By 2020, BYD is targeting to have production capacity of 34 GWh, which is closer to the production target of 35 GWh set by Palo Alto-based Tesla Motors Inc (NASDAQ:TSLA). To collect more money for its battery production, BYD is aiming to raise around 10-12 billion yuan ($1.6-1.9 billion) in private placement by June, according to IFR, a Thomson Reuters publication.
But that's not all; BYD has planned 9 billion yuan ($1.45 billion) capital expenditure for 2015, as reported by Reuters, citing Macquarie. Coincidentally or not, Tesla Motors has also fixed capital expenditure of $1.5 billion for this year to upgrade its vehicle models, launch new products, such as Model X, and speed up construction process of its $5 billion Gigafactory.
BYD, which has the backing of the Wall Street legend, Warren Buffet, is also not far away from Tesla Motors, in terms of market capitalization. As Quentin Webb rightly highlighted in Reuters blog, BYD is worth $26 billion, which is not far behind Tesla’s $32 billion market cap. As both the companies are currently having negative cash flow, Mr. Musk stated that this would change in the fourth quarter of this year.
One factor, which supports BYD more than Tesla is increased government incentives towards alternative fuel initiatives. China is trying to reduce its dependency on oil imports and boost local EV production. As a result, Chinese billionaires such as Leshi Internet leader, Jia Yeuting and Wanxiang Group Corporation are foraying into EV markets. Chinese government has also set a target to put five million EVs on roads by the end of this decade.
Entering into China in early 2014, Tesla Motors has been facing problems in the world’s largest auto market. Chinese consumers were reluctant to adopt Tesla’s luxury sedans, as people thought that they will face problems in charging them. Such concerns were even raised by Tesla Chief Executive Officer Elon Musk himself, who then dealt with the issue by bringing several management and organizational changes towards foreign sales staff. The prime beneficiaries of Tesla's underperformance in China were Chinese EV makers, such as Kandi and BYD.
Tesla stock is currently trading at $250.41, down 0.41%. The stock has surged 12.7% since the start of the year, outperforming the S&P 500 Index’s gain of 2.11% over the same period.
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