To The Moon

Price wars among EV conpanies!!

Like most new industries, eventually only a few companies would emerge victorious! A few EV companies (Lordstown Motors, Proterra) have declared bankruptcy recently and I'm sure there's more to come.

Most of these EV companies are still unprofitable, it's likely to hurt their profit margin even further with the increasing price wars, and they are likely to remain unprofitable in the near future. 

Unlike $Tesla Motors(TSLA)$ , most EV companies clearly have issues scaling up their production significantly. The competition in the EV market has intensified as numerous traditional car markers (Mercedes-Benz, BMW etc) are also investing and building more EV units. 

Using $XPeng Inc.(XPEV)$ as an example, its Q2 2023 results will be out soon 18 Aug 2023. 

Here's a breakdown of delivery: 

Q2 22 = 34,422

Q3 22 = 29,570

Q4 22 = 22,204

Q1 23 = 18,230

Q2 23 = 23,205 (up 27.3% qoq, down 32.6% yoy)

The key question is what is a fair valuation for this EV company? How fast can it grow over the next few years? Like any new industry, eventually there will only be few survivors. Although there's recent news that Volkswagen is investing US$700 million for ~5% stake in XPEV and there's potential collaboration between the 2 companies but do they deserve an extra premium at their current PE ratio after a recent huge rally? 

Things to look out for this Friday (18 Aug) include the delivery guidance for Q3 2023 and the profit margin for current Q2 report. With so many negative news (such as Country Garden struggles with debt, contracting manufacturing activities etc) coming out from China recently, it is likely that the short-term outlook for China's EV will be bleak. What do you think? Let me know your thoughts!

$Rivian Automotive, Inc.(RIVN)$ $Faraday Future Intelligent Electric Inc.(FFIE)$ $NIO Inc.(NIO)$ 

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