- The recent rout in Chinese equities due to regulatory intervention as China looks to rebalance the economy to achieve greater equality and sustainability, will see more investors flock to the buzzing electric vehicle (EV) industry as a safe haven.
- Notoriety as the world’s biggest polluter has driven China to take drastic measures to reduce its carbon output, and over USD 60 billion has been invested to supercharge the EV industry with plans to phase out conventional gas-burning cars by 2035.
- Around 1.9 million EVs are expected to be sold in China in 2021 and NIO, Xpeng, Li Auto, BYD, Geely, and Guangzhou Automobile are leading the race to reduce China’s carbon footprint.
When one thinks of helping the environment, names such as Greta Thunberg and Greenpeace might spring to mind.
China, on the other hand, is most likely to not feature in anyone’s list. Its status as the world’s biggest polluter has made it the antagonist to the likes of environmentalists and resource efficient countries such as Denmark and Luxembourg.
And China’s notoriety has driven it to take drastic measures to address the situation, as it pledges to be carbon neutral by 2060.
One initiative has been to supercharge the EV industry with over USD 60 billion handed out as China aims to phase out conventional gas-burning cars – known as internal combustion engine (ICE) vehicles – by 2035.
In China, government subsidies have been given to encourage the production and adoption of new energy vehicles (NEVs) ranging from battery-only EVs, plug-in EVs, and fuel cell EVs.
In Shanghai, ICE vehicle owners must pay USD 12,000 for a license plate that enables them to drive in the city. EV owners are exempt. In Beijing, EV cars also get immediate and full access to the city centre.
The government’s drive is working.
China sold 1.3 million EVs in 2020, representing 41% of the global EV sales that year, according to Canalys research. It expects 1.9 million EVs in China to be sold in 2021.
China Association of Automobile Manufacturers said 950,000 NEVs were sold in the first 5 months of 2021, 220% up YoY.
But where there’s innovation, there’s also competition.
Currently in China, everyone and their uncle is trying to join the EV game. There are now over 30 EV makers in the country.
That doesn’t even include the likes of non-vehicle-related companies such as Xiaomi, which is planning to extend its reach beyond its usual business to incorporate EV systems.
So, which Chinese EV is winning the race?
Instead of planting a tree, Bread has put together a shortlist of US and Hong Kong-listed purists and hybrids for you to look at, and maybe support. That’s worth at least a few trees, wouldn’t you say, Greta?
PURE EV PLAYS
Frequently attracting chatter among the WallStreetsBets crowd, NIO has served as a gateway to the world of Chinese stocks for young retail investors.
Founded in 2014, Nio has received around USD 1 billion in government funding so far. And it partners state-owned Jianghuai Automobile Group to manufacture its EVs in China.
The most impressive bit about NIO is its battery swapping stations within its ecosystem.
Unlike Tesla’s superchargers, which take 40+ minutes to fully charge their cars, Nio’s battery swapping system allows users to change their entire battery in under 5 minutes. One NIO battery swap costs around CNY 180 (USD 27). A full charge at a Tesla supercharger costs around USD 15 – 20.
What’s more, users can subscribe to NIO’s on-demand battery subscription for CNY 980 per month, which allows customers to lease the battery from the company.
NIO’s Battery As A Service (BaaS) ensures that customers won’t need to worry about the longevity of their batteries, whilst ensuring their customers’ vehicles remain fully charged efficiently and conveniently.
NIO has also recently begun its overseas expansion, choosing Norway as its first foreign destination.
It is reportedly planning another IPO back home.
# of EV models: 5, from SUVs, to a sports car, and a luxury sedan.
# of EVs delivered: 43,728 in 2020. 41,956 in 1H2021.
EV battery charge: 193 battery swapping stations, 134 supercharging stations and 327 destination stations across China.
By the end of 2020 alone, NIO aims to have 700 battery swapping stations.
It aims to construct 4,000 battery swapping stations around the world over the next four years.
Stock performance: NIO’s ADR reached heights of USD 67 each in February 2021. It was USD 2.40 in March 2020. That’s a 2691.67% increase from March 2020 to February 2021.
NIO was trading at 42.62 at the time of publication, with a PB ratio of 17.06.
Xpeng (XPEV:US, 9868:HK)
Capitalising on the EV love-in, Xpeng first went public with a USD 1.5 billion IPO on the NYSE in August 2020, and raised another USD 1.8 billion in a second primary listing on the HKEX in July 2021.
In between the two IPOs, it raised USD 76.9 million from government investment arm Guangdong Yuecai Investment Holdings.
Early backers of the relatively new company, established in 2015, include Chinese tech firms Alibaba and Xiaomi, as well the Qatar’s sovereign wealth fund.
Clearly, investors are excited by the EV maker’s future.
Xpeng’s focus is on the middle-class consumers in China, and while it only just recently announced a third EV model, it is well ahead in its battery charging network.
What’s most exciting for customers is that Xpeng is the first EV maker in China to offer free lifetime charging services, reflecting on the company’s optimism about the future of EV.
Chairman and CEO He Xiaopeng said China’s EV penetration could reach 30% by 2025.
# of EV models: 3 consisting of 2 sedans and an SUV.
# of EVs delivered: 27,041 in 2020. 30,738 in 1H2021.
EV battery charge: 19,019 charging and supercharging piles in 1,140 charging stations across 164 Chinese cities. Throughout the remainder of the year, Xpeng hopes to expand this network to cover 200 cities.
Stock performance: Xpeng is now trading at around USD 38.10 compared to its IPO price of USD 15. It has a PB ratio of 5.70.
Li Auto (LI:US)
Li Auto, founded in 2015, is another premium EV maker on the list and the smallest.
Its 1 and only model on sale now is plug-in hybrid EV (PHEV), which runs on battery as well as gas. While PHEVs need to be plugged into the mains to charge, they don’t solely rely on electricity to power them.
Li Auto’s Li One addresses consumers’ anxiety of going completely cold turkey on gasoline cars, whilst satisfying their desire to join the eco-fight.
The company plans to expand its offering to battery only EVs and EVs with an onboard generator powered by petrol.
Li Xing, the company’s founder, chairman and CEO wants the company to obtain 20% of the EV market share by 2025.
By 2030, Li is predicting that over 60% of cars on the road will be EVs.
Even though it only has 1 model now, Li Auto is doing as well as Xpeng.
The Chinese company also recently received approval for another listing on the Hong Kong stock exchange.
# of EV models: 1 SUV.
# of EVs delivered: 32,624 in 2020. 30,154 in 1H21.
EV battery charge: Battery in car can be charged by gas tank in car for more mileage.
Stock performance: Li Auto is now trading at around USD 30.66 compared to its IPO price of USD 16. It has a PB ratio of 6.07.
EV & ICE PLAYS
BYD (1211:HK, 002594:CH, BYDDF:US)
BYD is the beastliest Chinese EV maker on this list having been around the longest.
It started out as a battery maker in the late 1990s, before entering the traditional car market in early 2003, and launching its first hybrid car in 2008.
It also has commercial EVs such as buses.
OGs Warren Buffet and Charlie Munger have been particularly impressed with BYD CEO Wang Chuanfu.
“This guy is a combination of Thomas Edison and Jack Welch – something like Edison in solving technical problems, and something like Welch in getting done what he needs to do,” Charlie told Fortune in 2009.
Berkshire Hathaway’s USD 232 million punt for 10% of BYD in 2008, since diluted to 8.2%, was worth almost USD 6 billion as at the end of 2020.
In 2020, it reportedly received CNY 1.34 billion in EV subsidies from the government.
BYD is aiming to dominate China’s NEV with at least CNY 1 trillion in sales by 2025.
Not content with shipping its cars and buses globally, it wants to introduce an electric SUV capable of going 520km on one charge into Europe and hopes to “revolutionize” the electric school bus.
In 2020, it posted a net profit of CNY 4.23 billion on the back of CNY 153.47 billion in sales.
# of EV models: 15. From sedans, to hatchbacks, SUVs, buses, trucks, forklifts, and sanitation vehicles.
# of EVs sold: 189,689 in 2020. 154,579 in 1H2021.
EV battery charge: BYD isn’t in the charging infrastructure and battery swapping systems race.
It has partnered AXA to provide customers with on-call service for a mobile charging unit to come out to them in under 60 minutes.
Profitable: Yes. BYD is more than an EV and /ICE company. It is also engaged in handset components and assembly services, rechargeable batteries and photovoltaic cells and is developing an urban rail transportation business.
Stock performance: BYD is listed in Hong Kong, Shenzhen, and is traded OTC in the US. In Hong Kong, the stock has risen over 200% in the past year.
BYD was trading at CNY 264.71at the time of publication, with a PE ratio of 173.01 and a PB ratio of 126.84.
Geely Automobile Holdings (175:HK, GELYF:OTC)
NIO might be attracting the attention of WallStreetsBets but Geely Auto’s new premium EV brand Zeekr, launched in 2021, is named after its target audience – Gen Z and geeks who supposedly are into technology.
Zeekr, co-founded with parent company Zhejiang Geely Holding Group, has started production of its 001 model using Geely Auto’s open-source EV architecture.
Geely Auto also owns mass market EV brand Geometry, introduced in 2019.
Geely Auto also plans to collaborate with Volvo to jointly develop automotive solutions and systems including the next-generation electric vehicle architecture, as well as share EV technologies.
Geely Holding, founded in 1986, owns Volvo, which has its own EV brand Polestar.
Regardless, the EV business is still a relatively small part of Geely Auto, China’s third largest passenger vehicle brand in terms of sales volume.
# of EV models: 1 Zeekr model in production. Zeekr plans to introduce 6 EV models within 3 years. 2 Geometry models consisting of 1 SUV and 1 sedan.
# of EVs sold: 68,142 in 2020. 30,071 in 1H2021.
EV battery charge: It will build over 20,000 charging stations by the end of 2023 and is developing a battery swapping system that could rival NIO’s.
Profitable: Yes. In 2020, it posted a net profit of CNY 63.6 million on the back of CNY 92.1 billion in sales.
Stock performance: Geely Auto and is traded OTC in the US. In Hong Kong, the stock has risen over 50% in the past year.
Geely Auto was trading at HKD 25.95 each at the time of publication, with a PE ratio of 38.45 and a PB ratio of 3.297.
Guangzhou Automobile Group (2238:HK, 601238:CH)
State-backed Guangzhou Automobile Group (GAC), while not a top 3 automotive company in China, is sizenable in its own right.
In 2017, the group introduced NEV arm – GAC New Energy , now known as GAC Aion.
Most recently, GAC Aion invested in a new company – Guangdong Qianshun Mobility Technology Co, which focuses on ride-hailing services and the development of intelligent connected vehicle technologies.
GAC Aion also partnered with Didi to develop an autonomous electric car with a model for “large-scale commercial applications to accelerate mass production”.
Just last week, it claimed the battery in its new EV can achieve an 80% charge in 8 minutes.
GAC sells NEVs under other brands apart from EVs produced under GAC Aion.
Regardless, EVs form a sliver of GAC’s overall business.
# of EV models: 4 under GAC Aion brand, consisting largely of SUVs.
# of EVs sold: 20,286 in 1H2020 under GAC Aion. 43,013 in 1H2021.
EV battery charge: Currently 160 battery swap stations but plans to build 3000 battery swapping stations.
Profitable: Yes. In 2020, it posted a net profit of CNY 5.97 billion on the back of CNY 395.5 billion in sales.
Stock performance: Currently trading around HKD 6.72 each. It’s 52-week range is between HKD 6.08 – HKD 10.08.