BYD - China's dominant car manufacturer and one of the largest competitors of Tesla - recently recorded record revenues and profits. However, despite the positive results in the third quarter of 2023 and the sales records in November, experts warn of a significant flattening of growth.

The market reaction to the recent successes is subdued, as the growth of BYD has been declining for three quarters already. It is expected that this trend will continue in the next two periods, raising doubts about whether BYD can achieve its ambitious sales targets for 2023 and 2024, which are set at 3 million vehicles and 4 million units sold respectively. Given the current sales figures and the approaching year-end, it could be very tight to reach the goal.

To boost sales, BYD offers discounts, which experts criticize. Morgan Stanley analysts point out the risk that the price war with Tesla could deter potential customers who are waiting for increasingly cheaper cars. In fact, BYD has made several price cuts in recent weeks to achieve the annual target of selling 3 million vehicles.

UOB-Kay Hian analysts warn of rising inventory levels and a flattening sales trend. Therefore, they recommend selling BYD stock.

The long-term growth of BYD is also in question as established car manufacturers and new industry participants like Huawei have invested in intelligent and connected vehicle technologies.

This could lead to BYD losing its edge in these areas and giving up market share to competitors. Fund manager Xiadong Bao from Edmond de Rothschild Asset Management also views the weak outlook for the industry and the growing domestic competition as a threat to BYD.

The entry of Huawei into the electric vehicle market shortens the time it takes for new Chinese products to enter the market and makes BYD more vulnerable to market losses.

Although the decline in BYD's stock price may present an opportunity for cheap purchases, analysts warn of long-term security as the company's valuation depends on reaching high profit expectations.

The currently forward P/E ratio has fallen to its lowest level in twelve years, which can be seen as a low valuation but also carries risks. BYD's stock alone lost 17.4 percent of its value on the Shenzhen stock exchange last month, and a total of 23.6 percent since the beginning of the year.

In comparison, the Tesla stock has increased by 92.41 percent during this period. It remains to be seen whether BYD can solve its problems and maintain its position as the Chinese industry leader.