Chinese EV stocks are some of the best long-term value buys for high-growth investors.
|NIO (NASDAQ: NIO)
|Li Auto (NASDAQ: LI)
|Xpeng (NASDAQ: XPEV)
|BYD (OTC: BYDDY)
|Kandi Technologies (NASDAQ: KNDI)
Chinese EV Market Overview
China is the world’s largest automotive market, with a population of over 1.4 billion people and a rapidly growing middle class. The Chinese government has been aggressively promoting electric vehicles (EVs) as a way to reduce pollution and dependence on foreign oil. As a result, the Chinese EV market has grown rapidly in recent years, with sales increasing by over 300% in 2022 alone.
The Chinese EV market is dominated by a few major players, including BYD Auto, NIO, Xpeng, Li Auto, and WM Motor. These companies have been able to gain market share by offering high-quality EVs at competitive prices. They also benefit from strong government support, including subsidies and tax incentives.
Overall, the Chinese EV market is poised for continued growth in the coming years, driven by strong government support, increasing consumer demand, and the ongoing transition to a low-carbon economy. As such, investors looking to gain exposure to the EV market should consider investing in Chinese EV stocks.
Top 5 Chinese EV Stocks
In this article, we’ll go over the best Chinese EV stocks to buy. Here is a list of my Chinese electric car stock recommendations:
- Nio (NASDAQ: NIO)
- Li Auto (NASDAQ: Li)
- Xpeng (NASDAQ: SPEV)
- Kandi (NASDAQ: KNDI)
- BYD (OTCMKTS: BYDDF)
Nio (NASDAQ: NIO)
Nio is the largest electric car company in China by market cap. Billionaire CEO William Li founded NIO in 2014 to create a forward-thinking electric vehicle company that runs on incredible software and technology.
Many investors considered NIO the “Tesla of China” in 2021 and sent NIO shares to as high as $65 before crashing from all-time highs.
NIO stands out amongst its peers with its attractive vehicles and cost-saving “battery swap” technology. Customers can “rent” their battery and swap it in the future to help lower the cost of the initial EV purchase.
When your NIO battery runs low, Nio customers can drive to a battery swap station and replace the old battery with a newly charged one. The whole revolutionary process takes just 3 minutes to complete.
NIO has a long way to go because the company has only sold a cumulative 364k vehicles since inception. Annual Revenue has climbed over the years but the company isn’t profitable.
Nio Annual Revenue Numbers
- 2022: $7.1 billion
- 2021: $5.6 billion
- 2020: $2.4 billion
- 2019: $1.1 billion
- 2018: $720 million
The good news is that NIO deliveries continue soaring since demand for NIO’s electric vehicles remain high.
Nio Annual Deliveries
- 2023: 75,023 (YTD)
- 2022: 122,486
- 2021: 91,429
- 2020: 43,728
- 2019: 20,565
- 2018: 11,348
The biggest problem with NIO is that the company has negative profit margins, falling gross margins, and has yet to turn a profit.
NIO’s gross margins fell to 10.8% in 2022 and the company lost nearly $18,000 per electric car delivered. Vehicle margins shrunk to just 5.1% in Q1 2023 (down from 18.1% in Q1 2023) and gross margins hit a paltry 1.5% during the same quarter.
Net losses reached $2.2 billion in 2022 and it’s unclear whether NIO will become profitable anytime soon. With only $5.5 billion in cash on its balance sheet, NIO may be forced to raise cash via a stock sale or take on extra debt.
NIO stock looks like a better buy near its 52-week low of $7. I’m not touching the stock right now.
NIO Stock Forecast: SELL
Li Auto (NASdAQ: Li)
Li Auto Inc. is a Chinese electric vehicle manufacturer that focuses on developing extended-range electric vehicles. The company’s flagship product is the Li ONE, a six-seat electric SUV that has a range of over 800 kilometers. Li Auto has been growing rapidly in the Chinese market and has a market capitalization of over $30 billion.
Xpeng (NASDAQ: XPEV)
Xpeng Inc. is a Chinese electric vehicle manufacturer that specializes in smart EVs that are designed for the Chinese market. The company has a range of electric vehicles, including the G3 SUV and the P7 sedan. Xpeng has been gaining traction in the Chinese market thanks to its innovative technology and competitive pricing. The company has a market capitalization of over $30 billion.
The company is rapidly increasing deliveries at a robust pace with 2,223 g3 and p7 deliveries in February 2021 alone. Combined January and February deliveries equal a 557% YoY increase.
Xpeng continues to build out its supercharger network like Tesla and operates 135 branded super charging stations as of Q3 2020.
What makes Xpeng unique is its focus on smart EV technology, self-driving, and its fast growing super charging station networks.
XPEV stock currently trades at a P/S ratio of 20 that’s very similar to Tesla. The company will report Q4 2020 and full year results on March 8th and I’ll be sure to update this article with a more accurate valuation of the company.
At just a $21 billion market cap, Xpeng looks undervalued as a long term investment.
BYD (OTCMKTS: BYDDY)
BYD Co Ltd. is a Chinese electric vehicle manufacturer that has been in the industry for over 20 years. The company has a range of electric vehicles, including the Tang SUV and the Qin sedan. BYD has been making strides in the EV industry with its innovative battery technology and has a market capitalization of over $80 billion.
Kandi (NASDAQ: KNDI)
Risk Factors Influencing Chinese EV Stocks
Chinese EV stocks are influenced by various factors, including:
The Chinese government has been actively promoting the use of electric vehicles to reduce pollution and dependence on imported oil. Incentives such as tax breaks, subsidies, and license plate quotas have been put in place to encourage the production and purchase of EVs. However, changes in government policies can have a significant impact on the EV market, and investors must keep up with the latest developments.
Battery technology is a crucial factor in the success of EVs. Chinese EV companies that can develop and produce high-quality batteries at a low cost have a competitive advantage. Advances in battery technology, such as solid-state batteries, could further improve the performance and range of EVs, making them more appealing to consumers.
The Chinese EV market is highly competitive, with numerous domestic and international players vying for market share. Established companies such as BYD, NIO, and Xpeng face competition from new entrants such as Li Auto and WM Motor. Investors must consider the competitive landscape and the companies’ ability to differentiate themselves and succeed in the market.
Ultimately, the success of Chinese EV stocks depends on consumer demand. Factors such as price, range, performance, and charging infrastructure all influence consumers’ purchasing decisions. Companies that can offer attractive EV models that meet consumer needs and preferences are more likely to succeed in the market.
Global trends, such as the shift towards renewable energy and the increasing demand for sustainable transportation, also influence the Chinese EV market. Investors must consider the potential impact of these trends on the demand for EVs and the companies’ ability to meet this demand.
Are Chinese EV Stocks a Good Investment?
China is the world’s #1 electric car market due to its massive population and economy. However, China faces a lot of environmental challenges due to its huge population.
Smog and dust particles fill the air and can cause health problems. In major cities like Beijing, the air is so polluted that it’s the equivalent of smoking 40 cigarettes a day.
Can EVs save China from its dangerous pollution problem? EVs fight pollution from the environment since ICE vehicles cause around 80% of a country’s carbon emissions.
Chinese President Xi Jinping set a goal to hit peak carbon emissions by 2030 and zero Carbon emissions by 2060.
Moving China from ICE vehicles to EVs is one of the best ways for China to reduce its carbon emissions and improve its green footprint.
That means Chinese EV makers will receive a lot of demand for their vehicles once more Chinese consumers make the switch.
EV sales currently make up 19% of the overall auto market in China and total EV sales reached a whopping 320,000 units in October 2021.
EV sales will continue growing and it’s only a matter of time until EV overtakes ICE vehicles in China.