Chinese EV maker Li Auto shares surged 28.25 percent to close at $23.38 on Wednesday, a record high since its IPO, pushing its market capitalization to $19.55 billion.
Its rival NIO also surged 14.57 percent to $20.44 on Wednesday, a record high, giving it a total market capitalization of $24.2 billion.
On July 30, Li Auto went public on the Nasdaq under the ticker symbol "LI".
On the first day of trading, Li Auto rose by more than 50%, reaching a high of $17.50. By the end of the day, Li Auto's total market capitalization had reached $13.92 billion.
Li Auto market cap approaches NIO, why is it favored by capital markets?
Li Auto was founded in 2015, since its inception, it wants to build mid-sized SUVs without no mileage anxiety, so unlike other new car-building companies, Li Auto is focused on range extended technology.
In December 2019, Li Auto's first production model, the Li ONE, began deliveries to customers, priced at RMB 328,000.
As of June 30, 2020, Li Auto has delivered over 10,400 Li ONE units.
In 2022, Li Auto will launch its second range extended electric vehicle and plans to realize to L4 level autonomous driving by 2024.
After its IPO, Meituan Dianping and its founder Wang Xing replaced Li Xiang, the founder of Li Auto, as the largest shareholder.
However, Li Xiang still has the highest voting power at 72.7 percent, compared to 8.3 percent for Wang Xing and Meituan.
Li Auto and NIO are the only two Chinese EV startups that have gone public so far, and both chose to go public 7-8 months after the launch of their first mass-produced vehicles.
Li Auto and NIO have many similarities and differences, and a "contest" between them is inevitable.
What is the difference between NIO, Li Auto and Xpeng? Financials tell everything
According to Ping An Securities, Li Auto and NIO's delivery trajectory has certain similarities, and the distribution of target cities are mainly first- and second-tier cities, but Li Auto's profitability is significantly better than NIO's under the same delivery scale.
Compared to NIO, Li Auto is perceived to be "very economical", so Li Auto is believed to be effective in controlling costs, which has become one of its "killer weapons" in the capital market, i.e. its gross margin.
The prospectus shows that in the first quarter of 2020, Li Auto will achieve revenue of $852 million, gross profit of $68.3 million, and gross margin of about 8%.
By comparison, NIO began delivering its first production car in December 2017, but gross margins only turned positive for the first time in the fourth quarter of 2018, and only at 0.4%.
However, in terms of industry trends, Li Auto, which focuses on developing add-on technology, is not the mainstream of future development, and with falling battery costs and improved infrastructure, the current range and cost advantages of add-on vehicles over pure trams may no longer exist.
Ping An Securities said that in the long run, Li Auto needs to explore more diversified product routes to get rid of its reliance on a single technology route.
