In the first part of this article, we tackled about the history of the Chinese EV market and what drove the market’s growth in the country. Below we will take a closer look at our two focus companies, NIO and Xpeng, and look at what makes them the most important EV enterprises, even when there are others worthy of consideration within China.

The company was first founded back in 2014 by Li Bin (aka William Li), who currently serves as Chairman and CEO, along with Qin Lihong who is now CFO. William Li came from a very humble farming family, rising up to gain his bachelor’s from the prestigious Peking University and going on to form his own company Bitauto Holdings Ltd in 2000. This company was sold in 2013.

The founding of NIO attracted investment from some of the biggest names in Chinese technology, including Tencent, Baidu, Lenovo and others, including Singapore’s Temasek. Sales of their models kicked off modestly in 2018, but greatly picked up in 2019 with more than 29,000 units sold, up from 8,111 in 2018. 2020 was a worse year for obvious reasons, with NIO feeling the effects of the pandemic. The company has still managed to deliver more than 43,000 vehicles in 2020, however, according to Nasdaq.com

Financials:

Total Revenue: 

2018 – $764,609,337

2019 – $1,208,404,697

TTM – $1,168,374,893

NIO currently offers 3 production models, all electric SUVs. The earliest production model is the ES8, which started its run in 2018. Below is a summary:

NIO ES8 (2018-Present)

Style – Full-size SUV

5 doors, seats up to 7

Up to 100kWh Lithium-ion battery

NIO ES6 (2019-Present)

Style – Mid-size SUV

5 doors, seats up to 5

Up to 100kWh Lithium-ion battery

NIO EC6 (2020-Present)

Style – Mid-size SUV

5 doors, seats up to 5

Up to 100kWh Lithium-ion battery

Two more models, the ET7 mid-size sedan and the ET5 compact sedan are both scheduled to commence production in 2021. In 2022 the company is planning a further SUV, the ES3, and a minivan that can seat up to 8, the EF9.

Two things really set NIO apart when it comes to technology. The first is the use of battery swapping instead of a network of charging stations. Even though many compare NIO to Tesla, this is an area where the two companies differ greatly. Tesla has never deployed battery swapping on a large scale, though it has tried it. To date, NIO has constructed some 131 battery-swap stations along several key highways, including the G4 connecting Beijing to the Pearl River Delta, and also the G2 that connects Beijing and Shanghai. Another 143 battery swap stations have been added in 64 Chinese cities, and apparently fresh batteries can be swapped out in just 5 minutes.

The second area of distinction that NIO enjoys is with its autonomous driving technology. The so-called NIO Pilot system is the current level-2 autonomous system used by NIO, first launched with the ES8. It is essentially a suite of ADAS features that includes lane keeping, adaptive cruise control, lane departure warning, automatic emergency braking, highway pilot, traffic jam pilot and more. NIO were the first to make use of Mobileye’s EyeQ4 vision chip. Among NIO’s 2022 model year released will include a complete level-4 self-driving system, which is also being developed in conjunction with Mobileye.

After starting at $9.90 in September 2018, the NIO (NIO) price suffered through 2019, dropping to a low point of $1.51 in October 2019. The second half of 2020, however, has seen a meteoric rise as the price rose from its already higher rate of $14.98 in July 2020 all the way up to $58.92 as of January 8, 2021.

After a rocky year in sales during 2021, NIO nonetheless has withstood the maelstrom brought by the pandemic and come through the experience stronger than ever. They still managed to deliver more than 43,000 vehicles in 2020, proving that their production capacity was on the up.

Even after just unveiling their improved 100kWh battery back in November 2020, it is thought that as an extra push to boost their standing within the EV market in 2021, they will soon announce an even more powerful 150kWh battery offering greater range still before needing to swap. This coupled with the production of their much-anticipated sedan model in 2021 means there’s a lot to watch when looking for new car deals.

While there is a growing consensus that NIO might be overstretched and overvalued right now, there are other unique points of distinction that make it a good bet to hold on to if you already own shares. One thing is its Battery as a Service (BaaS) model, which offers huge savings on NIO models when buying in exchange for a subscription model for batteries. For example, the ES8 with the 100kWH battery is $81,230 MSRP. With local subsidies and the BaaS discount, buyers in China can get the same ES8 for just under $58,000. Users then spend $228 a month for on-demand 100kWh battery swapping as and when they need.

In all, the future has many plus points, but the pressure is on NIO now to produce and sell their products. With investment and credit stretched to the maximum, they will have to now focus on delivering their promises. Even a small deviation from the promised schedule could spell difficult times for the company ahead.

Despite some thinking of Xpeng — or Xiaopeng Motors — as a junior competitor of NIO, it has actually been around for about the same amount of time. The company was founded in 2014 by Xia Heng (aka Henry Xia) and He Tao, both of whom previously worked for Guangzhou-based automotive giant GAC. Their particular expertise lay in R&D, and they wanted to form a new enterprise that would push the boundaries of electrified, self-driving machines.

The company was initially supported and backed by the business’s namesake, He Xiaopeng, formerly of UCWeb and then Alibaba. He Xiaopeng, along with many other billionaire and corporate backers, put together initial investment to get Xpeng off the ground. By 2018, Xpeng launched its first production model, the G3 SUV, and then a second model in 2019, the P7 sedan.

Xpeng has touted a number of successes with its production capacity, most notably hitting the milestone of its 10,000^th P7 sedan rolling off the production line at their plant in Zhaoqing. What’s really impressive is Xpeng’s claim that these 10,000 units were manufactured within just 160 days of the factory opening up.

Total sales in 2020 closed at 27,041, an increase of 112 percent on the previous year. It was the launch of the P7 sedan that has made all the difference, since it is being far better received than the G3 SUV model. They’re now even exporting models to Norway.

Financials:

Total Revenue: 

2018 – $1,498,903

2019 – $358,467,266

TTM – $323,157,942

Xpeng currently only offers the two models that we have mentioned above:

Xpeng G3 (2018-Present)

Style: Mid-size SUV / Crossover

5 doors, seats up to 5

Up to 65.5kWh Lithium-ion battery

Xpeng P7 (2020-Present)

Style: Fastback sedan

4 doors, seats up to 5

80.87kWh Lithium-ion battery

There has been a strong degree of controversy surrounding Xpeng’s technology, particularly in the realm of its autonomous driving features. It is all currently just accusation, but there are been two notable cases brought against Xpeng, the first in 2018 and another in 2019. The first was the United States Department of Justice charging an ex-employee of Apple with stealing details on Apple’s autonomous car project in order to use as leverage to gain a job at Xpeng.

In 2019, a further case was brought by Tesla as one of their former employees, Cao Guangzhi, was accused of stealing the Autopilot source code in order to bring it to Xpeng. Cao admitted uploading the source code before he left the company, but denies that it was part of any theft on behalf of Xpeng. April 2020 saw fresh lawsuit filings brought by Tesla in what appears to be an ongoing tale.

In better news, however, Xpeng recently announced that they have partnered with Livox to supply LiDAR (light detection and ranging) technology in its 2021 production models. This will make it the first mass-produced Smart-EV to feature LiDAR, boosting the efficiency and reliability of Xpeng’s own XPILOT architecture. It will do this by increasing the detection range of its Horiz sensor. The new range will be 150m, allowing the XPILOT system to detect any obstacle on the road. A new rotating-mirror technology allows for an increased point cloud density and therefore faster detection of even small on-road objects, including things as small as traffic cones.

The path of the Xpeng (XPEV) stock price hasn’t been as “upward” as NIO in the past year, but it has been doing well. Since its initial price of $22.79 back in August 2020, it shot up to $64.28 in November 2020, before settling in the low 40s in December, and now experiencing a shallow climb through January, settling at the time of writing at $45.45.

While increases in stock price appear to have leveled off, there is still a lot of speculation that Xpeng remains a great long-term investment option. Not only has it doubled overall since the summer of 2020, but the long-term viability of the company value really depends on whether or not the EV market in China will continue to develop. The signs that we have shown already in this article, generally point to that being the case.

Xpeng has some challenges to overcome in terms of their international reputation, with the law suits of Tesla looming over them and accusations of intellectual property theft flying. If they come through those difficulties, however, then the brand could pose a serious international challenge to the likes of Tesla. For the time-being however, the burgeoning EV market in China should provide a solid foundation from which to launch themselves upward.

Other Chinese EV companies competing in the premium space include Nanjing-based Byton and Tianjin-based Iconiq. While both of these companies are presenting further attractive EV models like the Byton M-Byte SUV, for instance, they aren’t quite matching the performance of NIO and Xpeng in the current market, both having suffered setbacks during the pandemic. Companies like Byton and Iconiq do, however, represent a great upsurge within China of enterprises vying to take on the likes of Tesla for the global EV crown.

In addition, both NIO and Xpeng are pushing harder at the frontiers of cutting-edge technology to help make cars genuinely autonomous, both working on the integration of industry-first technologies in China (e.g., LiDAR) into new models at a faster pace than their other premium competitors.

With Warren Buffet’s chosen EV enterprise, BYD, outselling both NIO and Xpeng, why are we so interested in these two companies in the first place? The main reason is that these two occupy the premium EV space, much more like Tesla. BYD is a mass-production name that isn’t associated with the same luxury space that NIO and Xpeng are vying for.

Both have significant big-tech backers, and both are at a very similar stage of development. Xpeng was the first to launch a sedan into the marketplace however, despite its smaller range. The success of the P7 suggests that NIO’s sedan, the ET7, could also be well received in a market that is embracing the Xpeng electric sedan with gusto.

The two companies, despite a similar age and occupying the same market space, have fundamentally different approaches to their business, however. Xpeng is focused on vertical integration, bringing all production to their in-house smart factory, whereas NIO is still outsourcing production. Xpeng is taking a similar approach to Tesla, building its network of fast charging stations, whereas NIO is exploring the battery swap model. These differences could spell big difference further down the road, depending on which model catches on more effectively in the domestic China market and internationally.

US companies are undoubtedly watching the progress of the Chinese EV sector. One thing that likely concerns them is the level of government intervention that the Chinese market has experienced, which has provided an enormous spring board for these companies to rise up and achieve a status close to other EV enterprises that have been in business for much longer. They haven’t reached the level of sales that Tesla has, of course, but they have come a long way in a short time.

The US government under a new president like Joe Biden is perhaps more likely to offer support and incentives to boost the EV market in the US, but it remains to be seen. China’s trademark speed at implementing new infrastructure means that the future likely holds more and more rapid growth within China.

Investors are going crazy for EV stocks, and multiple opportunities with Chinese companies could make a lot of investors rich in a relatively short period of time. As the market becomes increasingly saturated, however, the power of each individual brand may wane somewhat. Even China’s market, which was previously prone to saturation of home-grown brands, is now becoming increasingly discerning in its tastes, which may see certain brands culled in favor of a select few that offer something really special. NIO and Xpeng are well placed to be among them, being as they are so close to the cutting edge.

The CPC has little to worry, as ever, from foreign competition. China has always done a lot to support domestic brands against foreign competition, and the sheer size of the Chinese domestic market means that even hindered foreign brands can find a sizeable market of elite and upper middle-class Chinese who want the international brand come what may. In the meantime, the bulk of the Chinese population will enjoy domestic brands, even premium ones. This is the typical story of local vs. international technology in China, and there’s little to show that the EV market will be any different.

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