As the electric vehicle giant BYD accelerates its growth, a captivating tug-of-war between bullish and bearish market sentiments unfolds concurrentlyRecently, Morgan Stanley made headlines by significantly raising its target price for BYD shares after substantially increasing its stock holdings, while noted investor Warren Buffett has been consistently reducing his stake in the company.

This clash of perspectives highlights the differing outlooks on BYD's future, with major financial institutions like Morgan Stanley expressing great optimism while Warren Buffett, often described as the "Sage of Omaha," appears to be less confident.

On July 10, Morgan Stanley released a research report that set a bullish tone on BYD's performance, raising the target price for both its H-share and A-share by over 80%, alongside a recommendation to "overweight" the stock.

Morgan Stanley’s optimistic outlook stems from BYD’s impressive performance in the electric vehicle sector, particularly its notable advancements in expanding into overseas markets.

Indeed, BYD's international expansion has been rapid

For instance, on July 8, the company signed an investment agreement with the Turkish Ministry of Industry and Technology to establish a factory in Turkey, showing its commitment to invest approximately $1 billion for this venture.

While major financial players like Morgan Stanley express confidence in BYD's future, Buffett’s Berkshire Hathaway has significantly reduced its shareholding, now owning just 5.99% of the company.

Major players such as Morgan Stanley and Citigroup continue to support BYD, pointing towards a strong future in the global electric vehicle market.

The rapid globalization of BYD has caught the attention of Morgan Stanley, which recently reported an ambitious target for the company.

The report outlined expectations for BYD’s H-share to rise from HKD 255 to HKD 475, and A-share from CNY 240 to CNY 440, with increases of 86% and 83% respectively, earning a recommendation to "overweight."

Morgan Stanley’s confidence in BYD stems from the company's impressive sales performance, particularly its expansion into international markets which has played a significant role in the increased ratings.

The research predicts that BYD's sales will reach 4 million units this year with projections of 5 million in 2025 and 6 million in 2026, marking a compound annual growth rate of 26% from 2023 to 2026.

Additionally, the report noted that BYD's second-quarter sales hit 987,000 units—a 58% increase quarter-on-quarter and a 40% year-on-year growth; further, the company’s net profit is projected to reach between 8 billion and 8.4 billion yuan.

Reflecting bullish sentiments, Morgan Stanley augmented its stake in BYD stocks recently, holding a total of 55.58 million shares, which constituted 5.06% of the company after a minor sell-off of a portion of the stock.

Notably, earlier in March, Citigroup also expressed a favorable view on BYD, setting a 90-day upward price target of HKD 463 for its H-shares, indicating a potential gain of 121% from the latest closing price with a "buy" rating.

The optimism from banking giants like Morgan Stanley and Citigroup is attributed to a critical strategic turning point expected for BYD in 2026 as well as milestones in its global expansion.

Evidence suggests that by 2026, production lines in Thailand, Indonesia, Brazil, and Hungary are expected to be operational, which would bolster BYD’s production capacity considerably.

However, Morgan Stanley points out that despite the competitive cost structure and performance of BYD's electric vehicles against international peers, establishing a strong brand presence overseas remains challenging

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To complicate matters, BYD is facing potential tariff increases from the EU; nonetheless, the bank believes BYD will prevail in the international market.

Notably, BYD's pace in overseas expansion has been swift, strategically deploying its electric vehicles in 88 countries and regions while continually making bold moves.

On July 8, BYD signed a significant investment agreement with Turkey's Ministry of Industry and Technology to establish a factory aimed at producing 150,000 vehicles annually and developing R&D capabilities, creating approximately 5,000 jobs with an anticipated launch in late 2026.

The positioning in Turkey capitalizes on the rapidly expanding electric vehicle market, with the local government offering "tariff exemptions" to attract foreign investments.

Data from the Turkish Automotive Distribution and Mobility Association shows that in 2023, electric vehicle sales in Turkey reached 66,000 units, accounting for a 6.8% share of total vehicle sales with a remarkable annual growth of 5.6 percentage points

Market research firm BMI forecasts that by 2032, electric vehicles will occupy over 30.4% of the automobile sales in Turkey.

Moreover, on July 5, Turkey announced a presidential decree modifying additional tariffs on import products, establishing no extra taxes for manufacturers encouraged to invest, effective immediatelyThis means manufacturers investing in local factories will pay only a 10% tariff instead of the initial 40%.

Besides the developments in Turkey, BYD's plans in Thailand, Uzbekistan and other locations are also advancing steadilyOn July 4, BYD's factory in Thailand, which is designed for an annual production capacity of 150,000 vehicles, officially commenced operation; earlier on June 27, the Uzbek facility produced its first batch of electric vehicles.

As BYD's globalization unfolds, with support from major financiers, Warren Buffett's diverging stance marks a notable contrast.

As the most notable shareholder of BYD, Buffett's recent actions reflect a pattern of gradual divestment.

On June 25, filings from the Hong Kong Stock Exchange disclosed that Buffett's Berkshire Hathaway reduced its holdings by approximately 2.0175 million BYD H-shares on June 19, cashing out roughly HKD 560 million, thus lowering its stake from 6.18% to 5.99%.

It is noteworthy that Berkshire Hathaway previously disclosed further reductions in BYD’s shares

On June 17, it reported a divestment of 1.3475 million shares, decreasing its holdings from 7.02% to 6.9%.

From the recent announcements, it is evident that Buffett, along with Berkshire Hathaway, has been persistently divesting BYD shares, a trajectory that began in August 2022 when first reductions were made.

Publicly available records trace Buffett's initial investment in BYD back to 2018 when he purchased 2.25 billion H-shares at about HKD 8 per share, constituting an investment of around HKD 1.8 billionOver the years, his stake remained stable until changes began emerging in 2022.

The first documented reduction occurred on August 24, 2022, with an initial sale of 1.33 million shares that brought his holding to 19.92%.

In total, during 2022, Berkshire Hathaway divested 16.6815 million H-shares in six rounds, and similarly reduced its holdings by 13.578 million H-shares in 2023; this year, despite having cut down 3.3645 million shares in two rounds.

At the recent Berkshire Hathaway annual shareholder meeting in May, Buffett acknowledged the relationship with BYD, crediting Charlie Munger for strongly advocating its purchase

Buffett remarked that both investments are often seen as decisions well made by Munger.

In regards to BYD’s reduction, Buffett commented, “Our investment in BYD is similar to our past ventures in Japan, we seldom venture outside the U.Sfor such significant investments; however, we will primarily focus on the U.Sfor future investments.”

It is essential to highlight that thus far, Buffett has recouped approximately HKD 36.147 billion via these divestments, significantly exceeding the initial investment of HKD 1.8 billion and portraying remarkable investment returns even without accounting for the shares still held.

Reflecting further on the broader landscape, public funds also exhibited patterns in holding BYD stocks

After reaching a peak in late 2021, their stakes have rapidly declinedReports indicate that public funds held a total of 172.31 million BYD A-shares at the end of December 2021, which fell to 166.68 million by the end of 2022 and to merely 92.32 million at the close of 2023, marking a reduction of 7.999 million shares over two years.

Recent quarterly reports show a significant decrease as well, with public funds holding 118.62 million BYD shares in Q1 of 2022, down to 92.947 million in Q1 of 2023, and further dropping to just 71.246 million by Q1 of 2024, incorporating a dramatic reduction of 47.377 million shares within two years.

The increasing competitiveness within the electric vehicle market has led to substantial industry pressures, impacting various automakers’ performances; brands like HiPhi find themselves teetering on the brink of elimination.

In this heated environment for the electric vehicle sector, the ultimate outcome of the current bullish and bearish sentiments regarding BYD may hinge on the company’s ability to navigate through the fierce competition.

Beginning February 19, BYD took a proactive step by unveiling a price-cutting scheme, prompting competitors like Wuling, Changan, and Beijing Hyundai to respond similarly, igniting a "price war" at the start of the year which has influenced the overall market sales favorably.

On July 10, the China Association of Automobile Manufacturers released the production and sales data for June and the first half of the year

In June, vehicle production and sales achieved 2.507 million and 2.552 million units respectively, representing a month-on-month increase of 5.7% and 5.6%, but year-on-year decreases of 2.1% and 2.7%. For the first half, total vehicle production and sales reached 13.891 million and 14.047 million units, with an annual increase of 4.9% and 6.1%.

Specifically, new energy vehicles (NEVs) remain the key growth engine during these periods, with NEVs market share rising to 41.1% in June and 35.2% for the first half of the yearBy the end of June, domestic NEV production and sales exceeded 30 million units.

Particularly noteworthy is BYD's remarkable performance, achieving over 340,000 in overall sales for June, again securing the title of the monthly sales champion among automakers; by mid-year, BYD's cumulative sales of electric vehicles had surpassed 7.9 million units.

In this intense competition, while BYD, Geely, and Changan have all successfully met over 40% of their annual sales projections, other automakers like Li Auto, SAIC, and GAC have achieved around 30%, with new entrants like XPeng, Neta, and Zhiji failing to meet even 20% of their targets.

The dynamic and escalating competition within the electric vehicle sector presents critical challenges for various manufacturers, with the path to survival and success increasingly narrowing.