The past few months have been very profitable for the investors of Tesla ($TSLA) who saw the share rise to incredible record highs. Just when most Wall Street analysts thought it had peaked for now, Tesla quietly continued to rise as it was doing. If you’ve considered investing in Tesla, but somehow failed to do so, there are several companies in the Chinese electric car industry that seem to be benefiting from the trend Tesla is creating in the stock market. Let’s not forget, China has become the fastest and largest growing market for electric vehicles in the world. Here you can read which five companies are on PSN’s radar.
Nio, Inc. hunts for a podium place
The in 2014 founded Chinese car manufacturer Nio, Inc. ($NIO) specializes in the design and development of electric autonomous vehicles. In addition, it participates in Formula E, an electric variant of Formula 1. Nio produces three different EAV-models – from SUVs to super cars – with various prototypes in the pipeline. Where it differs from Tesla are the battery exchange stations. While Tesla has also considered this method, Elon Musk decided to focus on its Supercharger network. In August 2020, Nio realized no fewer than 143 battery exchange stations in 64 Chinese cities and completed more than 800,000 battery changes for its customers.
Nio wants to significantly change the car’s global image and ownership experience through a premium service. Nio is located worldwide in strategic sites with a rich history of technology and automotive industry such as “Silicon Valley” San Jose, London, Shanghai, Beijing and Munich.
The company met with critical acclaim worldwide and in September 2018 the company filed a US $1.8 billion dollars initial public offering on the New York Stock Exchange. In late April 2020, Nio announced $1 billion dollars in new funding from a group of Chinese investors. Recently in August 2020, Nio launched “Battery as a Service” (BaaS) in collaboration with several major players in the segment. Each contributed around $29 million dollars to the company for 25% equity. Thanks to BaaS, the purchase price of Nio’s electric vehicles has been reduced by approximately 25%, boosting confidence and resulting in an increasing share.
Morgan Stanley opened very optimistic today about the Chinese car manufacturer by upgrading the status of the stock and predicting that it could grow by another 15%. On August 25, 2020, the stock rose 19.31% to a new all-time high, after UBS also revised and raised the stock’s status on the back of improving fundamentals. In particular, the cooperation that BaaS has caused with the Chinese city of Hefei is seen as a strong strategic injection. Also Contemporary Amperex Technology Co., Limited, Hubei Science Technology Investment Group Co., Ltd. and subsidiary of Guotai Junan International Holdings Limited are represented. Another motivation is the successful capital increase earlier in June this year and the recovering of our world economy.
Xpeng and the second era of Blackberry
Xpeng Motors – or Xiaopeng Motors – ($XPEV) is a Chinese car manufacturer founded in 2014 that is committed to the development and production of electric cars. What has given the company a lot of attention is the cooperation with Chinese business-2-business giant Alibaba. In a new round of funding in 2018, Alibaba’s Vice President Joseph Tsai joined Xpeng’s corporate board. Since 2018, the company has two production models in the form of a sedan and an SUV, where in 2020 it is doing research for new models.
After the realization of multiple experience & sales centers and delivery & service centers, Xpeng has also established itself in Mountain View, California. Here is the subsidiary XMotors.ai where it received a license to test self-driving cars by the California Department of Motor Vehicles in 2018. The license was revoked in February 2020 because Xpeng had not submitted a withdrawal report. In the meantime, in May 2019, Xpeng launched a car rental company that serves Guangzhou with its own vehicles.
Despite this withdrawal, the company collected two major contributions from investors for nearly $1 billion dollars. In July 2020, Xpeng raised $500 million dollars from Aspex, Coatue, Hillhouse Capital and Sequoia Capital China. Most recently, in August 2020, it received an additional $400 million dollars from the multinational companies Alibaba, Qatar Investment Authority and Mubadala of Abu Dhabi. As a result, Xpeng filed an IPO on the New York Stock Exchange this month following Li Auto.
Canadian company Blackberry – once a smartphone giant before the dominance of Apple and Samsung – has detected the development of Xpeng. As a result, both companies have announced that a collaboration is in the air. Blackberry is busy transitioning to deliver software for connected devices in the car of tomorrow. To do so, it has brought a large part of its activity to China. In August 2020, BlackBerry announced that it will power Xpeng’s Level 3 domain controller. The operating system is called QNX and has to compete with Android and Linux for the services to Chinese electric car manufacturers. The kernel of Xpeng’s domain controller is Nvidia’s Xavier cockpit chip for automated cars, making the majority of the software and hardware based on foreign innovative technology.
BYD counts on experience and a bigger scope
Since 1995 BYD Company Limited ($BYDDF) is a Chinese high-tech company dedicated to technological innovations for a more sustainable life. It specializes in electronics, new energy vehicles (NEVs) and commercial vehicles. From power generation and storage to its applications, BYD is committed to provide zero-emission energy solutions. As of 2015, the company’s NEVs have held the number one position in global sales for three consecutive years. Of all car manufacturers in China, it is the third largest independent Chinese car manufacturer. BYD has 15 different vehicle models in production supplemented by six electric transit bus models, 4 electric coaches, and 6 vans and trucks.
In May 2020 BYD announced it would expand into Europe, with Norway as their first location. In this country we find the city Oslo, the Tesla capital of the world, where the Norwegian government sees the promotion of electric vehicles as one of its main goals. Due to various laws and regulations, electric cars are not much more expensive here than petrol cars. Parking for electric vehicles is free, the owners pay no toll and the road tax is extremely low. As a result, in 2019 approximately 30% of the cars purchased in Norway were electrically powered.
Back to BYD, which Wedbush analyst Dan Ives recently spoke about with praise. This concerns the percentage of electric sales of new cars. “We believe China’s EV will go from 5% today to 10% in the next two years. Global EV will be 7% by 2024. China is the fuel for Tesla on EV demand.” He did point out the major differences between Tesla and BYD. Tesla belongs to the club with a market cap of $100 billion dollars, where BYD’s market cap is around $25 billion dollars. BYD makes more cars than Tesla and sold around 460,000 vehicles in 2019, while Tesla sold 367, 500 vehicles worldwide in the same year. Tesla generated approximately $24 billion dollars followed by BYD with $18 billion dollars. The reason for this is the significantly higher selling price of the Tesla models.
Finally, a great development for BYD in August 2020 as it supplies part of the bus fleet in Central America and Europe. This delivery is a historic milestone for BYD as it marks the first time that the Chinese multinational company has entered German public transport with an electric fleet.
Li Auto ‘the new kid on the block’
Li Auto ($LI) – also known as Li Xiang – is a Chinese electric vehicle manufacturer founded in 2015 that designs, develops and manufactures. It’s supported by China’s largest digital consumer services Meituan and Bytedance. Interesting fact, the owner of these companies is also the founder of social media platform success TikTok. The company differs from the competition by mainly responding to electric vehicles with a longer range (EREVs), which may have a petrol engine or electric power source. The company is a new kid on the block when it comes to the stock market as it recently rang the well-known Nasdaq Opening Bell on July 30, 2020.
This start-up based in Beijing, China has set up quite a bit in six years. Its aim is to disrupt the transportation and automotive industries through full vertical integration. It produces smart EVs and electric SUVs to enable long cross-town journeys. It’s also the founder of a similar Uber platform in China including an on-demand ride hailing.
Although the website is completely in Chinese, it becomes clear that the company is not overreacting to the competition. Production of the car fleet currently consists of one SUV named “One” that resembles a mix between the SUV’s of Range Rover, Jaguar and Mercedes-Benz. They have the smallest car fleet of the companies discussed in this article, but at the same time perhaps also the most potential on the market for the coming years.
Li Auto raised $1.1 billion dollars on its Nasdaq debut. The target group on which the company has set its sights is the Chinese middle class striving for cleaner, smarter and larger vehicles. With an SUV under $50 thousand dollars, that goal seems to be fulfilling so far. It’s named by several Wall Street analysts as the direct competitor of Xpeng and seems to be already one step ahead with the American IPO. The list of investors is worth mentioning, as the second largest shareholder Wang Xing is the boss of major Chinese shopping platform Meituan Dianping.
What seems to give Li Auto a strong market position is the choice for EREVs. These vehicles come with an auxiliary power unit – a small combustion engine – that keeps cars moving when there is no charging station nearby. This responds to a current problem in China, where many regions have insufficient charging stations.
Although the company lost a lot of money in the early years and still is characterized by red numbers, we notice many investors are optimistic about Li Auto. In 2020 it has started to generate income and strategic future plans have been made. Annual sales for 2019 were $40.4 million dollars, a big contrast to the main competitors, but keep in mind that this is a relatively young market player.
Li Auto sold shares in an IPO for $11.50 on July 29, 2020. Shares are up 30% higher, valuing the stock at approximately $12.5 billion in August 2020.
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