Chinese car companies hold only 10% of the global market value. Are they undervalued? Recently, UBS investment bank’s head of China automotive research, Gong Min, expressed optimism about investments in Chinese brands in the long term. Data shows that Chinese brands capture about 20% of the global automotive market. In the electric vehicle sector, they reach a 60% share. However, the market value of Chinese car companies lags behind, totaling only around 10% of the global automotive market value. This significant gap between market size and value suggests considerable investment opportunities and appreciation potential for Chinese car companies. Tesla vs. BYD: a tenfold market value difference. According to the latest statistics from Gaishi Automotive, 16 listed car companies include 6 overseas, 8 A-share, and 2 Hong Kong-listed companies. Some companies are dual-listed on A-shares and Hong Kong or on U.S. and Hong Kong exchanges.
Statistics show that overseas listed car companies generally have higher market values than comparable domestic companies. Moreover, new energy vehicle companies have significantly better valuations than traditional car manufacturers. Tesla stands out as the highest-valued automaker. Its market value of $1.13 trillion is five times that of Toyota and ten times that of BYD. However, the sales figures tell a different story. In the first nine months of 2024, Toyota led global sales with 7.4 million vehicles. BYD ranked ninth with 2.73 million vehicles sold. In contrast, Tesla sold only 1.29 million vehicles during the same period, falling far behind the top two companies.
Tesla’s high valuation results from multiple factors. First, the U.S. stock market views electric vehicle companies as tech stocks. It typically uses profit expectations for the next 5 to 10 years for valuation. Second, Tesla, as the first pure electric vehicle stock listed on NASDAQ, sets the standard for electrification and intelligence. Third, CEO Elon Musk’s influence adds extra brand value. This combination of technological innovation, founder effect, and early advantages in the capital market earns Tesla high recognition from Wall Street and global investors. Recently, Tesla’s stock price surged 40%, returning to the trillion-dollar mark. This rise relates to Trump, supported by Musk, winning the U.S. election. Wall Street analysts believe this will create significant opportunities for Tesla’s autonomous driving and AI business, raising its target price from $300 to $400 per share. Tesla’s forward P/E ratio has climbed to 113, nearly double that of tech giants like Apple, Microsoft, and Amazon. In the short term, Tesla’s market value advantage seems hard for other automakers to challenge. Chinese automakers’ valuations may rise. Significant differences exist between the valuation systems of U.S. and Chinese capital markets. The close ties between the Hong Kong stock market and the domestic market often lead to large valuation gaps. This phenomenon is evident in the automotive industry. Traditional Chinese automakers listed in A-shares and Hong Kong generally show low valuations. For example, SAIC Motor’s sales are comparable to Honda’s and Ford’s, yet its market value is lower by $10 billion. Besides BYD, other domestic listed automakers have not broken the $50 billion mark.
Analysts compare BYD and Tesla. They highlight two main reasons for the valuation gap: differences in net profit and the level of smart driving technology development. Overseas firms, including Tesla, Toyota, and GM, enjoy higher profit margins. This stems from a stable market and lower competition abroad. Tesla has established its market position as a tech company due to its lead in smart driving. This advantage brings significant valuation premiums. China’s strong market resilience attracts global capital. The IMF predicts China’s economy will maintain moderate to high growth in the coming years, contrasting with slowing demand in overseas markets. According to a strategist at China Merchants Securities, since September 2024, the A-share market has rebounded quickly, leading to a rapid return of overseas funds. From September 24 to October 14, ETFs tracking the A-share market saw inflows exceeding 100 billion yuan. Analysts believe that mature foreign institutions will inject new vitality and liquidity into the market.
The automotive manufacturing industry serves as a key economic pillar. It shows great investment appeal. Data indicates that the automotive and energy sectors have become focal points for foreign investment. This trend reflects the robust growth of China’s new energy vehicle market. It also highlights the rising influence of Chinese brands on the global stage. Currently, Chinese brands hold over 60% of the global electric vehicle market. They dominate the battery sector with a share of 70% to 80%. Gong Min states, “The Chinese electric vehicle market changes faster and is more dynamic than the European and American markets.” As Chinese brands accelerate their global expansion, their market share abroad continues to grow. They build stronger competitive advantages in electrification and intelligence. Global capital markets will gain a deeper understanding of the intrinsic value of Chinese automakers. In this process, the market value gap between Chinese and international automakers is expected to narrow, leading to an eventual increase in valuations.