NIU Technologies and Xpeng Motors (XPEV) are among China’s best home-grown EV companies. Both companies are relatively new and are designed from the ground up to cater to China’s burgeoning EV market.
While NIU caters to the two-wheeler EV segment, in which China is the largest world, Xpeng caters to the luxury EV segment, where China is also the largest market in the world. Both companies are poised to gain greatly from China’s target of becoming the largest EV supply chain vendor and producer in the world.
But which stock is a better buy, XPEV or NIU?
NIU is a six-year-old Chinese startup that produces smart two-wheelers. The company believes that the lower costs and maintenance of electric vehicles coupled with the convenience of two-wheelers is the future of urban mobility. NIU currently offers a portfolio of six two-wheeler products in China. The company listed itself on the NASDAQ a couple of years ago after raising $63 million through ADR.
Xpeng Motors on the other hand is in pursuit of the much larger electric car segment, which is expected to be about 3 million cars per year by 2025. The company is backed by several of China’s most influential and deep-pocketed investors such as Xiaomi, Foxconn and Alibaba. The company made its stock market debut in August this year after raising $1.5 billion on the NYSE.
The company currently offers customers a range of seven products that offer different range and performance combinations. The company brought Tesla’s business model to a two-wheeler. They started by offering a high-performance electric bike to create hype and tap into high-income consumer pools and used the proceeds to offer cheaper products. Unlike most auto-companies, NIU has not only survived but thrived through the pandemic due to their cheap products and the fear of using public transport.
The company plans to enter the US and European markets with an electric-assisted bicycle, which they expect is a 5 million units a year market. The company wants to dominate the global market for small distance urban mobility, which McKinsey expects will be worth $500 billion in five years. NIU is completely vertically integrated and does both design and production in-house.
The company’s current flagship products are the P7 sedan and the G3 SUV which are aimed to compete with Tesla’s Model 3 and Y, which are the current highest-sellers in the market. Like NIU, Xpeng too is vertically integrated and does both design and production itself. The company produces the G3 SUV and P7 at their Zhaoqing plant located in the Guangdong province.
The company has impressed onlookers with its impeccable execution of getting the plant production-ready in just 15 months from scratch. The company made 13000 deliveries in 2019.
NIU is expected to release Q3 financial results by the end of the month. Impressively, the company has been reporting profits for 3 out of the last 4 quarters. The company has recorded 43% sales growth so far this year, with Q3 deliveries of nearly 261,000 units. Management expects that sales will pick up sharply as work-from-home gradually reduces. The company has a P/E of 106 and a market cap of about $2.1 billion. The company also expects great sales from its new G0 model, which starts at just $400.
Xpeng has reported stellar October delivery numbers on Monday of 3040 cars, up nearly 2.2x from last year, this is following a similar performance in September when the company reported 3478 deliveries. The announcement sent the stock up about 8% to $21. Analysts are expecting revenues of $284 million and a loss of $73 million. Xpeng is currently available at about a 12.5x revenue multiple. The stock has a little more than doubled since its listing.
NIU is definitely the safer bet given its solid track record and near consistent profitability. However, Xpeng is still yet to turn a profit and is one of the largest players in the largest EV market in the world, and looking at the likes of NIO and Tesla, the stock might still have a long way to go.