This Is How NIO and BYD Become the Next Tesla

Published in December 2021
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Automotive companies market capitalization in November 2021. Tesla has a market capitalization of 1'013 billion U.S. dollars, Toyota 290 billion U.S Dollars and Volkswagen 142 billion U.S. Dollars.
Compiled by authors

But perhaps it is more telling to look at the price-to-sales ratio. You can calculate this by taking a company’s market capitalization and then dividing it by the company’s annual revenue.

Automotive companies Price-to-Sales ratio in November 2021. NIO has a price-to-sales ratio of 184.4, Xpeng has a price-to-sales ratio 42.3 and Tesla has a price-to-sales ratio 32.1.
Compiled by authors

What you see, of course, is how much the purely electric players have surged. But here is the obvious question: Who will become the next Tesla? Do NIO and BYD stand a chance?

 

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BYD is a classic case of low-end disruption. It never intended to be a car company from day one. It’s a contract manufacturer no one has heard of. Back in the mid 1990s, it was a battery manufacturer making nickel-cadmium batteries for Motorola, Nokia, and Sony Ericsson.

Then, like all things in China, BYD scaled up and moved up the value chain. It entered segments such as electric bikes, then it went into electric scooters and mopeds. Next, it got into electric buses. Every step along the way, the company reverse-engineered other brands’ vehicles. It copied, improved, and started to innovate on its own.

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