Tag: Inc. (TSLA)

Troubling Signs for Tesla (TSLA): Is the Era of EVs Coming to an End?

Posted on by The INO.com Team

Hertz, a rental car company, once envisioned itself as the ultimate EV broker, offering battery-powered vehicles to ride-hail drivers, business travelers, and tech newbies in an ambitious plan to capitalize on the EV revolution. The company signed deals with the world’s leading automaker,Tesla, Inc. (TSLA) and the Swedish EV startup Polestar to purchase more than 200,000 EVs.

However, the company’s IEV plans are running into some challenges Last week, Hertz stated that the declining resale value of its EVs and higher repair costs are forcing it to put brakes on its EV rollout.

TSLA has been rapidly slashing its prices to boost sales as it struggles with weakened demand and heightened competition. The price cuts have further lowered the resale value of the EVs in Hertz’s fleet by nearly one-third. Also, repair costs have been higher than anticipated, almost double what the company pays to repair gasoline cars, CEO Stephen Scherr said in an interview with Bloomberg.

A part of the problem concerns Hertz’s plans to rent EVs to ride-hail drivers. Of the 100,000 Tesla vehicles acquired by Hertz, almost half were to be allocated to Uber drivers as part of an agreement with the ride-hail company. As Uber drivers tend to drive their vehicles into the ground, the higher utilization rate can lead to more damage than Hertz expected.

Hertz will slow the pace of buying EVs while it learns how to manage costs, Scherr added.

This news, coupled with several other headwinds, hints at the bearish sentiment surrounding TSLA lately. Shares of the electric vehicle maker have plunged more than 11% over the past month.

Now, let’s review in detail what has happened in the past few months and discuss several factors that could impact TSLA’s performance in the near term:

Deteriorating Financial Performance

For the third quarter that ended September 30, 2023, TSLA reported revenue of $23.35 billion, missing analysts’ expectations of $24.14 billion. The company’s gross profit declined 22.4% from the year-ago value to $4.18 billion. Its operating expenses increased 42.5% year-over-year to $2.41 billion. Its income from operations was $1.76 billion, down 52.2% year-over-year.

Furthermore, the automaker’s adjusted EBITDA decreased 24.4% from the prior year’s quarter to $3.76 billion. Its adjusted net income attributable to common stockholders came in at $2.32 billion, a decline of 36.6% year-over-year. The company posted an adjusted EPS of $0.66, below the consensus estimate of $0.73. This compared to $1.05 a year ago.

TSLA’s net cash provided by operating activities was $3.31 billion, down 35.1% from the previous year’s quarter. Also, the company’s free cash flow declined 74.3% year-over-year to $848 million.

Misses on Quarterly Delivery Expectations

Tesla missed market estimates for third-quarter deliveries due to production constraints caused by planned factory shutdowns. TSLA’s total deliveries dropped 6.7% sequentially and 35.6% year-over-year to 435,059 vehicles in the third quarter. The company’s deliveries missed analysts’ estimate of 461,640.

Further, the company reported total vehicle production of 430,488, compared to $479,700 during the prior quarter and 365,923 in the same period of 2022, respectively.

“A sequential decline in volumes was caused by planned downtimes for factory upgrades, as discussed on the most recent earnings call,” the company said. “Our 2023 volume target of around 1.8 million vehicles remains unchanged.”

Continued Price Cuts

On October 6, TSLA slashed the prices of its top-selling models in the U.S. again after the EV giant reported third-quarter deliveries that missed Wall Street expectations. The starting price for the Model 3 is listed at $38,990 on Tesla’s website, a drop from $40,240. The long-range Model 3 price declined from $47,240 to $45,990.

Also, the price of the Model 3 Performance fell from $53,240 to $50,990. The company’s Model Y Performance sports utility vehicle’s price now starts at $52,490, down from the prior price of $54,490.

Beginning at the end of 2022, TSLA started cutting the prices of its vehicles worldwide to drive demand amid concerns over eroding consumer spending in markets such as the U.S. and China and heightened competition in the EV space.

Elon Musk, CEO of TSLA, has earlier hinted at the company’s desire to chase higher volume over bigger margins this year.

Panasonic Battery Warning

Panasonic Holdings Corp., a longtime partner and supplier to Tesla, announced that it had reduced battery cell production in Japan during the period that ended September 2023. Panasonic cells have been used in TSLA’s older and higher-priced vehicles, including Model X SUVs and Model S sedans.
The recent update from Panasonic stoked investor concerns over softening demand for EVs, especially for high-priced EVs that may not qualify for tax breaks or other incentives from the government in and beyond the U.S.

Tesla Cybertruck Concerns

Elon Musk also mentioned in Tesla’s third-quarter earnings call that the company was facing severe challenges with the production of its long-awaited Cybertruck. He cautioned that Cybertruck won’t deliver considerable positive cashflow for 12 to 18 months after production starts.
The EV maker announced on X (formerly Twitter), now owned by Musk, that “Cybertruck production remains on track for later this year, with first deliveries scheduled for November 30th at Giga Texas.”

On the earnings call, Musk said, “It is going to require immense work to reach volume production and be cashflow positive at a price that people can afford” with the Cybertruck. He added, “I just want to temper expectations for Cybertruck. It’s a great product, but financially, it will take a year to 18 months before it is a significant positive cash flow contributor.”

Growing Risk of Smart Money Exit

An analyst recently warned of potential mass exit by big institutional investors.

GLJ Research’s Gordon Johnson said that the last time (the second quarter of 2022) when Tesla missed analyst estimates was just a fraction of what the company reported for the third quarter of 2023, and over the next six months, the stock dropped nearly 50% as the “smart money” existed.
“It's not weak demand. It's poor results… that are getting worse,” Johnson added.

TSLA exhibits substantial institutional ownership, with institutions owning around a 42.75% stake. Moreover, the total value of these holdings amounts to $295.96 billion. However, disappointing financial results and other factors could result in a mass exodus by smart money.

Unfavorable Analyst Estimates

Analysts expect TSLA’s revenue for the fourth quarter (ending December 2023) to come in at $25.57 billion, indicating an increase of 5.1% year-over-year. However, the consensus EPS estimate of $0.73 for the current quarter reflects an alarming 38.4% year-over-year decline. Moreover, the company has missed the consensus revenue estimates in three of the trailing four quarters.

For the fiscal year 2023, the company’s EPS is expected to decrease 21% year-over-year to $3.22.

Bottom Line

TSLA grapples with high-interest rates pushing up financing costs and discouraging consumers from making discretionary purchases. The company, in response, has aggressively cut prices this year as it aims to grow its user base to battle weakened demand and increased competition.

The company’s third-quarter revenue and earnings missed Wall Street expectations. The company reported a significant drop in earnings and thinner profit margins. Also, due to factory upgrades that led to planned downtimes, it missed vehicle delivery expectations in the last reported quarter.

Further, analysts seem bearish about TSLA’s prospects as the company will continue to face headwinds, including immense challenges in scaling production, lower margins due to price cuts, sharp competition in the EV market, and persistent soft consumer spending amid the rising interest rate environment.
Therefore, avoiding this EV stock for now could be wise.

4 Stocks to Buy Instead of TSLA as Its Downtrend Continues

Posted on by The INO.com Team

Tesla, Inc. (TSLA) aims to sell 20 million EVs a year by the end of this decade. However, the company faces steep competition from other manufacturers as they launch their battery electric vehicles (BEVs) and invest in ramping up their EV manufacturing capabilities.

To ward off competition and economic uncertainty, TSLA has cut the prices of its vehicles this year. Recently, the company cut the prices for Model 3, Model S, and Model X in the United States. In China, TSLA reduced Model S and X prices. The company has been focusing on boosting volume growth by lowering prices, but it is affecting its gross margins.

Due to price cuts, discounts, and tax credits, the company reported delivering a record-setting 466,140 vehicles during the second quarter. However, Wall Street analysts have cut TSLA’s third-quarter delivery estimates by 2%. They expect the EV maker to deliver 462,000 vehicles during the third quarter.

TSLA CEO Elon Musk had said during the second-quarter earnings call that although it was sticking to its target of producing 1.8 million vehicles, third-quarter production would take a hit due to essential factory upgrades that would take place during the quarter.

Some analysts have forecasted that delivery numbers will be less than 460,000 units. Deutsche Bank analyst Emmanuel Rosner lowered his delivery expectations to 440,000, down from his previous forecast of 455,000. Baird analyst Ben Kallo has projected that the third quarter deliveries would be 439,200 units.

Rosner said, “Tesla’s 3Q 2023 deliveries and production could miss Street expectations, but more important, we see meaningful downside risk to 2024 consensus due to limited volume growth next year.” The analyst has cut its target price on TSLA to $285 from $300.

Amid the confusion over the third-quarter deliveries and production figures, many analysts are worried that TSLA’s production next year will be lower than the previous estimates. Deutsche Bank believes the EV maker’s earnings could face headwinds in 2024. In an investor meeting, they said that TSLA suggested that it was not looking to ramp up production at its Austin and Berlin factories to 10,000 units per week next year.

The bank has forecasted that TSLA will produce 2.1 million units next year, down from the previous consensus estimate of 2.3 million units. They also reduced the price target of TSLA to $285 per share from $300.

Moreover, TSLA is currently trading at an expensive valuation. In terms of forward EV/EBITDA, TSLA’s 42.58x is 364% higher than the 9.18x industry average. Likewise, its 7.47x forward EV/Sales is 564.3% higher than the 1.12x industry average. Its 70.97x forward non-GAAP P/E is 410.1% higher than the 13.91x industry average.

Given the uncertainty surrounding TSLA’s near-term prospects, it could be wise to buy fundamentally strong auto stocks Ferrari N.V. (RACE), General Motors Company (GM), Li Auto Inc. (LI), and NIO Inc. (NIO).

Let’s discuss these stocks in detail.

Ferrari N.V. (RACE)

Headquartered in Maranello, Italy, RACE designs, designs, produces, and sells luxury sports cars worldwide. The company offers a range, special series, Icona, and supercars; limited edition supercars and one-off cars; and track cars. It also provides racing cars, spare parts and engines, and after-sales, repair, maintenance, and restoration services for cars.

RACE’s revenue grew at a CAGR of 18.2% over the past three years. Its EBITDA grew at a CAGR of 24.2% over the past three years. In addition, its EPS grew at a CAGR of 29.1% in the same time frame.

In terms of the trailing-12-month net income margin, RACE’s 19.46% is 342.8% higher than the 4.40% industry average. Likewise, its 30.86% trailing-12-month EBITDA margin is 180.3% higher than the industry average of 11.01%. Furthermore, the stock’s 6.73% trailing-12-month Capex/Sales is 109.4% higher than the industry average of 3.22%.

RACE’s net revenues for the second quarter ended June 30, 2023, increased 14.2% year-over-year to €1.47 billion ($1.55 billion). Its adjusted EBITDA rose 32.1% over the prior-year quarter to €589 million ($620.54 million). The company’s adjusted EBIT increased 35.3% year-over-year to €437 million ($460.40 million).

Its adjusted net profit rose 33.1% year-over-year to €334 million ($351.89 million). Also, its adjusted EPS came in at €1.83, representing an increase of 34.6% year-over-year.

Analysts expect RACE’s revenue for the quarter ending September 30, 2023, to increase 25.8% year-over-year to $1.55 billion. Its EPS for the fiscal period ending March 2024 is expected to increase 8.8% year-over-year to $1.94. It surpassed the consensus EPS estimates in each of the trailing four quarters.

General Motors Company (GM)

GM designs, builds, and sells trucks, crossovers, cars, and automobile parts; and provides software-enabled services and subscriptions worldwide. The company operates through GM North America, GM International, Cruise, and GM Financial segments.

On August 16, 2023, GM invested $60 million in a Series B financing round of AI and battery materials innovator Mitra Chem. The company’s AI-powered platform and advanced research and development facility in Mountain View, California, will help accelerate GM’s commercialization of affordable EV batteries.

Gil Golan, GM vice president, Technology Acceleration and Commercialization, said, “This is a strategic investment that will further help reinforce GM’s efforts in EV efforts in EV batteries, accelerate our work on affordable battery chemistries like LMFP, and support our efforts to build a U.S.-focused battery supply chain.

On April 25, 2023, GM and Samsung SDI announced that they plan to invest more than $3 billion to build a new battery cell manufacturing plant in the United States, slated to start operations in 2026.

GM Chair and CEO Mary Barra said, “GM’s supply chain strategy for EVs is focused on scalability, resiliency, sustainability, and cost-competitiveness. Our new relationship with Samsung SDI will help us achieve all these objectives. The cells we will build together will help us scale our EV capacity in North America well beyond 1 million units annually.”

GM’s revenue grew at a CAGR of 13.6% over the past three years. Its EBIT grew at a CAGR of 46.6% over the past three years. In addition, its net income grew at a CAGR of 82.4% in the same time frame.

In terms of the trailing-12-month levered FCF margin, GM’s 7.27% is 42.3% higher than the 5.11% industry average. Likewise, its 15% trailing-12-month Return on Common Equity is 34.2% higher than the industry average of 11.17%. Furthermore, the stock’s 5.95% trailing-12-month Capex/Sales is 84.9% higher than the industry average of 3.22%.

For the second quarter ended June 30, 2023, GM’s total revenues increased 25.1% year-over-year to $44.75 billion. Its net income attributable to stockholders rose 51.7% year-over-year to $2.57 billion. The company’s adjusted EBIT rose 38% year-over-year to $3.23 billion. Also, its adjusted EPS came in at $1.91, representing a 67.5% increase year-over-year.

For the quarter ending September 30, 2023, GM’s revenue is expected to increase 3.9% year-over-year to $43.52 billion. Its EPS for fiscal 2023 is expected to increase 1.5% year-over-year to $7.70. It surpassed the consensus EPS estimates in each of the trailing four quarters.

Li Auto Inc. (LI)

Headquartered in Beijing, the People’s Republic of China, LI designs, develops, manufactures, and sells new energy vehicles in the People’s Republic of China. The company provides Li ONE and Li L series smart electric vehicles. It also offers sales and after-sales management, technology development, corporate management services, as well as purchases of manufacturing equipment.

LI’s revenue grew at a CAGR of 263.4% over the past three years. Its total assets grew at a CAGR of 115.8% over the past three years.

In terms of the trailing-12-month levered FCF margin, LI’s 23.51% is 360.2% higher than the 5.11% industry average. Likewise, the stock’s 7.69% trailing-12-month Capex/Sales is 139.2% higher than the industry average of 3.22%.

LI’s total revenues for the second quarter ended June 30, 2023, increased 228.1% year-over-year to RMB28.65 billion ($3.91 billion). Its gross profit rose 232% over the prior-year quarter to RMB6.24 billion ($853.63 million). The company’s non-GAAP income from operations came in at RMB2.04 billion ($279.07 million), compared to a non-GAAP loss from operations of RMB520.80 million ($71.25 million).

Also, its non-GAAP net income stood at RMB2.73 billion ($373.46 million), compared to a non-GAAP net loss of RMB183.40 million ($25.09 million).

Street expects LI’s revenue for the quarter ending September 30, 2023, to increase 245.3% year-over-year to $4.64 billion. Its EPS for the quarter ending December 31, 2023, is expected to increase 151.7% year-over-year to $0.34. It surpassed the Street EPS estimates in three of the trailing four quarters.

NIO Inc. (NIO)

Based in Shanghai, China, NIO designs, develops, manufactures, and sells smart electric vehicles in China. It offers five- and six-seater electric SUVs and smart electric sedans. The company also offers power solutions, power chargers and destination chargers, power mobile, power map, and One Click for power valet service.

On July 12, 2023, NIO announced that it closed the $738.50 million strategic equity investment from CYVN Investments RSC Ltd, an affiliate of CYVN Holdings L.L.C., an investment vehicle majority owned by the Abu Dhabi Government with a focus on advanced and smart mobility. The NIO and CYVN entities would collaborate strategically in international business and technology cooperation.

NIO’s revenue grew at a CAGR of 70.6% over the past three years. Its total assets grew at a CAGR of 55.7% over the past three years.

In terms of the trailing-12-month Capex/Sales, NIO’s 17.62% is 447.9% higher than the 3.22% industry average.

For the second quarter ended June 30, 2023, NIO’s total revenues fell 14.8% year-over-year to RMB8.77 billion ($1.20 billion). Its adjusted loss from operations widened 132% year-over-year to RMB5.46 billion ($746.93 million). In addition, its adjusted net loss attributable to ordinary shareholders of NIO widened 140.2% year-over-year to RMB5.45 billion ($745.56 million).

Furthermore, its adjusted net loss per share attributable to ordinary shareholders widened 144.8% year-over-year to RMB3.28.

For the quarter ending September 30, 2023, NIO’s revenue is expected to increase 47.2% year-over-year to $2.66 billion.

Insight Into Warren Buffett's Strategy: Unveiling His 40 Million General Motors (GM) Shares and the Investment Implications

Posted on by The INO.com Team

Berkshire Hathaway Inc. (BRK), led by fabled investor Warren Buffett, also fondly known as The Oracle of Omaha, owns 22 million General Motors Company (GM) shares, equating to a 1.6% stake in the legacy U.S. automaker.

A fundamentally robust company such as GM deserves its spot in a conglomerate's portfolio with a reputation for acquiring parts or the entirety of businesses that possess enduring competitive advantages and are likely to be aided by favorable economics in the long run.

On the back of a strong performance in the fiscal 2023 second quarter, the Detroit-headquartered auto giant has raised its guidance for 2023. The company raised its net income expectations for the fiscal from a high end of $9.9 billion to a high end of $10.7 billion. Its automotive division’s free cash flow is also expected to come between $7 billion and $9 billion, up from $5.5 billion to $7.5 billion.

In addition, GM said it is increasing cost-cutting measures through next year and now plans to cut $3 billion in expenditures compared with previous guidance of $2 billion. The financial outperformance driven by the booming traditional automotive business powered by highly profitable trucks and SUVs has enabled the company to ramp up its presence in the electric vehicle (EV) segment.

Consequently, GM reiterated that it would double EV production in the year's second half to 100,000 units. In addition to the long-awaited introduction of an electric Chevrolet Silverado pickup truck and EV versions of Chevy’s Equinox crossover and Blazer compact sport-utility vehicle, the company says it will reach 400,000 cumulative units of EV production by early 2024.

GM also anticipates that its EV business will reach profitability by 2025, with an EV production capacity of 1 million units in North America and EV revenue of roughly $50 billion.

In addition, the company is making itself future-ready by fixing supply-chain issues with measures such as a $60 million investment round in Mitra Chem, a California startup working on cheaper EV batteries. Mitra Chem aims to develop low-cost lithium iron phosphate batteries that can hold more power than current versions. If it’s successful, its batteries could appear in GM’s EVs later this decade.

GM is also developing its Ultium EV platform, which will help reduce costs and improve profitability. In addition, GM is diversifying to more potentially lucrative businesses such as Cruise, its driverless cab service, and BrightDrop, which is focused on helping businesses meet consumer demand for last-mile services.

All the above factors make GM an apparently solid bet in the automotive sector and a far cry from cash-strapped and debt-burdened EV upstarts that are struggling to keep themselves afloat amid increased borrowing cost due to sustained interest-rate hikes and EV price war that has been waged by Tesla, Inc. (TSLA).

The Flip Side

When asked about when to sell stocks, Buffett famously replied, “To break off relationships with people that I like and people that have joined me because they think it’s a permanent home, to do that simply because somebody waves a big check at me would be like selling one of my children.”

So when the legend, whose favorite holding period is forever, decides to cut his stake in GM, a business his company has owned since 2012, by almost half, it can only mean that either BRK is chronically short of funds and has been finding numerous opportunities to put them to better use or the economic characteristics of the business change in a big way.

Since BRK is sitting on a mountain of cash worth at least $147 billion, we can definitely count out the former possibility. As far as the latter is concerned, carmakers in the U.S. and Europe are once again under siege.

However, this time around, the war is on climate change, the goal is rapid decarbonization and energy transition, the battleground is smart, connected, and electric mobility solutions, and the invaders are from the other side of the Pacific, beyond the Sea of Japan.

Recently, after BYD Company Limited (BYDDY) delivered its five millionth electric vehicle, its founder Wang Chuanfu declared the “time has come for Chinese brands.” And he has good reason to be optimistic. Chinese automakers have access to its vast domestic market, abundant supplies of resources, such as rare earths, which are critical for energy transition, and a government keen on seeing its domestic brands compete globally.

China’s dominance in rare earth and other clean energy metals is back in the limelight after the recent export restriction on germanium and gallium. With the trade war between the U.S. and China intensifying amid restrictions on exports of semiconductor chips and investments in other cutting-edge technology by the former, the latter is expected to keep upping the ante.

This could hurt the prospects of Western car manufacturers as they might be compelled to deal with increased input costs on top of exchange-rate headwinds and credit crunch due to the Federal Reserve ratcheting up the benchmark borrowing cost to 5.25%-5.50% from nearly 0% in the space of 16 months. 

While carbon border tax and other protective measures could provide temporary shelter for besieged Western automakers, the beneficiaries stand to lose more if the Chinese government cuts off their access to the massive domestic market on which the Chinese automakers could always fall back upon encountering turbulence overseas.

Moreover, with Vietnamese EV-maker VinFast Auto Ltd. (VFS) surpassing the market capitalization of heavyweights, such as Ford Motor Company (F) and GM, in the words of VW chief Thomas Schaefer, “The roof is on fire,” and according to former Aston Martin chief executive Andy Palmer, manufacturers in Europe and the US face a “real and present danger” from the East.

Bottomline

GM, first added by BRK in 2012, now constitutes merely 0.2% of the conglomerate’s portfolio of marketable securities, which in turn is just a component of its holdings, which are comprised mainly of wholly owned businesses.

Therefore, instead of being denominator blind and jumping on the Buffett bandwagon, it could be wise for investors to hold their horses and verify if Western automakers can hold their own against Oriental challengers before making an investment decision.

The Chinese EV Onslaught Commences – Secure Your Position with These 5 EV Stocks

Posted on by The INO.com Team

On August 14, U.S electric mobility major Tesla, Inc. (TSLA) announced a fresh round of price cuts for Model Y and Model 3 in China. This move was soon followed by further price cuts on August 16, in which Model S and Model X prices were reduced by $7,400 and $8,500, respectively.

These moves aimed to boost sales and gain market share by undercutting intense competition from domestic automakers, to whom the auto major lost ground even as it is ramping up production in its Shanghai Gigafactory.

Contrary to this being an isolated incident, carmakers in the U.S. and Europe are once again under siege after ceding ground to Japanese automakers with superior energy efficiency rendered desirable in the aftermath of the oil embargo between 1970 and 1990.

However, this time around, the war is on climate change, the goal is rapid decarbonization and energy transition, the battleground is smart, connected, and electric mobility solutions, and the invaders are from the other side of the Pacific, beyond the Sea of Japan.

Recently, after BYD Company Limited (BYDDY) delivered its five millionth electric vehicle, its founder Wang Chuanfu declared the “time has come for Chinese brands.” And he has good reason to be optimistic. Chinese automakers have access to its vast domestic market, abundant supplies of resources, such as rare earths, which are critical for energy transition, and a government keen on seeing its domestic brands compete globally.

China’s dominance in rare earth and other clean energy metals is back in the limelight after the recent export restriction on germanium and gallium. With the trade war between the U.S. and China intensifying amid restrictions on exports of semiconductor chips and investments in other cutting-edge technology by the former, the latter is expected to keep upping the ante.

This could hurt the prospects of Western car manufacturers as they might be compelled to deal with increased input costs on top of exchange-rate headwinds and credit crunch due to the Federal Reserve ratcheting up the benchmark borrowing cost to 5.25%-5.50% from nearly 0% in a span of 16 months. 

While carbon border tax and other protective measures could provide temporary shelter for besieged Western automakers, the beneficiaries stand to lose more if the Chinese government cuts off their access to the massive domestic market on which the Chinese automakers could always fall back upon encountering turbulence overseas.

In such a circumstance, former Aston Martin chief executive Andy Palmer might be justified in his statement that manufacturers in Europe and the US face a “real and present danger.”

As the adage goes, “If you can't beat them, join them,” here are five stocks that could be worthy of consideration in case the Western defenses do get breached:

BYD Company Limited (BYDDY)

In addition to being a manufacturer and seller of transport vehicles, Chinese automaker BYDDY is also engaged in the manufacture and sales of electronic parts and components and electronic devices for daily use, such as rechargeable batteries and photovoltaic products, mobile phone parts and assembly, and related products.

Over the last three years, BYDDY’s revenue and net income have grown at a 59.8% CAGR, while its EBITDA has grown at a 48.2% CAGR. During the same time horizon, the company’s net income and total assets have grown at 173.3% and 41.9% CAGRs, respectively.

Last year, BYDDY overtook Tesla, Inc. (TSLA) as the world’s top electric car maker, including plug-in hybrids. With its five millionth new energy vehicle (NEV), a DENZA N7, rolling off on August 9, the Chinese auto major is aiming to outpace TSLA on purely battery-powered cars this year.

Here’s the legendary investor Charlie Munger summing up the rivalry between BYDDY and TSLA by commenting, “This carmaker is so ahead of Tesla in China, it's ridiculous.”

On July 14, it was revealed that BYDDY submitted a $1 billion investment proposal to build electric cars and batteries in India in partnership with privately held Hyderabad-based Megha Engineering and Infrastructures.

On July 4, BYDDY confirmed an investment of R$3 billion ($602.97 million) to start operations in three factories simultaneously in the Camaçari complex, 50km from Salvador, Brazil. The company believes that Domestic production will allow for more competitive prices and the possibility for a car-loving population to own an electric vehicle in the garage.

Analysts expect BYD’s revenue and EPS for the fiscal year 2023 to increase by 41.1% and 44.7% year-over-year to $87 billion and $2.40, respectively. Revenue and EPS are expected to increase by 23% and 30.1% year-over-year to $107.20 billion and $3.13, respectively.

Li Auto Inc. (LI)

Headquartered in Beijing, LI designs, develops, manufactures, and sells smart new energy passenger vehicles (NEVs). The company also sells peripheral products and offers related services, such as charging stalls, vehicle Internet connection services, and extended lifetime warranties.

Over the last three years, LI’s revenue has grown at 263.4% CAGR, while its total assets have grown at 115.8% CAGR.

For the fiscal 2023 second quarter that ended June 30, LI’s total vehicle deliveries increased by 201.6% year-over-year to come in at 86,533 units. As a result, vehicle sales and total revenues for the same period increased by 229.7% and 228.1% year-over-year to RMB 27.97 billion ($3.85 billion) and RMB 28.65 billion ($3.94 billion).

LI’s non-GAAP net income was RMB2.73 billion ($375.38 million) in the second quarter of 2023, compared with RMB183.4 million ($25.22 million) non-GAAP net loss in the previous-year quarter.

For the fiscal year 2023, LI’s revenue is expected to increase by 146.3% year-over-year to $16.07 billion, while its EPS is expected to come in at $1.03 compared to $0.01 during the previous fiscal. Revenue and EPS are expected to increase by 53.7% and 50.5% year-over-year to $24.70 and $1.55, respectively.

NIO Inc. (NIO)

Headquartered in Shanghai, NIO designs, develops, manufactures, and sells high-end smart electric vehicles. The company also offers energy and service packages; design and technology development activities; manufacture of e-powertrains, battery packs, and components; and sales and after-sales management activities.

Over the last three years, NIO’s revenue has grown at an 87.7% CAGR, while its total assets have grown at a 79.9% CAGR.

On August 1, NIO announced the delivery of 20,462 vehicles in July 2023, representing an increase of 103.6% year-over-year. The deliveries consisted of 14,066 premium smart electric SUVs and 6,396 premium smart electric sedans. With this, the cumulative deliveries of NIO vehicles reached 364,579 as of July 31, 2023.

On July 12, NIO announced the closure of a $738.5 million strategic equity investment from CYVN Investments RSC Ltd, an affiliate of CYVN Holdings L.L.C., an investment vehicle majority owned by the Abu Dhabi Government with a strategic focus on advanced and smart mobility.

Going forward, both entities will work jointly to pursue strategic collaborations in international business and technology cooperation.

In addition to ever-narrowing losses, NIO’s revenues for fiscal 2023 and 2024 are expected to increase by 22.9% and 51.6% year-over-year, to come in at $8.82 billion and $13.36 billion, respectively.

 XPeng Inc. (XPEV)

Guangzhou-based XPEV is involved in designing, developing, producing, and selling smart electric vehicles (Smart EVs) that are primarily targeted toward the mid-to-high-end of the passenger vehicle market. Other offerings include supercharging, maintenance, ride-hailing, and vehicle leasing services.

Over the last three years, XPEV’s revenue has grown at a 122.8% CAGR, while its total assets have grown at a 97.7% CAGR.

On August 1, XPEV announced that it had recorded deliveries of 11,008 Smart EVs in July 2023, which indicates a sequential increase of 28% and marks its sixth consecutive month of delivery growth.

On July 26, XPEV announced its strategic partnership with Volkswagen AG (VWAGY). The framework agreement involves strategic technical collaboration and a share purchase agreement for strategic minority investment by the latter for 4.99% of XPEG at $15 per ADS, for a total consideration of approximately $700 million.

With the collaboration, both companies seek to leverage each other’s complementary strengths and forge a long-term win-win partnership.

In addition to ever-narrowing losses, XPEV’s revenues for fiscal 2023 and 2024 are expected to increase by 15.2% and 66.4% year-over-year, to come in at $4.49 billion and $7.47 billion, respectively.

Niu Technologies (NIU)

Beijing-based NIU designs, manufactures, and sells smart electric two-wheeled vehicles. The company is mainly engaged in the design, manufacture, and sales of high-performance motorcycles, scooters, bicycles, and kick-scooters.

Over the last three years, NIU’s revenue has grown at a 13.3% CAGR, while its total assets have grown at a 12.2% CAGR.

On July 4, NIU updated that in the fiscal 2023 second quarter, the company sold 211,996 units, including e-motorcycles, e-mopeds, e-bicycles, kick-scooters, and e-bikes, indicating an increase of 1.5% year-over-year. The number of units sold in China market and international markets were 178,567 and 33,429, respectively.

Consequently, NIU’s quarterly revenue increased by 0.1% year-over-year to RMB 828.8 million ($113.68 million). The company’s gross margin was 23.1%, compared to 20.3% during the previous year's quarter. As a result, its adjusted net income came in at RMB 14.4 million ($1.98 million).

Analysts expect NIU’s revenue for the fiscal year 2023 to increase by 10.2% year-over-year to $507.55 million, while its EPS is expected to increase astronomically to $0.22. Both revenue and EPS are expected to increase by 29.4% and 108.7% year-over-year to $656.55 million and $0.47, respectively.

The Chinese EV Onslaught Commences – Secure Your Position with These 5 EV Stocks

Posted on by Chelsea

On August 14, U.S electric mobility major Tesla, Inc. (TSLA) announced a fresh round of price cuts for Model Y and Model 3 in China. This move was soon followed by further price cuts on August 16, in which Model S and Model X prices were reduced by $7,400 and $8,500, respectively.

These moves aimed to boost sales and gain market share by undercutting intense competition from domestic automakers, to whom the auto major lost ground even as it is ramping up production in its Shanghai Gigafactory.

Contrary to this being an isolated incident, carmakers in the U.S. and Europe are once again under siege after ceding ground to Japanese automakers with superior energy efficiency rendered desirable in the aftermath of the oil embargo between 1970 and 1990.

However, this time around, the war is on climate change, the goal is rapid decarbonization and energy transition, the battleground is smart, connected, and electric mobility solutions, and the invaders are from the other side of the Pacific, beyond the Sea of Japan.

Recently, after BYD Company Limited (BYDDY) delivered its five millionth electric vehicle, its founder Wang Chuanfu declared the “time has come for Chinese brands.” And he has good reason to be optimistic. Chinese automakers have access to its vast domestic market, abundant supplies of resources, such as rare earths, which are critical for energy transition, and a government keen on seeing its domestic brands compete globally.

China’s dominance in rare earth and other clean energy metals is back in the limelight after the recent export restriction on germanium and gallium. With the trade war between the U.S. and China intensifying amid restrictions on exports of semiconductor chips and investments in other cutting-edge technology by the former, the latter is expected to keep upping the ante.

This could hurt the prospects of Western car manufacturers as they might be compelled to deal with increased input costs on top of exchange-rate headwinds and credit crunch due to the Federal Reserve ratcheting up the benchmark borrowing cost to 5.25%-5.50% from nearly 0% in a span of 16 months. 

While carbon border tax and other protective measures could provide temporary shelter for besieged Western automakers, the beneficiaries stand to lose more if the Chinese government cuts off their access to the massive domestic market on which the Chinese automakers could always fall back upon encountering turbulence overseas.

In such a circumstance, former Aston Martin chief executive Andy Palmer might be justified in his statement that manufacturers in Europe and the US face a “real and present danger.”

As the adage goes, “If you can't beat them, join them,” here are five stocks that could be worthy of consideration in case the Western defenses do get breached:

BYD Company Limited (BYDDY)

In addition to being a manufacturer and seller of transport vehicles, Chinese automaker BYDDY is also engaged in the manufacture and sales of electronic parts and components and electronic devices for daily use, such as rechargeable batteries and photovoltaic products, mobile phone parts and assembly, and related products.

Over the last three years, BYDDY’s revenue and net income have grown at a 59.8% CAGR, while its EBITDA has grown at a 48.2% CAGR. During the same time horizon, the company’s net income and total assets have grown at 173.3% and 41.9% CAGRs, respectively.

Last year, BYDDY overtook Tesla, Inc. (TSLA) as the world’s top electric car maker, including plug-in hybrids. With its five millionth new energy vehicle (NEV), a DENZA N7, rolling off on August 9, the Chinese auto major is aiming to outpace TSLA on purely battery-powered cars this year.

Here’s the legendary investor Charlie Munger summing up the rivalry between BYDDY and TSLA by commenting, “This carmaker is so ahead of Tesla in China, it's ridiculous.”

On July 14, it was revealed that BYDDY submitted a $1 billion investment proposal to build electric cars and batteries in India in partnership with privately held Hyderabad-based Megha Engineering and Infrastructures.

On July 4, BYDDY confirmed an investment of R$3 billion ($602.97 million) to start operations in three factories simultaneously in the Camaçari complex, 50km from Salvador, Brazil. The company believes that Domestic production will allow for more competitive prices and the possibility for a car-loving population to own an electric vehicle in the garage.

Analysts expect BYD’s revenue and EPS for the fiscal year 2023 to increase by 41.1% and 44.7% year-over-year to $87 billion and $2.40, respectively. Revenue and EPS are expected to increase by 23% and 30.1% year-over-year to $107.20 billion and $3.13, respectively.

Li Auto Inc. (LI)

Headquartered in Beijing, LI designs, develops, manufactures, and sells smart new energy passenger vehicles (NEVs). The company also sells peripheral products and offers related services, such as charging stalls, vehicle Internet connection services, and extended lifetime warranties.

Over the last three years, LI’s revenue has grown at 263.4% CAGR, while its total assets have grown at 115.8% CAGR.

For the fiscal 2023 second quarter that ended June 30, LI’s total vehicle deliveries increased by 201.6% year-over-year to come in at 86,533 units. As a result, vehicle sales and total revenues for the same period increased by 229.7% and 228.1% year-over-year to RMB 27.97 billion ($3.85 billion) and RMB 28.65 billion ($3.94 billion).

LI’s non-GAAP net income was RMB2.73 billion ($375.38 million) in the second quarter of 2023, compared with RMB183.4 million ($25.22 million) non-GAAP net loss in the previous-year quarter.

For the fiscal year 2023, LI’s revenue is expected to increase by 146.3% year-over-year to $16.07 billion, while its EPS is expected to come in at $1.03 compared to $0.01 during the previous fiscal. Revenue and EPS are expected to increase by 53.7% and 50.5% year-over-year to $24.70 and $1.55, respectively.

NIO Inc. (NIO)

Headquartered in Shanghai, NIO designs, develops, manufactures, and sells high-end smart electric vehicles. The company also offers energy and service packages; design and technology development activities; manufacture of e-powertrains, battery packs, and components; and sales and after-sales management activities.

Over the last three years, NIO’s revenue has grown at an 87.7% CAGR, while its total assets have grown at a 79.9% CAGR.

On August 1, NIO announced the delivery of 20,462 vehicles in July 2023, representing an increase of 103.6% year-over-year. The deliveries consisted of 14,066 premium smart electric SUVs and 6,396 premium smart electric sedans. With this, the cumulative deliveries of NIO vehicles reached 364,579 as of July 31, 2023.

On July 12, NIO announced the closure of a $738.5 million strategic equity investment from CYVN Investments RSC Ltd, an affiliate of CYVN Holdings L.L.C., an investment vehicle majority owned by the Abu Dhabi Government with a strategic focus on advanced and smart mobility.

Going forward, both entities will work jointly to pursue strategic collaborations in international business and technology cooperation.

In addition to ever-narrowing losses, NIO’s revenues for fiscal 2023 and 2024 are expected to increase by 22.9% and 51.6% year-over-year, to come in at $8.82 billion and $13.36 billion, respectively.

 XPeng Inc. (XPEV)

Guangzhou-based XPEV is involved in designing, developing, producing, and selling smart electric vehicles (Smart EVs) that are primarily targeted toward the mid-to-high-end of the passenger vehicle market. Other offerings include supercharging, maintenance, ride-hailing, and vehicle leasing services.

Over the last three years, XPEV’s revenue has grown at a 122.8% CAGR, while its total assets have grown at a 97.7% CAGR.

On August 1, XPEV announced that it had recorded deliveries of 11,008 Smart EVs in July 2023, which indicates a sequential increase of 28% and marks its sixth consecutive month of delivery growth.

On July 26, XPEV announced its strategic partnership with Volkswagen AG (VWAGY). The framework agreement involves strategic technical collaboration and a share purchase agreement for strategic minority investment by the latter for 4.99% of XPEG at $15 per ADS, for a total consideration of approximately $700 million.

With the collaboration, both companies seek to leverage each other’s complementary strengths and forge a long-term win-win partnership.

In addition to ever-narrowing losses, XPEV’s revenues for fiscal 2023 and 2024 are expected to increase by 15.2% and 66.4% year-over-year, to come in at $4.49 billion and $7.47 billion, respectively.

Niu Technologies (NIU)

Beijing-based NIU designs, manufactures, and sells smart electric two-wheeled vehicles. The company is mainly engaged in the design, manufacture, and sales of high-performance motorcycles, scooters, bicycles, and kick-scooters.

Over the last three years, NIU’s revenue has grown at a 13.3% CAGR, while its total assets have grown at a 12.2% CAGR.

On July 4, NIU updated that in the fiscal 2023 second quarter, the company sold 211,996 units, including e-motorcycles, e-mopeds, e-bicycles, kick-scooters, and e-bikes, indicating an increase of 1.5% year-over-year. The number of units sold in China market and international markets were 178,567 and 33,429, respectively.

Consequently, NIU’s quarterly revenue increased by 0.1% year-over-year to RMB 828.8 million ($113.68 million). The company’s gross margin was 23.1%, compared to 20.3% during the previous year's quarter. As a result, its adjusted net income came in at RMB 14.4 million ($1.98 million).

Analysts expect NIU’s revenue for the fiscal year 2023 to increase by 10.2% year-over-year to $507.55 million, while its EPS is expected to increase astronomically to $0.22. Both revenue and EPS are expected to increase by 29.4% and 108.7% year-over-year to $656.55 million and $0.47, respectively.