NIO, Li Auto, and XPeng have all released their third-quarter financial results recently. They have achieved significant year-on-year and chain-over-quarter growth in delivery volume and revenue, and their gross margins have risen quickly.
The following are comments from China's top investment bank, CICC.
NIO, Li Auto, and XPeng all achieved record quarterly sales of 12,270, 9,050, and 8,636 units respectively, with QoQ growth rates of 20.0%, 35.5%, and 159.2% respectively.
NIO ES6 has been China's electric SUV market champion for 13 consecutive months, and Li ONE has been the new energy medium- and large-sized SUV market champion for 10 consecutive months, reflecting the increasing product recognition of China's new car-making force.
The average selling price of NIO, Li Auto and XPeng are RMB 350,000, RMB 285,000 and RMB 221,000 respectively.
Driven by the increase in sales of higher-priced models, the average selling price of NIO and XPeng increased by 3.6% and 32.0% YoY respectively.
The gross profit of NIO and Li Auto was RMB51,000 and RMB56,000 respectively, up 54.9% and 45.7% YoY.
XPeng's gross profit turned around from a loss of RMB 0.9 million in the second quarter to a profit of RMB 0.7 million in the third quarter.
Both NIO and Li Auto's management noted during the results conference that October's order intake was a new record.
Their management's sales guidance for the fourth quarter is also optimistic, with NIO and Li Auto at 16,500-17,000 and 11,000-12,000 units, respectively.
Their gross margins are improving faster, they continue to improve expense control, and they have a strong cash position.
Gross margins for NIO, Li Auto, and XPeng were 12.9 percent, 19.8 percent, and 4.6 percent in the third quarter, up 4.8, 6.5, and 9.9 percentage points respectively from the previous quarter.
With XPeng's gross margin turning positive, the gross margins of these three new carmakers are all positive and in an upward trend.
The main reasons behind this are lower battery pack and material costs, expense control and improved sales volume, driving down per-vehicle expenses.
Li Auto's one-time rebate from suppliers contributed about 3 percentage points to its gross margin, and it still grew nearly 4 percentage points from the previous quarter.
In the fourth quarter, scale effects are expected to further drive down unit costs as new Chinese carmakers are better aligned with overall supply chain capacity.
All three companies reported cash and cash equivalents of around $3 billion in the third quarter, which will effectively support sales network expansion and investment in research and development of new models and technologies.
NIO said that in the fourth quarter, it will recognize RMB 120 million in points revenue from the sale of new energy vehicles in 2019, and expects RMB 480 million to RMB 600 million in points revenue next year.
What is the difference between NIO, Li Auto and XPeng in terms of Q3 results?
We judge that China's credit points policy may be gradually tightened, the value of new energy points is highlighted and the transaction price is rising, which is expected to continue to increase the gross profit contribution to the non-vehicle business of new car makers.
All of them have developed their own intelligent driving technology, and their new model plans appear.
In the next phase of research and development, NIO is currently accelerating the development of its second-generation technology platform, NP2.0, which is expected to be the industry's most advanced mass-produced automated driving system.
Li Auto expects to triple its autopilot team in the first half of 2021, release a fully automated parking system in 2021, and gradually achieve L4 level autopilot in 2022.
XPeng plans to launch XPILOT3.0 OTA in early 2021 and test the full-stack self-developed NGP navigation and driving system on a 2,000-kilometer highway between Guangzhou and Beijing in the first quarter of next year.
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In terms of new models, NIO hopes to create a more complete product layout, and will soon release a sedan, and still has a sedan in development.
Li Auto expects to deliver a new model every year from 2022 onwards, and will continue to feature one model with one configuration.
Valuation Recommendation
In the third quarter, China's new energy vehicle market has gradually emerged from the impact of less subsidy and Covid-19, and the penetration rate of the new energy vehicle market has been increasing.
In the medium term, the gradual release of production capacity by the supply chain of new carmakers in China will strengthen the scale effect.
In the long term, the release of services such as intelligent driving and other services revenue is expected to fulfill the corresponding expectations.
In terms of investment advice, the market sentiment is high, and the stock price of the new car-making force may have retracement pressure in the short term, but the long-term fundamentals are positive, it is recommended to focus on NIO, Li Auto, and Tesla (not covered).
Chinese investment bank CICC raises NIO price target by 206% to $52
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