Buying an electric vehicle is becoming cheaper than ever. Automakers around the world are cutting prices on their electric vehicles and offering cheaper models. The impact on their results has not gone unnoticed.

Even You’re here (TSLA 2.22%), leader in electric vehicles with very great brand strength, had to cut its prices. It now plans to build a 25,000 euro (just under $27,000) vehicle in Germany, according to a Reuters report. As prices fell, Tesla’s profit margins declined. Its cost of goods absorbed 7.2% more of its sales last quarter than in the same period last year.

But its biggest rival in the production of electric vehicles, BYD (BYDDY -0.21%), did not face the same challenge. In fact, it managed to increase its gross margin on auto sales by three percentage points during the same period. And you can buy the shares at a great price right now.

The future largest manufacturer of electric vehicles

BYD delivered almost as many electric vehicles as Tesla last quarter: 431,000 versus 435,000. It could overtake the king of electric vehicles in the fourth quarter.

BYD is growing its sales of new electric vehicles, or NEVs, extremely quickly. (The NEV categorization is used to distinguish BYD’s fully electric vehicles from plug-in hybrids and internal combustion vehicles.) NEV deliveries increased 53% year over year last quarter. For comparison, Tesla deliveries increased 27%.

This strong volume growth led to significant improvements in economies of scale which helped to strengthen gross margin. BYD also saw strong sales of newer, high-gross-margin models. At the same time, because its sales are concentrated in China, it was not as affected by price wars and other pricing pressures in the most recent quarter. That said, BYD has made some price cuts this year in response to Tesla’s price cuts in its home market.

Tesla highlighted the impact of rising interest rates on its pricing during its third-quarter earnings conference call. Since most cars in the United States are purchased with debt, rising interest rates have a big impact on the total cost of a car. As a result, Tesla has worked to lower its price to ensure it is able to meet its delivery goals.

As a result, BYD’s 22% gross margin on its vehicle sales now far exceeds Tesla’s. Tesla’s gross margin was just 17.9% last quarter.

Certainly, Tesla still generates significantly more profit per vehicle than BYD. BYD generated $1,730 in profit per vehicle sold, while Tesla generated more than double that, at $4,260 per vehicle, in the third quarter, according to calculations published by Quartz. But trends favor BYD, which is increasing its profit per vehicle, while Tesla’s is rapidly contracting in the current environment.

Continued strong sales growth, particularly in high-end NEVs, and continued improvement in economies of scale are expected to push BYD’s profits and margins further higher. And with the potential for international expansion, there are plenty of opportunities to increase NEV sales.

The stock is a bargain

Despite BYD’s good results, the stock can still be had at a bargain price.

Shares currently trade at around 1.1 times sales. That’s well below its five-year median sales multiple of around 1.5 times.

With its margins expanding, its EV/earnings before interest, taxes, depreciation and amortization (EBITDA) multiple has fallen to just 17 times. This is near its all-time low, indicating that now is a great time to buy stocks.

As the price war and rising interest rates put great pressure on other automakers, BYD is bucking the trend. And it doesn’t look like that’s going to change anytime soon. At current prices, it’s worth acquiring shares before they outpace Tesla’s deliveries and further narrow the per-vehicle profit gap.

Adam Levy has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends BYD and Tesla. The Motley Fool has a disclosure policy.

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