Tesla vs. BYD: Here's why one fund manager prefers the Buffett-backed automaker

Published Sun, May 21 20238:12 PM EDT

In an era defined by the need to tackle climate change, electric vehicles are seen as an increasingly important part of the solution. For Philip Ripman, portfolio manager at Storebrand Asset Management, one global EV automaker stands out: China's BYD — not Elon Musk's Tesla . Over the past two years, shares of BYD listed on the Hong Kong Stock Exchange have risen by 49%, compared to Tesla, which is down by 9% over the same period. As an investor, Ripman said that Warren Buffett-backed BYD's appeal goes beyond just manufacturing electric cars. "BYD has a huge place, both from the electric vehicle perspective and also through the battery production side," Ripman, who manages the $1 billion Storebrand Global Solutions sustainable fund, told CNBC Pro Talks last week. Ripman highlighted the company's developments in cheaper , sodium-ion battery technology, which could potentially replace lithium batteries. He noted that these could become prevalent in BYD's more affordable EVs and help increase profit margins for the automaker. With demand outstripping supply, lithium-ion batteries have become a bottleneck in EV production. Public transport opportunities Ripman said that BYD's public transport division, particularly electric buses and the Sky Rail project, is also often overlooked. Sky Rail — which BYD calls an "advanced monorail train" — runs on battery power, doesn't require dedicated tracks, and can carry large numbers of people. "Interestingly enough, a lot of the buses here in Oslo are actually BYD buses, just demonstrating a little bit their global reach in that sense," Ripman added. Public transport operator Nobina already operates over 300 BYD electric buses across multiple Nordic cities. The company placed an order for 70 more zero-emission buses earlier this year. Ripman believes BYD is well-positioned to gain more market share, even as the Chinese EV market becomes increasingly saturated with local and international players, including Tesla. "I do think BYD is one of the leaders in the segment. We've seen growth over time," he said. Affordable and high-end vehicles Another reason Ripman favors BYD over Tesla is the former's broader range of vehicles. The fund manager sees BYD's ability to offer products across different segments, from luxury to more affordable options, as a strength. BYD is set to launch a small electric city car this year in Europe for roughly $11,000. At the top end, the company also unveiled plans to sell one of the most expensive EVs on the road in China, costing around $140,000. However, Ripman said that BYD's aggressive expansion into Europe, a highly competitive market that Tesla cannot afford to lose, raised some geopolitical risks related to data collection. "I think there is a geopolitical play here to be a little bit wary about," he said, citing U.S. sanctions on China's telecom giant Huawei as a recent example. A distracted Musk? On Tesla, Ripman expressed some concern over CEO Musk's distractions and their potential impact on the automaker's stock price. While acknowledging Musk's significant role in leading the company's growth to date, Ripman suggested that his various ventures, including SpaceX and Twitter, could be detrimental to Tesla. In addition, he pointed out that even Tesla has recognized BYD's position within the market by choosing to use BYD batteries in some of their models. Last year, BYD agreed to supply batteries to Tesla . "We're now good friends also with Elon Musk , because we're preparing to supply batteries to [Tesla] very soon," BYD Vice President Lian Yubo said during an interview with Chinese state media anchor Kate Kui.