Electric vehicle (EV) stocks fell sharply last year as fully electric and plug-in hybrid electric vehicle (PHEV) sales increased 31% globally in 2023 after growing by 60% in 2022. But this year, demand is expected to rebound, with EV sales volume expected to reach $623 billion in 2024.
Most of this new demand will come from China, so it is no surprise that we are profiling three Chinese EV plays. First, we will look at the first Chinese EV startup to turn a profit. Then, we will look at an erstwhile favorite that’s lost its way a bit among Chinese EV stocks, thanks to losses mounting in 2023.
Last is an EV stock looking to increase the number of countries it serves in Europe, as it aims to achieve profitability in 2025. It already sells its EVs in the Netherlands and Norway. Let’s explore further!
EV Stocks: Li Auto (LI)
Li Auto (NASDAQ:LI) is one of the more irritating Chinese EV firms to invest in. While outperforming rivals on several important measures, the stock remains flat at around $30 because of macroeconomic headwinds caused by high interest rates and oil prices.
Based on an average 12-month price target of $54, the stock has an upside potential of around 70%. Among EV stocks, none of the ten analysts tracking the Chinese play suggest selling. Instead, they all urge buying.
The stock has created a lot of interest partly because of its impressive delivery figures for 2023. With 376,030 vehicles delivered in 2023 — up 182.2% from the previous year — Li Auto enjoyed impressive year-over-year growth compared to the competition.
But what distinguishes Li Auto from its Chinese rivals is profitability. In the fourth quarter of 2023, the company outperformed Wall Street estimates, revealing profits per share of 60 cents on revenues of $5.8 billion — a first for Chinese electric vehicle companies.
When it comes to cars over 300,000 yuan in price, the L7 and L8 models are the best-selling models. Furthermore, Li Auto’s eagerly awaited Li Mega model is now off the factory floor and into the hands of happy consumers.
Li is also branching out. The less expensive Li L7 and Li L8 models are scheduled for release in May. When combined, these initiatives will help Li reach its 800,000-a-year sales target by 2024.
Last but not least, with sales up 38% to 9.49 million units and a 31% market share, China leads EV sales. Li will profit as long as the Chinese government continues to give billions in subsidies to maintain its supremacy.
Nio (NIO)
At one point, Nio (NYSE:NIO) led Chinese EV stocks, but those times are gone as shares dip 45% in 2024.
A slowdown in EV sales and Nio’s net loss soaring almost 44% to $2.9 billion in 2023 ensure investors hone in on Li Auto instead. Nio shipped 141,601 units last year.
Nio is rapidly expanding into new markets outside of China, especially in Europe and the U.S., to improve the situation. The Chinese carmaker intends to introduce its Firefly EV brand to the European market in 2025, the same year Nio will debut in the U.S.
Furthermore, NIO stock joins the high-end EV market and competes with luxury manufacturers like Tesla (NASDAQ:TSLA) and Porsche with the ET9, an ultra-luxury electric vehicle. Costing over $100,000, it comes with a self-driving chip and a faster-charging battery. The ET9 could help Nio create sales at the highest end of the market, opening up larger margins.
Nio will need a robust supply chain to ensure all of these initiatives run smoothly. On that note, there are rumors the EV maker wants to acquire industrial assets to increase its independence.
Analysts predict that NIO stock will likely rise by 50% or more, which represents the company’s potential rebound as it attempts to turn a profit for the first time in 2024.
EV Stocks: XPeng (XPEV)
Our analysis of Chinese EV stocks concludes with XPeng (NYSE:XPEV), which has a 70% upside potential based on a 12-month target price of about $13 per share.
XPEV is much in the same boat as NIO, but a critical difference for XPeng is stock dilution. Total outstanding shares are 893 million, a rise of 137% from 165 million in 2018. Understandably, XPEV needs capital to ramp up EV production, pursue new product lines and enter hitherto unserved markets. Still, such substantial dilution raises eyebrows.
Fortunately, XPEV is expanding rapidly outside of China into other areas, particularly in Europe, the second-largest EV market globally. Xpeng is now operational in Norway and the Netherlands. Its current goal is to gain ground in France, Germany and Britain by 2024.
XPeng is also working on autonomous driving technologies similar to Full Self-Driving from Tesla. By 2024, Xpeng hopes to use its X NGP (navigation-guided pilot) technology to enable semi-autonomous driving throughout mainland China.
Furthermore, Xpeng’s models — such as the G6 SUV — appeal in more cost-conscious markets because of their reasonable prices, especially in contrast to rival Tesla. It was able to ship 160,038 cars last year.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
