The struggles of Tesla are increasing the appeal of China's top EV manufacturer, BYD.

Despite intensifying competition domestically, BYD has emphasized its sales strength with a significant increase in profits and is rapidly catching up to Tesla, the world's largest pure electric vehicle seller.

The stock price of China's electric vehicle company, BYD, listed in Hong Kong, has risen by about 1% this month, surpassing Tesla's 17% slump and the declines of other peer companies. While the stock price of Elon Musk's company has more than doubled the rate of increase in BYD since the beginning of this year, the latter shows signs of further growth.

Traders are buying up bullish options on BYD, and analysts have raised their financial estimates for BYD to a record high since the release of this month's quarterly report. Despite intensifying competition and a significant slowdown in sales of new energy vehicles in China, BYD has achieved record-high revenue. The company will announce its third quarter earnings after market close on Monday.

Mr. Musk recently expressed a pessimistic outlook that the rising interest rates in the United States have had a negative impact on sales and cast a shadow over the global EV sector. Tesla's performance has also been affected by the impact of price competition that has been ongoing for several months to stimulate demand. While analysts have raised their outlook for BYD, they have lowered their earnings forecasts for US manufacturers.

Kevin Nett, head of the Asian stock division of Tocqueville Finance, says, "BYD seems to be the safest bet against Tesla in the short term, considering its discipline in balancing volume growth and profitability. BYD is also increasing its exposure to hybrid vehicles, which are contributing to its expansion of market share and improvement in profit margins in China."

BYD sold a record-high 822,094 vehicles in the latest quarter, including hybrid cars, solidifying its lead as the best-selling automobile brand in China. Particularly surprising is that BYD has increased its profit per vehicle despite price competition.

According to JP Morgan's forecast, the profit per vehicle, excluding the impact of its electronics division, increased by as much as 46% compared to the previous quarter. Analysts expect that BYD will be able to maintain profitability next year through the continued expansion of high-end car sales and overseas expansion.

Outside of China, BYD boasts a high market share in countries including Brazil, but its entry into the US passenger car market has been put on hold due to tax and political considerations.

With improved profit prospects, BYD's stock price has become more attractive, with a future profit multiple of around 18 times compared to Tesla's over 50 times. Recent option data also indicates a shift to the bullish side compared to a month ago, which looks positive.

While BYD has the support of Warren Buffett, the sale of Berkshire Hathaway's shares over the past year may be weighing on the stock price. In addition, the European Union's investigation into subsidies for Chinese-made EVs is also creating headwinds for the stock price.