In a research note released on Monday, analysts at Bernstein argued that Chinese electric vehicle (EV) giant BYD is a more prudent investment compared to its American counterpart, Tesla. The note detailed the analysts' case for the convergence of the two companies' valuations, while also highlighting the research firm's continued pessimism towards Tesla, despite its staggering 120% surge in share price in 2023.

According to FactSet data, Berkshire Hathaway, the renowned American investment firm led by billionaire Warren Buffett, currently holds an 8% stake in BYD shares listed on the Hong Kong Stock Exchange. Although the firm has noticeably reduced its stake in BYD over the past 15 months, its ongoing interest in the Chinese EV manufacturer speaks volumes about the perceived value of the company.

In terms of global EV deliveries during the third quarter of 2023, Tesla narrowly outperformed BYD with 435 million deliveries, while BYD recorded 432 million. However, when evaluating the top and bottom lines of both companies, Tesla clearly maintains a wider lead. Tesla has generated an impressive $72 billion of revenue year-to-date, with net income standing at $7.1 billion. In comparison, BYD achieved $59 billion in revenue and $3 billion in net income for the same time period.

China has become a critical market for Tesla, with 22% of its total revenue this year stemming from the country. However, the intense battle for market share in China has forced Tesla to slash prices on many of its vehicle models. While this move may bolster its market presence, it has garnered criticism from investors focused on maximizing profitability.

Despite the overall optimism surrounding Tesla, Bernstein's rating on the company remains significantly below the average analyst target of $239. This is only a mere 2% higher than Tesla's current share price of $234. Many Tesla supporters place their faith not solely in the company's core EV business, but rather on its potential for growth through ventures such as battery charging and controversial autonomous driving units. Canaccord Genuity analyst George Gianarikas, who rates Tesla as a "buy," commented last month that they believe Tesla's AI value may be underestimated in the long run.

As the debate continues over the investment potential of Tesla versus BYD, investors and industry analysts alike eagerly await to see how these EV giants will fare in the competitive electric vehicle market.