NIO vs XPeng: Two EV Companies With Huge Potential

·5 min read

Electric vehicles (EV) are increasingly being adopted around the world. According to a CNBC report, China has invested $60 billion into various initiatives to drive the growth of the EV industry, and is looking at going fully electric, or using more hybrid vehicles by 2035.

Using the TipRanks Stock Comparison tool, we will compare two Chinese EV manufacturing companies, NIO and Xpeng, and see how Wall Street analysts feel about these stocks.

EV car stocks comparison
EV car stocks comparison

NIO (NIO)

NIO is a Chinese manufacturer of premium electric vehicles headquartered in Shanghai that uses proprietary autonomous driving (AD) technology in its vehicles and has launched its Battery-as-a-Service (BaaS), which allows buyers to purchase EVs and separately subscribe to the usage of battery packs.

The company announced preliminary unaudited first-quarter results last week with revenues jumping 481.8% year-on-year to $1,218.3 million, while net losses narrowed to $68.8 million, a decrease of 73.3% year-on-year. NIO’s non-GAAP adjusted loss per American Depository Share (ADS) was $0.04 in 1Q.

Vehicle sales increased 489.8% year-on-year to $1,130.3 million while vehicle deliveries also grew 422.7% year-on-year to 20,060. Vehicle sales accounted for 93% of the company’s total revenues in 1Q, with the balance coming from energy and service packages, and other products and services bundled with the sale of vehicles.

NIO stated that because of supply-chain constraints due to chip shortages, the company is expecting vehicle deliveries of between 21,000 and 22,000 in the second quarter. The company has forecast revenues of between $1,243.3 million and $1,298 million, indicating year-on-year growth of 119% to 128.7%.

The company is looking at increasing its production capacity by building a new plant in Xinqiao Industrial Park in Hefei. Last month, NIO started deploying the Power Swap Station 2.0. This second-generation Power Swap Station can carry up to 13 battery packs and will shorten the time required for battery swapping, thus increasing the service capacity to 312 swaps each day. (See NIO stock analysis on TipRanks)

Over the long term, NIO is looking at expanding its sales and service network to improve operational efficiency and enhance brand influence.

On May 3, Morgan Stanley analyst Tim Hsiao reiterated a Buy and a price target of $64 (73% upside potential) on the stock. The analyst is optimistic that the delivery of 7,102 vehicles in April indicates that NIO is well on track to achieve its delivery targets in 2Q. Hsiao believes that rising demand for the company’s vehicles would enable NIO to have higher operating flexibility for more elaborate marketing campaigns.

Shares of NIO have tanked around 35% in the past three months as investors are wary about the stock due to rising competition from other EV makers.

Overall, consensus among analysts is a Moderate Buy based on 7 Buys and 3 Holds. The average analyst price target of $60.04 indicates upside potential of around 63% from current levels.

XPeng (XPEV)

XPeng is another Chinese EV manufacturer that targets the mid-to-high-end segment of the Chinese passenger vehicles market. The company is expected to report 1Q results on May 13.

XPeng released its vehicle delivery numbers for April earlier this month, which showed a 285% year-on-year jump to 5,147 vehicles. As of April 30, XPeng had delivered 18,487 vehicles year-to-date, reflecting a year-on-year rise of 413%.

Of the 5,147 vehicles delivered in April, 2,995 were of XPeng’s sports smart sedan, while 2,152 G3 sports utility vehicles (SUV) were delivered.

XPeng is looking at expanding its EV portfolio with newer models and has started the delivery of the sports sedan P7 Wing edition and the lithium iron phosphate (LFP) battery-powered SUV G3. The company will also begin delivering its LFP battery-powered P7 this month.

XPeng stated at its 4Q earnings call that while it expects the LFP battery supply issue to be resolved by the third quarter, it could continue to face supply challenges in the first half of this year.

The company is also looking at launching a sales drive in the third quarter for the P5 sedan, equipped with light detection and ranging (LiDAR) sensors. Deliveries of the P5 are expected to start in the fourth quarter.

XPeng is ramping up its production capacity in China and is looking at building an EV manufacturing factory in Wuhan that is expected to have a capacity of 100,000 units each year. Furthermore, XPeng is also expanding its sales and services network through a strategic partnership agreement with Zhongsheng Group that will invest in and operate Xpeng branded dealership outlets in China.

In the first quarter, XPeng has forecast delivery of 12,500 vehicles, indicating a year-on-year jump of 450%. However, the company delivered its lowest number of vehicles in February due to the seasonality factor.

XPeng expects revenues of RMB 2.6 billion ($404.2 million) in the first quarter, an increase of 531% year-on-year.

In 4Q, the company reported revenues of $437 million, up 345.5% year-on-year, while vehicle sales revenue reached $419.2 million, an increase of 375.7% year-on-year. Vehicle deliveries in 4Q jumped 302.9% year-on-year to 12,964.

XPeng reported a non-GAAP net loss of $0.15 per share in 4Q. (See XPeng stock analysis on TipRanks)

Last month, Merrill Lynch analyst Ming-Hsun Lee reiterated a Buy and a price target of $53.10 (99% upside potential) on the stock. The analyst expects the company to see an uptick in sales volumes because of its advanced autonomous driving technology and the competitiveness of its EVs in the Chinese market.

However, shares of XPEV have fallen around 25% in the past month.

Overall, consensus among analysts is a Strong Buy based on 6 unanimous Buys. The average analyst price target of $48.68 indicates upside potential of approximately 82% from current levels.

Bottom Line

The rising demand for electric vehicles in China and the Chinese Government’s initiatives to go green when it comes to transportation could continue to benefit both NIO and XPeng in the years ahead. Both stocks appear to indicate significant upside potential over the next 12 months, according to analysts on the Street.

That being said, currently, analysts appear to be more bullish on XPeng's long-term growth prospects.

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