers in China were more than 500. The demand for electric cars is growingly rapidly, but the market will not be able to support the increasing number of manufacturers.

Looking back in the US, Tesla has lost the whooping $700 million in the past quarter alone. Even if we remove the subsidies from BYD Auto, the company would break even or score a very slight profit. Tesla’s growing manufacturing issues have however, resulted in the company to fall 13 000 short of its 63 Q1 goal.

The stock is down about 8% but comparing the two companies seems unfair mainly because of the difference in vehicle class. Tesla is mostly producing luxury vehicles while BYD is aimed almost exclusively towards low-level electric cars.

In the coming years, the market will test both these companies. As the Chinese competition has shown, there are plenty of hungry fish out there waiting to become sharks.

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About Ian Karamanov

Based in Sofia, Bulgaria. Writing about cryptocurrency, politics, finance and esports. Keen interest in unedited history, spirituality and freedom.

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