Shares in Chinese electric vehicle makers NIO, XPeng and Li Auto have received buy ratings as well as high forecasts from several major investment companies. The ratings were given by Goldman Sachs, Morgan Stanley, UBS, JP Morgan, Deutsche Bank and others.
2021 will bring increased demand for electric vehicles around the world, and especially in China, according to a number of Wall Street analysts, citing government programs to reduce hydrocarbon emissions and delayed consumer demand due to the COVID-19 pandemic.
Although shares in US electric vehicle maker Tesla (TSLA) are up 657% YTD, reflecting continued hype around the popular brand, the gains have outperformed Chinese rival Nio (NIO), which surged 982%.
Chinese electric vehicle makers Xpeng Motors (XPEV) and Li Auto (LI) have also seen demand for their stocks up, up 133% and 95% YTD, respectively. Xpeng Motors shares and Li Auto shares also received high ratings from reputable investment companies.
Predictions for the electric vehicle market in 2021
In 2021, competition between brands will intensify even more, as much more new products are expected to appear than in the crisis year of 2020.
Analyst Calvin Lau of Daiwa Capital said: “We see 2021 as a big year for new smart cars and new electric vehicles. Leading players need to be well positioned for their established brand equity, and some have received local government support to reduce their risk of facing financial problems. But we do not expect that the enthusiasm of local authorities will spread to every launch of new generation vehicles, and therefore we are predicting the closure of more small brands. “
Wedbush’s forecast for the next 5 years is that “electric vehicles will increase from (roughly) 3% of total car sales today to 10% by 2025”.
However, China will play a major role in the growth of the global electric vehicle market, “which has seen a significant surge in demand over the past six months with a tidal wave of momentum heading into 2021.”
In China, Nio, Tesla and Xpeng are accelerating capacity expansion amid a general boom in electric vehicle sales in China.
Comparison of NIO, XPeng and Li Auto stocks
Among stocks NIO, XPeng and Li Auto, the firsts received the highest number of ratings, which is not surprising, since NIO is seen as a key competitor to Tesla in the Chinese market.
NIO’s capitalization amounted to $ 65.5 billion (at the close of trading on Wednesday) against $ 35 billion and $ 29 billion of XPeng and Li Auto, respectively.
XPeng and Nio were founded in 2014, Li Auto in 2015, with Nio going public in September 2018, and Li Auto and XPeng’s IPOs on July 30 and August 27, 2020, respectively.
Nio has the widest EV lineup to date (three premium SUVs: ES8, ES6 and EC6), Xpeng has a G3 SUV and a P7 sedan, and Li’s sales consist of a single model of the Li Xiang One electric SUV with a small petrol engine.
NIO, XPeng and Li Auto supplies
Nio delivered about 21,000 vehicles in 2019, up from around 11,000 in 2018. By comparison, Xpeng delivered around 13,000 vehicles in 2019 and Li Auto delivered around 1,000 vehicles, given that production only started late last year.
Nio’s shipments in October nearly doubled year-over-year to 5,055 vehicles, and Xpeng also delivered some 3,040 vehicles, up 230% from October 2019, mainly driven by sales of the P7 sedan. Li Auto said it delivered 3,692 Li ONE SUVs in October, up 5% from the previous month.
While Nio’s shipments this year may be close to 40k units, Li Auto and Xpeng are likely to deliver around 25k units.
For 2019, Nio had revenues of $ 1.1 billion, compared with approximately $ 40 million for Li Auto and $ 330 million for Xpeng. Nio’s revenues are likely to rise 95% this year, while Xpeng’s revenues are likely to grow by about 120%.
All three companies remain severely unprofitable as development and expansion costs remain high relative to revenues.
Nio’s net margin was -195% in 2019, Li Auto’s margin was around -860%, and Xpeng’s margin was -160%. However, in 2020, profitability is likely to improve dramatically as shipments grow.
Wall Street Analyst Assessment
Goldman Sachs analyst Fei Fang rates Li Auto as Buy and NIO as Hold (neutral), with a target price of $ 60 per share for Li (Wednesday’s close of $ 31.36) and NIO – $ 59 (Wednesday closing price $ 44.67).
The analyst predicts that Li sales will grow from 30,000 units in 2020 to 1.7 million units in 2030 and 5 million units in 2050.
Fang’s forecast for NIO: Sales will grow from 43,000 units in 2020 to 800,000 in 2030 and 3.2 million units in 2050.
Morgan Stanley analyst Tim Xiao gives lower ratings for Li Auto and NIO, although he gives both a buy-equivalent rating, with Li and NIO price targets of $ 26 and $ 33, respectively. Both stocks are trading above these levels, but the analyst has not updated these price targets in about a month.
UBS analyst Paul Gong gives XPeng a Hold rating and forecasts a price of $ 59 versus $ 47.4 at close of trading on Wednesday.
JP Morgan analyst Nick Lai recommends buying NIO and XPeng shares and sets a target price for both shares at $ 50.
Deutsche Bank analyst Edison Yu recommends buying NIO shares with a target price of $ 50.
Daiwa Capital’s leading analyst Calvin Lau recommends buying NIO shares and selling Xpeng, with a target price of $ 32 for Xpeng.
Over the past three months, Xpeng has received 7 Buy, 1 Hold and 1 Sell ratings. This means that the average analyst rating is “moderate buy”. However, the average target price of $ 41.75 for Xpeng shares represents an 8% fall over the next twelve months.
NIO has received 8 Buy and 4 Hold ratings over the past three months (analyst average is Moderate Buy). The average price target of $ 49.84 implies about 11% upside potential.