Tesla's Feeling the Pain of Lower Pricing, but This EV Maker Isn't. Is the Stock a Buy?

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Purchasing an electric car is now more affordable than it has ever been. Global automakers are cutting the cost of their electric vehicles and releasing more affordable models. They've noticed the effect on their bottom line.

Even the market leader in electric vehicles with the strongest brand, Tesla (TSLA 2.22%), was forced to lower pricing. It now intends to produce a car in Germany for 25,000 euros, or somewhat less than $27,000, according to a Reuters story. Tesla has seen a decline in profit margins due to decreased prices. Compared to the same period previous year, its cost of goods consumed 7.2% more of its sales in the most recent quarter.

Yet, BYD (BYDDY -0.21%), its largest opponent in the EV production market, has not encountered the same difficulty. In fact, over the same time frame, it was able to raise its gross margin on auto sales by three percentage points. And right now, the stock is available for a very attractive price

The soon-to-be biggest EV maker
BYD is growing its new ele
ctric vehicle, or NEV, sales extremely quickly. (The NEV categorization is used to distinguish BYD's fully electric vehicles from plug-in hybrids and internal combustion vehicles.) NEV deliveries increased 53% year over year last quarter. By comparison, Tesla deliveries increased 27%.

The robust increase in volume has led to notable enhancements in economies of scale, which have supported the gross margin. Newer, high-gross-margin models sold well for BYD as well. Its revenues were centered in China, so this past quarter's pricing battles and other pressures didn't have as much of an effect on it. Nevertheless, in reaction to Tesla's price reductions in its native market, BYD has lowered some of its prices this year.


During its third-quarter results call, Tesla discussed the effect that higher interest rates were having on its pricing. Rising interest rates have a significant effect on the total cost of an automobile since most cars in the United States are purchased with loan. Consequently, Tesla has endeavored to reduce its cost to guarantee that it can fulfill its delivery commitments.

Consequently, BYD currently has a considerably higher gross margin on vehicle sales than Tesla, with a 22% margin. Last quarter, Tesla's gross margin was a meager 17.9%.
Indeed, Tesla continues to make a lot more money per car than BYD. In the third quarter, BYD made $1,730 each vehicle delivered, whereas Tesla made $4,260 per vehicle, more than twice as much, according to




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