EV Deliveries: Winners And Losers

Article Summary

Many EV players have announced their June and Q2 delivery numbers over the last couple of days. In this article, we will take a look at a couple of individual companies and what their deliveries in June and Q2 could mean for the future.

What EV Deliveries Looked Like For A Couple Of Key Players

We will take a closer look at the deliveries reported by BYD Company Limited (OTCPK:BYDDY) (OTCPK:BYDDF), Li Auto (LI), NIO Inc. (NIO), Tesla, Inc. (TSLA), and XPeng Inc. (XPEV).

Starting with BYD, the first player had an excellent June and second quarter. A total of 253,000 new energy vehicles were sold during June, for an annualized pace of more than 3 million. BYD does not sell "old" energy vehicles any longer, as its entire model lineup consists of pure EVs and plug-in hybrid vehicles. Both of these segments, which are roughly split 50:50 (pure EV sales are slightly higher, though), keep growing rapidly, as both roughly doubled over the last year. Deliveries were up on a month-to-month basis as well, in both segments, indicating that the company remains on a growth track and that the year-over-year growth was not driven by weak results last year when China was still impacted by COVID lockdowns.

While BYD is mostly focused on its home market China - the most important EV market in the world - the company keeps expanding in foreign markets. In June, BYD sold around 11,000 vehicles outside of China, for a pace well north of 100,000 - that's way more than the total sales of many EV players, including the likes of Lucid (LCID), Rivian (RIVN), and so on. While BYD and its Chinese peers remain highly dependent on their (fast-growing) home market, they keep expanding internationally, and it looks like the Chinese EV industry is here to stay as a global player.

BYD's sales of commercial vehicles (electricity-powered) rose rapidly as well, although from a low absolute level. Relative to the much higher passenger vehicle sales, commercial vehicle sales aren't too important, making up around 0.6% of total sales.

So far, BYD has sold 1.3 million EVs in 2023, the most by far among any company in the world, including legacy players and EV pureplays. The company aims for at least 3 million sales this year, and based on the hefty growth of 95% over the first half of this year, I believe that there is a very good chance that BYD will achieve its goal - not a lot of sequential growth is needed for that.

Li Auto is another Chinese EV player, with a model lineup that is mostly focused on plug-in hybrids. These are attractive for those with range anxiety and do thus address a market that is hard to reach for companies that solely sell BEVs. Consumers that live in areas where there is not a lot of charging infrastructure (yet) may prefer a vehicle that can use electricity when it is available, but that can also run on gasoline when charging the vehicle is impractical or impossible. With this approach, Li Auto is having a lot of success in the recent past: Deliveries totaled 33,000 vehicles in June, which was up by a hefty 150% year over year, for the best growth rate among the EV companies covered in this report. Sales also were up by a pretty nice 15% on a month-to-month basis, indicating that the company remains on a growth track - even higher sales during the second half of the current year thus seem likely to me (although that is not guaranteed, of course). With this sales number, Li Auto also beat its own delivery forecast for the second quarter handsomely, which naturally is great - a company that underpromises and over-delivers is doing something right. Other EV players that have to reduce their guidance and/or that miss it should take note.

Li Auto believes that its deliveries will rise to 40,000 vehicles per month towards the end of the year, which seems achievable to me, based on the current deliveries run rate and the sequential growth rate. With a roughly 500,000 vehicles per year run rate, Li Auto would be a major force in the EV space if this plays out.

NIO has had a rough couple of months, but its June deliveries were pretty solid. The company sold 11,000 vehicles in June, up by a hefty 74% month-to-month, but that was mainly due to weak sales in May. The run rate in June of around 130,000 vehicles is significantly below what NIO aimed for at the beginning of the year and is also below what management believes the run rate will look like at the end of the year. Unlike Li Auto, for example, NIO has thus had a hard time delivering on its goals. According to management, things will improve substantially during the second half of the year, due to new product launches such as the new version of the ET5 and the new ES8.

The next EV company in this article, Tesla, remains the undisputed king in the EV space in terms of market capitalization: With an $850 billion valuation, Tesla overshadows all EV peers and all legacy competitors. When it comes to deliveries, it is one of the largest EV players, but Tesla sells fewer vehicles than BYD - although at a higher average price. Deliveries totaled 470,000 during the second quarter or around 155,000 per month. That's roughly two-thirds of BYD's current delivery run rate. Tesla easily outperformed expectations, as its sales were higher than the highest Wall Street estimate - a fact that was rewarded by the market, as Tesla soared by 7% on Monday. Production was higher than Tesla's deliveries, meaning the company continued with a trend of growing its inventory. This hurts the company's cash generation, all else equal, but allows Tesla to serve demand without long waiting times for most of its vehicles. With this deliveries report, it seems pretty likely that Tesla will achieve its 1.8 million sales milestone for the current year, as that pencils out to around 450,000 vehicles per quarter - Tesla has proven that it is able to do that and even more.

The last company in this article is XPeng, another Chinese EV pureplay. It brands itself as a tech-focused company that puts a lot of value on advanced driving assistance systems and similar items in its EVs. XPeng sold 9,000 vehicles in June, which is the lowest number among the companies covered in this report. Still, XPeng showed solid month-to-month growth of 15% and outperformed its own guidance - which, again, is a positive sign. On the other side, deliveries unfortunately were down compared to the previous year, which is far from great - EV companies are growth companies, and since most of them aren't profitable yet, business growth is needed to eventually allow for profitability.

Which EV Company Is A Good Investment?

Let's start out by saying that the automobile industry, in general, is cyclical, capital intense, and margins aren't high in this space. There is a lot of competition both in the EV space and in the overall auto space. The auto industry thus is not among my favorite industries to invest in.

That being said, the EV space promises a lot of growth potential in the coming years, and EV pureplays that don't have any legacy business overhang should benefit substantially from said growth potential.

From a growth perspective, Tesla, BYD, and Li seem most attractive. Especially BYD and Li have shown massive growth in the recent past. Tesla is growing a little slower, but has the advantage of better-than-average margins and generates attractive cash flows relative to other EV pureplays. Looking at valuations, we see the following:

Note: BYD sales estimates are not available on YCharts, but according to Seeking Alpha's data, the company trades at 2.1x this year's revenue. There is a pretty clear disconnect between the valuation of Chinese EV players and the valuation of Tesla: Due to Tesla's profitability advantage and macro/geopolitical factors, a premium makes sense, but I believe that it shouldn't necessarily be this high - after all, Tesla is still highly dependent on China for both production and sales, thus TSLA is far from immune from macro or geopolitical risks.

Considering the absolute delivery numbers that these companies report, the relative growth rate, and the valuation, I believe that BYD seems like the most attractive choice right here. The fact that it is a major battery supplier and thus also benefits when other companies sell EVs is an advantage as well.

Takeaway

The EV industry continues to grow, but not all companies benefit equally. Li has shown excellent growth, although from a lower basis than Tesla and BYD. NIO and XPeng have some operational problems and aren't growing much right now, but both forecast improving results in the near term. While Tesla is the most profitable company, its pretty high valuation results in some risks. BYD looks best overall, I believe.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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