Chinese EV Producers Report Strong Earnings as Demand Surges

By Mariliana Fotopoulou Wednesday, November 18, 2020

The demand for affordable electric vehicles (EV) has continued to increase in the third quarter, according to three major China-based manufacturers. Strong numbers have provided carmakers with a solid base to significantly increase its production capacity going into 2021.

NIO corporate headquarters in Silicon Valley.

NIO Reports a Record-Breaking Quarter

Chinese electric carmaker NIO has been one of the favorite picks among investors on the back of gains of 1,059% since the start of the year. As far as the third-quarter numbers are concerned, NIO reported $666.6 million in revenue to top consensus estimates by 6%.

This is 159% higher compared to a year ago and north of the second-quarter revenue of $526.4 million. The carmaker reported an operating income of -$139.3 million and $3.3 billion in cash and cash equivalents.

Higher numbers came as a direct result of the increased production output. NIO shipped more than 5,000 electric vehicles for the first time last month, 2,695 of which were the ES6 model, 1,477 units of the ES8 model, as well as 883 units of the EC6 model.

Li Bin, Chief Executive of NIO, suggested that the company would leverage its collaboration with JAC motors to boost its yearly output capacity to 150,000 vehicles in 2021 and up to 300,000 units by the end of 2021 and into 2022.

“Our order growth momentum continued steadfastly, driven by the expanded brand awareness, growing user base, extended sales network, and most importantly, the compelling products and technologies. Meanwhile, our continuous improvement of operational efficiency, cash flow and balance sheet has laid a solid foundation for our future sustainable growth and decisive investments in technologies," said Steven Wei Feng, NIO’s chief financial officer.

Going into the final quarter of the year, NIO predicted to ship between 16,500 and 17,000 units. The company also estimated revenue between $921.8 million and $947.9 million in Q4.

Shares of NIO ticked more than 1.5% higher in after-hours trading.

Xpeng Share Price Erupts on Strong Q3 Earnings Report

Shares of Xpeng Motors climbed by 33.4% to $44.73 after the company reported strong Q3 earnings.

In the report, Xpeng Motors said its revenue was ¥1.99 billion ($303 million) in the third quarter, up 342% compared to the same period last year, driven by an increase in demand for its vehicles.

Deliveries climbed by 266% to 8,578 units, compared to Q3 2019. Additionally, 6,210 of total shipments included Xpeng’s P7 sedans, its second mass-production unit and a direct competitor to Tesla’s Model 3.

Xpeng said its Q3 loss climbed to ¥1.15 billion ($175 million), compared to ¥776 million ($118 million) last year, while its gross margin declined to 4.6% from -10.1% last year. The carmaker’s operating costs increased by 60% quarter-over-quarter to ¥1.8 billion ($274.5 million).

The Chinese carmaker has been developing its promising driver-assistance technology and is becoming a more serious rival to other electric vehicle manufacturers such as Tesla and others.

He Xiaopeng, Chief Executive of Xpeng, said the company’s aim is to produce the most sophisticated self-driving solution in China. Xpeng is fully focused on the research and development of its self-driving system, which is key to developing a solution that will make it more advanced compared to its competitors, according to Xiaopeng.

Analysts Upgrade Li Auto

Shares of Li Auto are trading higher this week, driven by strong Q3 results and bullish analyst comments. Li Auto posted net losses of ¥106.9 million ($16.30 million), up 42% compared to the second quarter, due to share-based compensation costs related to staff stock options.

The company reported a stronger-than-expected revenue in the third quarter, up 28.9% compared to the previous quarter. Li Auto’s deliveries climbed by almost a third to 8,660 units in Q3.

The company reported a non-GAAP net income of ¥16 million ($2.44 million) in the third quarter, boosted by cost cuts and strong operating efficiency, said analysts of the Chinese financial services company.

In total, Li Auto shipped 21,852 vehicles for the first ten months of 2020. The company’s Li One model was the top-selling electric SUV in the country over the past two months, data by China Automotive Technology and Research Center (CATARC) showed.

Investment banking company Citi boosted Li Auto’s rating to “Buy” from “Hold” and elevated its target price by 68% to $45.60 after the automaker reported better-than-expected revenues and a gross margin of 19.8%, compared to 13.7% in the previous quarter.

Furthermore, China International Capital Corporation (CICC) also lifted Li Auto’s price target to $40.00 from $21.50 in anticipation of a stronger margin in 2021.

Summary

Chinese electric carmakers — namely NIO, Xpeng Motors, and Li Auto — all posted strong earnings results in the third quarter, driven by an increase in demand for electric vehicles.

About the Author


Headshot for author Mariliana Fotopoulou

Mariliana has an MSC in consumer analytics and business strategy. She has a special interest in fast-moving industries and big data.

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