The penetration rate of EV, defined as sales of EV accounts over total vehicle sales, reached 20% in September, a figure equal to the annual target for 2025 set by the government previously.
As we near the end of 2021, China's EV industry continues with good sales momentum sprouting from last year, with year-to-date NEV sales already hitting 2.53 million, far beyond 1.36 million for the whole of 2020. 2022 is likely to be another winning year due to a number of tailwinds such as rollouts of more advanced models, better charging infrastructure and rising demand for EVs. On the other side, headwinds like supply chain shocks and intensifying competition remain in place. We believe the sector is poised to become a growth engine for China's already-slowing-down economy. On top of that, we compare and evaluate four Chinese EVs and weigh some risks in the article. Here's a 'TLDR':
Although the competition is intensifying, the whole year delivery guidance for NIO, XPeng, Li Auto and BYD remain strong due to a fast-growing demand for EVs, which implies growth opportunities ranging from 20% to 75% under the backdrop of a fall-rise capacity pattern in the supply chain.
Q3 2021 results comparison
The 4 car makers presented another solid quarter with raised sales and gross margins and contracted expenses. Li Auto is highly likely to become the first of them to break even. The company only has one product and, as of now, has not heavily invested in R&D. But this might change as Li is designing a new model and an in-house-built autonomous driving system.
XPeng kept positioning itself as an innovator, which dragged its net profit. The company just exhibited its fourth model, G9, a large SUV, at the 2021 Guangzhou Auto Show. The car is unfinished and will be equipped with NGP 4.0. This and other R&D-heavy future developments will continue to affect the EV maker's profitability.
NIO's rather 'balanced' performance was a result of a product diversification: the company has been trying new business schemes such as carbon credit sales, data, merch and other services. This time, those contributed to the company's margin improvement.
BYD hasn't disclosed its EV-specific Q3 financials.
After comparing the trio's 3Q results, we will project their future deliveries and, based on that, break down their investment opportunities.
XPeng 2022 TP: USD 70
In our previous analysis, we modeled XPeng's revenue and claimed the biggest challenge to it was chip shortage. XPEV's Q3 results indicated the company is less impacted compared with other NEVs. As a result of that, the stock performed well in recent days. Based on the modeling below, we think XPEV can reach USD 70 apiece in 2022.
Valuation
Our last article estimated that XPEV would deliver 78,000 vehicles in 2021 – the figure will be between 91,000 - 95,000, as the company's performance improved in Q3. The auto chip shortage didn't bother XPeng much. Based on this and our new findings on the chip shortage, we assume XPEV will grow its sales slowly in the first half of 2022, fast recovering production in the second half when the supply chain is relieved.
The sales estimation is based on a top-down analysis. In 2021, XPeng's 91,000 deliveries account for 2.7% of around 3.4 million annual sales globally. Given the growing number of new players in the space. we assume the best scenario is that its market share will increase a bit to 3% in 2022. Assuming full-year sales of new energy vehicles reach 6.5 million units in 2022 (up 90% year-on-year), XPeng's delivery figure will be between 175,000 and 195,000.
Specifically, P7 will still be the top-selling model. But P5 is likely to add more momentum as XPEV promotes it more in the less competitive middle-class EV market. G3i is said to be allocated with more production to add delivery. G9, as the newest model, will contribute fewer sales in later 2022. In our model, XPEV will sell 190,000 of these four kinds in 2022, which equals to USD 6.5 billion in revenue. The company is priced at USD 52 to 56 billion under a 2022 PS ratio of 8-9x.
Don't underestimate BYD
EVs and EV batteries
From January to November, BYD delivered 500,922 EVs, up 230% year-on-year. This particularly surpassed our previous estimation. BYD has proved its strong supply chain ability by combining its own and outsourced capabilities. As we previously mentioned, OEMs like TSLA and BYD would be less affected by the supply chain issue. Thus, we lift our estimate on EV sales, projecting they will grow by 220% in 2021, 100% in 2022. The average EV selling price will remain unchanged in 2022 as the new premium models offset some discounts to deals to stimulate more EV sales.
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