In This Article:
Key Points
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BYD dominates China's new-energy vehicle market.
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BYD plans to double international sales in 2025.
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Ferrari's margins leave competition in the dust.
Depending on who you ask, or where you read your financial news, the chances of a recession in the U.S. during 2025 sits between 45% and 60%. Obviously, this will change how some people invest, at least temporarily. But here are two stocks that could be buying opportunities even in the face of a potential recession: Ferrari (NYSE: RACE) and BYD (OTC: BYDDY).
Creating a monster
Little did foreign automakers know decades ago, when they were forced to team up with domestic Chinese automakers to enter the market, that they would eventually be creating a monster. With foreign automakers to learn from, and a government subsidizing automakers with a focus on developing electric vehicle (EV) technology, Chinese automakers slowly but surely became arguably the most advanced and most affordable EVs on the planet -- and one auto shines above the rest, BYD.
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BYD already dominates China's new energy-vehicle (NEV) market, which includes hybrids as well as full battery-electric vehicles. It had nearly 30% market share in March, with the next closest competitor checking in at 11.2%. BYD is finding success beyond its home market, even without entering the U.S. market. In fact, BYD expects to double international sales in 2025 to roughly 800,000.
One key to BYD's success is that it started as a battery company before moving into vehicle manufacturing. The company remains vertically integrated and uses a high percentage of in-house components. Its lower battery costs are a competitive advantage enabling it to lower prices and steal valuable market share.
Short term, a recession might slow BYD down. But as the world transitions to EVs, BYD might be the best positioned to thrive.
Racing ahead
Ferrari is an incredible ultra-luxury automaker with respected racing heritage, a powerful brand, pricing power, and margins almost all companies dream of owning. But one key thing about Ferrari is that its demographic, the super wealthy, are less impacted by economic downturns and generally will buy Ferraris whenever the opportunity arises.
That's also what makes Ferrari interesting, as opportunities to purchase the vehicle aren't always there. There's a strict ownership process, a resale rule, and the company famously will always deliver fewer cars than there is demand for. While this limits growth to some degree, it makes it more consistent and resistant to economic uncertainty. Heck, the company's wait lists for vehicles stretch to two years and beyond.