Just a week after its IPO, Li Auto's market capitalization is approaching that of NIO, which has been traded on the US market for nearly two years.
As of Thursday's close, Li Auto's ADR share price was $18.50, giving it a market capitalization of $15.472 billion, while NIO's closed at $13.84, giving it a market capitalization of $16.399 billion.
NIO is currently selling two models, the ES6 and ES8, and recently unveiled the price of a third model, the EC6, which is currently taking reservations and will begin deliveries in September.
Li Auto has only one model, the Li ONE, on sale so far, and the next model won't be released until 2022.
NIO's offerings are all in pure electric mode, while the Li Auto features an range extender hybrid technology, with the former having a higher technical threshold.
Why is there only a $751 million difference in market capitalization between NIO, which has more models and more advanced technology, and Li Auto? Is Li Auto overrated or NIO underrated?
In the second quarter of this year, NIO delivered a total of 10,331 vehicles, an increase of 191% year-on-year.
NIO delivered 3,533 vehicles in July this year, an increase of 322.1 percent year-on-year, the second highest monthly delivery result after June this year.
The Li ONE, which went on sale this year, delivered 2,896 vehicles in the first quarter and 6,604 in the second quarter.
Based on these figures, Li Auto does not yet have the ability to compete with NIO.
However, the capital markets have a different view.
The analysts of Bernstein have rated Li Auto a with a Outperform rating. The price target was set to $21.00. At a current price of $18.5 there is upside potential of 13.5%.
During the Li Auto IPO process, Hillhouse Capital also subscribed for $300 million in shares in the IPO.
Hillhouse Capital was a major investor in NIO, and in the fourth quarter of last year it completely liquidated all of its NIO shares.
The capital market's attitude toward the two companies may be answered by a comparison of the financials.
NIO had revenue of $1.37 billion in the first quarter of 2020, with selling and administrative costs of $848 million.
Li Auto's quarterly revenue was $850 million, with selling and administrative costs of just $112 million.
NIO's revenue was 1.6 times that of Li Auto, but its costs were 7.6 times that of Li Auto.
Another set of data comparison is that NIO's losses in the first quarter of this year alone amounted to 1.723 billion RMB.
Li Auto, on the other hand, lost less than RMB 4 billion in the two years of 2018 and 2019 and only RMB 77 million in the first quarter of this year.
NIO's products are OEM'd through JAC, while Li Auto has its own factories.
Li Auto's model is more costly in the early stages of investment, but is more effective in controlling costs and improving gross margins in the later stages.
Li Auto may be able to achieve profitability sooner than NIO through its tight cost control.
The ability to see profitability is probably a big reason why the capital markets are interested in Li Auto.
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