Most nations around the world have adopted modern cars in the contemporary era, as batteries have become stronger, performance of electric cars have soared over the years thanks to research and development, and they have become much cheaper to produce compared to the old days. This is why, according to the World Economic Forum, 1 in 100 cars today on a global scale are electric. Surely, you heard about Tesla and its popular cars, alongside other automotive giants such as BMW and Volkswagen also innovating electric cars, but one growing market is that of the Chinese electric vehicle market. This article will focus on the three most effective players in the Chinese EV playing field; Nio, XPeng & Li Auto.
Nio: The Chinese Tesla
Nio, also deemed as the Chinese Tesla, was founded in 2014, and is quite popular among foreign investors. The company has enjoyed high demand for its electric cars and SUVs in recent times. Nio takes pride in innovating EV batteries, so it doesn’t depend on EV battery manufacturers to supply its cars with the much sought-after batteries. Also, Nio has exclusive services for its drivers. This includes battery-swapping services, and if you buy one of its cars, you get access to a fleet of rescue vans with built-in chargers. No wonder why the company witnessed an impressively high utilization rate, more than doubling its sales in 2020.
The long-term trend for Nio is quite neutral, but the short term is positive. This is a sign that the stock is being more appreciated by traders, evident in its 9.9% rise the past month. Looking into its profitability, Nio’s return on assets is -5.6%, which is worse than the rest of the industry. Nio is also valued quite expensively, with price to book value of 14.95. Nio is expected to report negative earnings next quarter, which feeds into this low valuation. Despite that, the company is exhibiting strong growth. Their earnings per share have grown by an impressive 30.3% over the past year, with its revenue growing over 200% since 2020. Lastly, Nio is financially healthy with a current ratio of 2.48, indicating that it has no problem in meeting its short-term obligations.
XPeng: The Intelligent Connected Car
The technology & innovation-oriented company was founded in 2015, which had a quite successful initial public offering (IPO) on July 7th of 2021, selling over 100 million shares at $15 each. XPeng truly stresses the importance of promoting its cars as intelligent and connected vehicles. In essence, they are redefining the automobile as a giant smart mobile device rather than simply a means of transportation.
XPeng is heavily driven on research and development, solely for the purpose of leveraging the user-centered technology. This includes features such as having a self-driving ability, multi-censor suite consisting of cameras, radars and ultrasonic sensors to achieve upmost safety for its drivers. Not only that, but XPeng differs from other EV giants by focusing on comfort rather than performance, with a softer ride and plush interiors that are better suited to Chinese driving conditions and environment.
The Chinese automotive company is doing exceptionally well the past 12 months, and is looking quite solid in the short and long terms. In fact, XPeng outperforms 88% of 26 stocks in the same industry regarding its technicals.
Onto the fundamental analysis, XPeng has a profit margin of -28.48%, which is worse than the figure of the rest of the industry of 5.14%. The company is also overvalued, just like Nio, trading at 3.45 times its book value. Yet, the company is showing solid and consistent growth, with its revenue growing 161% since last year, and earnings per share jumping 50%. This is a very good sign that the company is yet to grow even further. Lastly, the company is financially healthy, with a current ratio of 3.87. This is better than 66% of stocks in the same industry.
Li Auto: The New One
Although the company was established in 2015, in a little over a year, the company emerged from nowhere to become in July of this year the best-selling startup in the industry. The firm focuses on one car only, conveniently named One. While the company witnessed a strong success the past few months, it still aims to break the 10,000 cars sold a month barrier in efforts to share the stage with major, successful electric vehicle leaders.
Li has been growing exceptionally well the past year, with its stock price surging 75.5% in a span of one year. For Li, both short and long-term trends look promising. Regarding its fundamentals, its profit margin is -1.60%. This is negative, but still better than that of Nio and XPeng, so despite this, the company is expected to start making profits in the next years. Just like its competitors, the company is overvalued, trading at 3.45 times its book value.
It only outperforms 22% of competition in the valuation aspect. Li however, has exhibited strong growth not only the past year, but since establishment. Their revenue rocketed 3360% just the past year, with earnings per share growing 93% since last year. Although the company is quite healthy with no issues meeting its short-term obligations, there is room for improvement. Taking all of this into consideration, it can be seen that Li is quite the attractive stock with a lot of potential.
Over 100 countries joined an alliance aiming for net zero emissions by 2050, setting targets to end global warming contributions. Looking into China’s national commitments, it aims to account 70% of new car sales by 2030 to be fully electric, while aiming to achieve net zero carbon emissions by 2060. This is because there is rising popularity for electric vehicles and going green, not only for businesses but for individuals and the general population.
Sources: Nio.com – IR.Nio.com – XPeng.com – LiLixiang.com – Investors.com – The Motley Fool – Yahoo! Finance – Business Wire – Globe News Wire – CNBC – TradingView
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