HSBC: The 14 times market value gap between BYD and Tesla is unreasonable, maintaining a "Buy" rating for BYD

HSBC Research published a report indicating that over the past six months, the stock price trends of Tesla (TSLA.US) and BYD (01211.HK) have shown significant divergence, with the market capitalization gap between the two expanding to 14 times. The bank does not believe there is a reasonable explanation for this gap. Both are leaders in the electric vehicle sector, although BYD is more successful and likely to expand its lead. The future lies in autonomous driving, where Tesla may have a slight advantage, but this is still debatable, as it is by no means the only player in this field. Tesla also seems to lead BYD in the Robotaxi (autonomous taxi) sector, but it is no longer the market leader as it once was in the electric vehicle space.

The report points out that the growth paths of the two companies are clearly different. For BYD, it is about large-scale, ultra-efficient manufacturing accelerating global expansion; for Tesla, it involves potentially disruptive innovations that could change personal vehicle ownership models and give rise to humanoid robots. One future is tangible and well-funded, while the other is more speculative and may require more capital; the bank believes the current valuation gap is unreasonable.

The bank is optimistic about BYD, expecting its main electric vehicle platform to launch in the first quarter of 2026, along with new models and refresh cycles that will further solidify its leadership position in the domestic market. At the same time, BYD's international business expansion is strong, with higher profit margins in overseas markets due to a more favorable competitive environment, which helps enhance profitability. It maintains a "Buy" rating on BYD with a target price of HKD 139.

For Tesla, the bank believes that as the electric vehicle market slows down, its profitability will continue to be under pressure. Additionally, its projects that have not yet generated revenue face significant uncertainty in terms of timing and scale, but these risks are not reflected in the market valuation. It gives a target price of USD 133 and maintains a "Reduce" rating on Tesla