Chinese U.S.-listed electric vehicle players Nio, Xpeng (NYSE: XPEV) and Li Auto (NASDAQ: LI) have underperformed this year, with their stocks falling about 30% each since early January. So how do these stocks compare after the correction? Although Nio and Xpeng remain more expensive than Li Auto, they probably justify their higher valuation for several reasons. Here is a little more about these companies.
Our analysis Nio, Xpeng and Li Auto: How do Chinese EV stocks compare? compares the financial performance and valuation of the main Chinese electric vehicle players listed in the United States.
Nio remains the most valued of the three companies, trading at around 10.5 times futures earnings. Revenue is expected to increase by more than 110% this year, according to consensus estimates. Longer-term growth is also expected to remain strong, given the company’s large product portfolio (it already has three models on the market), unique innovations such as battery replacement, and expansion plans. global and autonomous driving investments. The Nio brand also has a lot more buzz, with the company seen as Tesla’s most direct rival.
Xpeng is trading at around 10x forecast revenue for 2021. Sales growth is expected to be the strongest among the three companies, increasing by more than 150% this year, according to consensus estimates. In addition to its projected higher growth, investors are giving the company a bonus due to its progress in the autonomous driving space. Xpeng is currently selling the G3 SUV and P7 sedan, and its new P5 compact sedan is expected to hit the roads later this year. Although Xpeng’s gross margins improved, reaching around 11% in the first quarter, from negative levels a year ago, they are still below Nio’s margins.
Li Auto is trading at just 6x expected revenue for 2021, the lowest of the three companies. Revenue is expected to roughly double this year, with gross margins of 17.5% in the fourth quarter of 2020 (the company has yet to release results for the first quarter). The lower valuation is likely due to the company’s focus on a single product – the Li Xiang ONE, an electric SUV also equipped with a small gasoline engine and also the fact that Li Auto lags behind its rivals in terms of engine technology. autonomous driving.
[10/30/2020] How to compare Nio, Xpeng and Li Auto
The Chinese electric vehicle space is booming, with Chinese-based manufacturers accounting for over 50% of global electric vehicle deliveries. Demand for electric vehicles in China is expected to remain robust, as the Chinese government wants around 25% of all new cars sold in the country to be electric by 2025, up from around 5% currently.  While Tesla is a leader in the Chinese luxury electric vehicle market driven by production from its new Shanghai plant, Nio, Xpeng (NYSE: XPEV) and Li Auto (NASDAQ: LI) – three relatively young electric vehicle players Chinese listed in the United States, also gained ground. In our analysis Nio, Xpeng and Li Auto: How do Chinese EV stocks compare?We compare the financial performance and valuation of the main Chinese electric vehicle players listed in the United States. Parts of the analysis are summarized below.
Overview of the activities of Nio, Li Auto and Xpeng
Nio, which was founded in 2014, currently offers three premium electric SUVs, ES8, ES6, and EC6, starting at around $ 50,000. The company is working on developing autonomous driving technology and also offers other unique innovations such as Battery as a Service (BaaS) – which allows customers to subscribe to car batteries, rather than paying for them. in advance. Although the company has increased production, it has not been without challenges, as it recalled around 5,000 vehicles last year after reports of multiple fires.
Li Auto sells extended range electric vehicles, which are essentially electric vehicles equipped with a small gasoline engine that can generate additional electric power for the battery. This reduces the need for electric vehicle charging infrastructure, which is currently limited in China. The company’s hybrid strategy appears to be paying off – with its Li ONE SUV, which costs around $ 46,000 – ranking as the best-selling SUV in the new energy vehicle segment in China as of September 2020. The new segment of energy includes fuel cells, electric vehicles and plug-in hybrids.
Xpeng produces and sells high-end electric vehicles, including the G3 SUV and the P7 four-door sedan, which are roughly positioned as rivals to Tesla’s Model Y SUV and Model 3 sedan, although they are more affordable, with the base version of the G3 starting at around $ 22,000 after subsidies. The G3 SUV was among the top 3 electric SUVs by sales in China in 2019. While the company began production in late 2018, initially through an agreement with an established automaker, it began production in its own factory in Guangdong province.
How did shipments, revenues and margins change?
Nio delivered around 21,000 vehicles in 2019, up from around 11,000 vehicles in 2018. This compares to Xpeng which delivered around 13,000 vehicles in 2019 and Li Auto which delivered around 1,000 vehicles, given that it doesn’t only started production at the end of last year. While Nio’s deliveries this year could approach around 40,000 units, Li Auto and Xpeng are expected to deliver around 25,000 vehicles, with Li Auto recording the strongest growth. In 2019, Nio’s revenue was $ 1.1 billion, compared to around $ 40 million for Li Auto and $ 330 million for Xpeng. Nio’s revenue is expected to grow 95% this year, while Xpeng’s revenue is expected to grow by around 120%. The three companies remain deeply in deficit, as costs related to R&D and general and administrative expenses remain high in relation to revenues. Nio’s net margins were -195% in 2019, Li Auto’s margins were around -860% while Xpeng’s margins were -160%. However, margins should improve strongly in 2020, with the recovery in volumes.
Nio’s market capitalization was around $ 37 billion as of October 28, 2020, with its share price increasing around 7 times since the start of the year due to growing investor interest in EV shares. . Li Auto and Xpeng, both of which were listed in the United States around August as they looked to take advantage of rising valuations, have a market cap of around $ 15 billion and $ 14 billion. dollars, respectively. On a relative basis, Nio is trading at around 15x expected earnings for 2020, Li Auto is trading at around 12x, while Xpeng is trading at around 20x.
While valuations are certainly high, investors are likely betting that these companies will continue to grow in the domestic market, while potentially playing a larger role in the global electric vehicle space by taking advantage of the relatively low-cost manufacturing of China and the country’s auto parts and batteries ecosystem. Suppliers. Of the three companies, Nio might be the safest bet, given its slightly longer track record, higher earnings, and investments in tech like battery swaps and autonomous driving. Li Auto also looks attractive given its rapid growth – driven by the adoption of its hybrid powertrains – and a relatively attractive valuation of around 12x revenue in 2020.
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