Chinese automaker BYD ( BYDDY , Financial ) is catching up with EV sales at a record pace, vaulting the automaker to within a virtual tie with global EV leader Tesla ( TSLA , Financial ). Its December sales soared to 207,734 units, helping it reach the 1.76 million mark for 2024, up 41% year on year. For Tesla, which is due to report about 1.8 million units of global car sales later this week, this is a big problem.

As Tesla continues to lead by a big margin in overall global sales, the Chinese company's ascent is powered by a surge in demand for its hybrid models and strategic subsidies in China, where 90% of its vehicles are sold locally. With a highly competitive domestic market, Germany's Volkswagen and Toyota are being outpaced.

But BYD's ambition to extend its reach beyond China is stymied. High tariffs in Europe and the United States, particularly in the United States, are constraining expansion, the company has said. However, despite these challenges, BYD remains focused on emerging markets, and a recent work stoppage in Brazil has damped BYD's momentum there.

At the same time, traditional automakers like Volkswagen and Stellantis are pressed to restructure to stay on top in a rapidly changing global automotive market. The battle between Tesla and BYD is one of the closest to watching competitions happening in the EV sector as competition becomes fiercer.

This article first appeared on GuruFocus .