Now, it’s fair to say that NIO hasn’t gone on to emulate Tesla – EV delivery numbers have been disappointing at times and the stock has tanked. The good news, however, is that there’s another Chinese company that is looking like it could be a genuine Tesla of China.

Skyrocketing EV sales

The stock in focus today is XPeng (NYSE: XPEV). Listed on both the New York Stock Exchange and the Hong Kong Stock Exchange, it’s an EV company that’s rapidly scaling up production.

Now, there are three main reasons why this company is increasingly looking like a Tesla-style business. The first is that it’s having a lot of success on the EV front.

Today, it has a range of models including the P7, a four-door sports saloon that’s often compared to Tesla’s Model 3, and the G6, a mid-sized all-electric SUV that competes with Tesla’s Model Y.

In the third quarter, the company registered a record-high 116,007 deliveries. This was up 149% year on year (much stronger growth than Tesla).

Impressive self-driving tech

The second reason is that, like Tesla, the company has some impressive self-driving technology. Its systems include XPILOT and the newer XNGP (Navigation Guided Pilot), which use a combination of cameras, radar, and LiDAR to provide advanced driver assistance.

XNGP is basically XPeng’s version of Tesla’s Full Self-Driving (FSD). It’s designed to provide a fully autonomous driving experience.

Note that XPeng is also active in the robotaxi space. It plans to launch three robotaxi models in the near future and commence trial operations for the service next year.

State-of-the-art humanoid robots

On top of all this, XPeng has humanoid robots. Its version is called IRON.

This robot has 200 degrees of freedom across 60 articulated joints. A key feature is its ‘Eagle Eye’ vision system, which uses high-resolution cameras to provide 720-degree environmental awareness.

It’s worth noting that XPeng’s approach to humanoids is quite similar to Tesla’s – it’s aiming to leverage its experience in EVs and AI to create versatile robots that can be mass produced. Already, IRON has been deployed in XPeng’s EV factories (where it works on assembly lines) and the company is hoping to ramp up production in 2026.

Worth a look?

So, is this company worth considering as a growth investment? I think so.

It’s certainly growing quickly. This year, revenue is expected to rise about 90% to CNY 78.5bn.

Meanwhile, the valuation looks very reasonable. Currently, the company’s price-to-sales ratio is only around two (versus 15 for Tesla).

I’ll point out that, like a lot of Chinese stocks, XPeng is higher up on the risk spectrum. Some risks to consider include competition in the Chinese EV and robotaxi markets (which is intense), US-China relations, and larger-than-expected investments in technology and AI.

Weighing everything up though, I see a lot of investment potential to consider. But it’s not the only stock that looks attractive right now.

The post Forget NIO stock! This company is rapidly becoming the ‘Tesla of China’ appeared first on The Motley Fool UK.

So let’s take a closer look at these stocks and see whether now is a good time for me to buy.

Chinese EVs

Li Auto stock soared in May and June as Covid-19 restrictions were reduced. The firm also announced the long-awaited launch of its L9 model — a six-seater, full-size flagship SUV. Li claims that the SUV is the best family SUV available for less than $750,000. That’s a very bold claim when you consider the L9 only costs $70,000.

NIO is probably my favourite Chinese EV stock. The company has a broad range of models on offer, which will help revenue growth. It’s been on a Tesla-esque growth curve in recent years and I think its technology could be a real winner in the years to come. It’s battery-swapping tech allows drivers to change empty batteries for full ones at NIO charging stations in just a matter of minutes. NIO is also looking to open a second factory this year, but unlike its peers, it’s not the owner of its factories.

Xpeng offers a cheaper range of vehicles than its peers. But its delivery volume is the highest. Xpeng reported 34,422 EV deliveries during the second quarter of 2022 and topped the list of related Chinese brands for the fourth consecutive quarter. XPeng is also taking on Tesla in Europe and is undercutting the US brand with its P5, which is being sold for around $57,000.

Is now the time to buy?

One issue is that I can only buy these stocks through their US listings at the moment. And with the pound weak, now isn’t the best time to buy dollar-denominated stocks. Eventually, I believe that the pound will get stronger and therefore currency appreciation could wipe out my gains.

However, I see Chinese EV stocks as having big growth potential and therefore I’m willing to overlook my concerns about the currency.

I also believe that now looks like a good time to buy. In all honesty, there isn’t a massive amount between these three companies in terms of valuation. They all trade with cheap price-to-sales (P/S) ratios (Xpeng 4.9, NIO six, Li Auto eight).

Xpeng is down 40% over the past 12 months, while NIO is down 47%. Li Auto is the only manufacturer up (7%) on this time last year.

I do have some concerns about the impact of slowing economic growth globally, and more Chinese lockdowns, on sales, but I see that as already being priced in. Chinese growth concerns are one of the reasons why these three companies have P/S ratios that are just a fraction of Rivian (222) and Lucid (160).

While I’m positive on all three companies, my personal favourite in NIO. I think the brand offers something really unique and I think the swappable batteries will be a big plus in the years to come.

The post Is now a good time to buy Chinese EV stocks as economic growth slows? appeared first on The Motley Fool UK.

While they all differ, there’s a common theme. They’re cheap compared to their US counterparts by the price-to-sales (P/S) ratio.

So let’s have a close look at these three companies and see which one is right for my portfolio.

NIO

Ok, I already own NIO stock. In fact, I bought when the share price dipped to $13. But it’s now trading at over $20 a share, still down 55% over 12 months.

Despite the recent gains, I still see $20 as a good buy opportunity. NIO has been on an impressive growth curve, comparable to Tesla, and it owns market-leading technology.

Its battery-swapping technology is a real winner for me, allowing drivers to change empty batteries for full at NIO charging stations in just a matter of minutes.

The company also uses larger batteries than Tesla, giving some models a greater range than their American counterpart.

NIO hopes to turn a profit for the first time in 2024 and will open its second factory later this year.

Collective concerns here include the impact of more Chinese lockdowns, the health of the Chinese economy, and access of these EV manufacturers to lucrative Western markets.

Li Auto

Li Auto stocks soared in May and June as Covid-19 restricted were dialled back and the company announced the long-awaited launch of its L9 model — a six-seater, full-size flagship SUV.

The firm contends that Li’s L9 is the best family SUV on the market for less than $750,000. That’s a bold statement, but even bolder when you consider the L9 only costs $70,000.

Lockdowns saw the share price fall and would have represented a great buying opportunity. April deliveries fell to less than 5,000 amid Covid-19 restrictions.

But production has recovered and Li is also on an impressive growth curve. Revenue for the quarter ending 31 March was $1.5bn, an impressive 307.89% increase year-on-year. 

Despite the positivity around Li Auto, it’s a little more expensive than its Chinese peers. Both NIO and XPeng have more models too. I wouldn’t buy Li now.

XPeng

XPeng offers a cheaper range of vehicles than its peers and its delivery volume is the highest.

In June, Xpeng delivered 15,295 Smart EV, representing a 133% increase year-on-year. The company reported 34,422 EV deliveries during Q2, meaning it topped the list of related Chinese brands for the fourth consecutive quarter.

I actually think its cheaper range makes it a potential winner amid the predicted global economic downturn. A slowdown in growth is also expected in China amid a banking and property crisis.

XPeng’s P5 is being sold in Europe for around $57,000. It’s not cheap, but its primary competitor, the Tesla Model 3, costs $62,560 on the continent. Naturally, it’s a lot cheaper in China, which should aid Chinese consumer sales.

XPeng has been on an impressive growth curve, has a wide range of models at cheaper price tags. Because of this, and it’s attractive valuation, XPeng stock is a buy for my portfolio.

The post NIO, Li Auto, XPeng: buying Chinese EV stocks before the next bull run! appeared first on The Motley Fool UK.

So, here are two growth stocks I’m looking to buy before the market recovers.

XPeng

Xpeng (NYSE:XPEV), also known as Xiaopeng Motors, is a Chinese electric vehicle (EV) manufacturer headquartered in Guangzhou.

Over the past two months, XPeng’s share price has lagged its peers, but there are some positive signs coming from the Chinese firm.

Amid Covid-19 lockdowns, the stock was pushed down by sluggish delivery growth over the first few months of the year.

However, more recent data is positive. In June, it recorded 15,295 Smart EV deliveries, marking a 133% increase year-on-year. The firm delivered 34,422 EVs in total in the second quarter, topping the list of emerging auto brands in China for the fourth consecutive quarter.

Despite this, XPeng’s valuation is actually less than that of its peers NIO and Li Auto. And it trades with a price-to-sales ratio of 5.8, which is comparable with the two other firms.

In terms of average sales price, NIO is the highest of these three companies and XPeng is the lowest. I think this could aid it as China’s economy flounders. In some cases, its offering is by far the cheapest.

As an international investor, there a several perceived risks with Chinese companies. For one, I just don’t know how bad this financial crisis is going to be over there. Secondly, there are geopolitical concerns, although I don’t see China waging war on Taiwan in the immediate future.

For me, XPeng is a buy right now as concerns over Chinese economic growth peak.

Darktrace

Investors have been talking about Darktrace (LSE:DARK) a lot, but largely for the wrong reasons. The cyber-defence firm tanked in June after one of its executives was named in a legal row concerning Autonomy’s 2011 sale to Hewlett Packard. 

The company clearly has huge potential, but valuing it has proven tricky. The share price has jumped up and down considerably since its IPO.

Darktrace is on an impressive growth curve. On Tuesday, it upped its guidance and said it expected revenue of at least $417m, reflecting year-on-year growth of approximately 48%. As a point of reference, total revenue in the year to June 2018 was $79.4m.

More than 500 net new customers were added during the year. The group’s customer base now extends to 7,400, representing a year-on-year rise of around 32%.

Given the geopolitical environment, it’s no surprise that Darktrace is attracting customers. And I see this as a theme that will pick up further in the years to come.

Some analysts are concerned about increasing competition in the space and it’s true that growth is certainly not guaranteed in this industry.

At 374p, Darktrace is a buy for m portfolio. It’s down 48% year-on-year, but I think there are considerable growth opportunities here.

The post 2 high-potential growth stocks I’m buying on the dip appeared first on The Motley Fool UK.

Reasons to buy shares

There is no dispute that XPeng has a ton of potential. The EV maker has managed to consistently increase production, with 6,565 vehicles being delivered in the month of June. This is a 617% increase year-on-year. Such a figure is extremely impressive and has seen the XPeng share price rise as a result. It is also a sign that the global semiconductor shortage is starting to subside.

There are also signs that there is significant demand, and this is increasing every year. In fact, according to Schroders, EVs are expected to make up 50% of all new car sales in China by 2035. In 2020, just 6.3% of sales were EV cars. This demonstrates the huge growth potential of the market, boding very well for Chinese EV companies such as XPeng.

What are the risks?

Although the growth potential is clear, risks also abound. For example, there is the risk of higher inflation, which may cause the US Federal Reserve to raise interest rates. When interest rates rise, growth stocks are usually the most severely affected. This is because it increases borrowing costs and input costs, while also reducing future earnings. Therefore, this could lead to some downward pressure on the XPeng share price.

Another risk revolves around the current tensions between China and the US. In fact, after the Chinese regulators accused DiDi of illegally collecting personal data, there have been some discussions in Beijing of banning Chinese companies from US listings. Although it is not overly clear what effect this will have on XPeng and other Chinese EV companies, it could prevent them from issuing more shares in the US. This would cut off a substantial source of funding.

Finally, the XPeng share price may suffer due to the competition. In fact, there are already a number of EV makers capitalising on the high demand. These include established companies in the US such as Tesla, alongside newer companies coming to the market like Lucid Motors. In China, XPeng also faces tough competition from NIO and Li Auto in particular. This may hinder growth in the long term.

Is the XPeng share price a great opportunity?

Overall, I am very impressed with XPeng. It has managed to grow production levels significantly and demand is clearly rising. Despite this, I am not going to buy. Although the company has seen significant revenue growth over the past few years, it still cannot make a profit and has been cash flow negative for the past three years. Until there are signs that this can be turned around, XPeng shares are too much of a risk for me. I’m therefore looking elsewhere.

The post Is the XPeng share price an opportunity not to be missed? appeared first on The Motley Fool UK.