Two of the most disciplined investors in the world—Berkshire Hathaway and Li Lu (Trades, Portfolio)'s Himalaya Capital—own significant stakes in BYD. Yet the broader market remains hesitant. What are these long-term shareholders seeing that others might be missing?
BYD trades at valuation multiples that suggest caution, not conviction. But behind the modest pricing lies a complex manufacturing system, carefully built and increasingly capable. Analyzing its per-unit economics may help explain why some investors have quietly committed capital—while others hesitate.
Investors regularly overlook the subtleties that separate genuine long-term winners from temporary growth stories. BYD, a notable Chinese automaker and battery producer, currently trades at modest valuation multiples. Yet, investors remain cautious. Is this skepticism warranted, or is the market undervaluing a disciplined, quietly efficient operator?
Business Model and Unit Economics
BYD builds electric vehicles (EVs) and plug-in hybrids, integrated vertically from battery production to final assembly. This vertical integration allows BYD tight control over quality, costs, and innovation cycles.
Analyzing per-car economics reveals telling insights. BYD's per-car capital expenditure (Capex) is derived from its cumulative five-year Capex divided by current output. Growth Capex, or incremental investment required to expand output, depends on multiplying output growth by per-car Capex. Additionally, evaluating employee productivity through vehicles produced per employee, revenue per employee, and gross margin paints a clear picture of operational efficiency.
The numbers in the table are sourced from the company's official documents. In some cases, these numbers differ from those on many sites, including GuruFocus.
Assessing the Factory
In the car business, investors aren't just buying the finished product—they're buying the factory that builds it. And the economics of that factory tell us everything.
Start with capital. For every Tesla produced, the company has spent roughly $18,750 to build the production capacity behind it. At BYD, the number is just $5,200. That's not a rounding error. It means BYD can get more output per dollar of factory, freeing up capital for other uses—or for growth itself.
Toyota also performs well here. With $6,400 of capital spent per current unit of production capacity. With BYD spending $1,040 on growth per unit of current capacity, it could double production in five years. Both Toyota and BYD generate sufficient free cash flow even after investing for growth, meaning they could accelerate expansion if they chose. BYD grows faster simply because its factories are cheaper to build. The contrast is more than academic. It reflects a company's ability to scale with discipline rather than debt.
Ford and GM struggle in this regard. Ford is currently spending $1,620 per vehicle on growth Capex—but its actual factory cost per vehicle remains around $13,167. At that pace, it will take years to meaningfully expand capacity. GM, meanwhile, isn't investing at all. Whether by choice or constraint, both firms now face a fundamental challenge: their factories require too much capital to grow efficiently. Compounding the issue, their facilities deliver relatively modest gross margins—suggesting the value created per dollar of capital is underwhelming. On top of this, their models depend heavily on uninterrupted, global supply chains. When those links falter, the entire system slows.
Capital, of course, is only part of the story. Labor matters, too. Vertical integration—the approach taken by BYD and Tesla—allows for greater control over inputs and helps capture more of the vehicle's value chain. That shows up in gross margins. But it comes with a cost: more hands are needed on the line.
Toyota and GM, by contrast, outsource more and assemble more. As a result, they build significantly more vehicles per worker. On a per-unit basis, BYD employs roughly four times as many people per car produced as Ford, Toyota, and General Motors. Put another way: GM and Ford spend about one and a half weeks of labor on each vehicle. At BYD, the same car absorbs six. If we assume—unrealistically—that wages are equal across firms at $1,000 per worker per week, that implies BYD spends $5,500 more in labor per vehicle. And yet, the overall economics still work.
That's because capital efficiency offsets the labor load. A well-designed factory, even when more integrated and labor-intensive, can still come out ahead. The low-cost producer balances both sides—capital and labor—and builds in a way that is structurally hard to match. That's what makes the factory hum. And that's what investors are ultimately underwriting.
Risks & Unknowns
Strategically, the key uncertainty is BYD's international expansion. While the company has executed well in its home market, sustaining margins and per-unit economics abroad remains unproven. Operationally, rapid scale introduces execution risk—discipline is harder to maintain when growth accelerates.
That said, BYD's vehicle lineup is priced for accessibility, not aspiration. This is reflected in its relatively low revenue per car, which positions the company well for broad, cost-sensitive markets. Demand for affordable transportation spans both developed and developing economies, offering a wide runway—if the company can extend its operating model as effectively as it has expanded output.
Conclusion
Here's what investors are paying, relative to what each automaker produces:
Market capitalization is a measure of what investors are willing to pay for a company's ability to produce. Divide the market cap by the number of vehicles produced, and the picture becomes clear: this is what the market is paying per unit of output capacity.
What are we getting for that price? In BYD's case, we are acquiring an efficient, vertically integrated production system—and the free cash flow that system reliably generates. In that regard, BYD distinguishes itself.
The company can build the capacity to produce one vehicle per year for just $5,200. Tesla, a formidable peer in both engineering and ambition, requires $18,750 to achieve the same. GM and Ford come in lower on a market-cap-per-car basis, but the apparent affordability masks deeper issues. Their factories demand far more capital to maintain output—largely in the form of maintenance Capex. More importantly, they capture less of the vehicle's value chain, as evidenced by structurally lower gross margins.
The story isn't about hype or headline deliveries. It's about a disciplined factory, scaled with intent, and producing vehicles profitably. That's the structure investors are buying into—whether they realize it yet or not.
In 2024, BYD produced approximately 4.3 million vehicles globally, accounting for about 4.6% of the total global vehicle production of 93.5 million units. with a modest but growing share of global auto volume, BYD's status as a low-cost, capital-efficient producer gives it a unique profile. In a capital-heavy industry, that combination—discipline, scale, and efficiency—can offer long-term investors something rare: profitable growth without the price tag of dominance.
