NIO, Xpeng and Li Auto: three alternative electric car stocks to Tesla
Tesla might be the best-known brand name in the world of electric vehicle (EV) stocks, but Chinese electric car manufacturers are quickly catching up. Use this guide to learn how to trade and invest in alternative EV stocks.
Electric car industry: what you need to know
The global automotive market is undergoing a period of historical change. The demand for new technologies has disrupted the market, while changing attitudes towards climate change have created a perfect environment for a new type of vehicle.
Globally, sales of commercial and passenger vehicles fell by more than 4% in 2019. Statista reports say sales in 2020 could fall below 62 million vehicles, far from the 80 million recorded in 2017. However, within this market, trends in the electric vehicle sector (or subsector) have given traders and investors plenty to think about.
In 2019, sales of electric vehicles hit 2.1 million units, marking a growth of more than 12,200% in 10 years. The International Energy Agency (IA) estimated that there were around 7.2 million electric cars in circulation by the end of 2019.
Despite the automotive contraction in 2020, the electric car sector is expected to have maintained its market position, capturing close to 3% of total global sales in the automotive industry.
One of the key factors behind the electric vehicle market’s resilience is government intervention. A range of government programmes have been introduced in countries across the world, with the aim of reducing carbon emissions, using various incentives to encourage people to buy electric vehicles.
This suggests that the electric vehicle market will just keep on growing, and China is expected to emerge as a leading manufacturing hub.
In 2019, China was the world’s largest electric vehicle market, with 2.3 million electric vehicles in active use – that’s nearly half (45%) of the global stock of electric vehicles. By contrast, Europe and the US had 1.2 million and 1.1 million electric vehicles, respectively.
There are expected to be over 500 electric vehicle models in the market by 2022, further encouraging the rapid development of new technologies, and increasing competition in this growing marketplace. Tesla is the largest electric vehicle company in terms of market capitalisation, despite the fact that its production only started 12 years ago. Other, traditional vehicle manufacturers such as BMW, Volkswagen and Nissan and General Motors have made significant inroads into the electric vehicle space in recent years.
However, these are not the only electric car companies that are attracting consumers and investors. Companies such as NIO, Xpeng and Li Auto have gained relevance due to their performance and potential in China and the rest of the world.
Top alternative electric car stocks to Tesla
There are some great alternative electric car stocks emerging in China. Even though the market is still relatively young, a few names in particular have been gaining traction among investors and traders, and continue to expand their reach in competition with Tesla. They are:
NIO (NYSE: NIO)
NIO focuses on the design, production and marketing of high-end electric cars. The company was founded in November 2014 and it is based in Hefei, China. Its specialisation areas include innovation and cutting-edge technologies in connectivity, autonomous driving and artificial intelligence for the electric vehicle market.
NIO has quickly become a favourite with investors, for its produce and distribute a huge number of road-ready vehicles.
In 2019, the company reported over $1.15 billion in total sales – a 56% increase year on year. Its first production line was launched in 2018 under the ES8 model, and since then NIO has distributed 68,634 units in total, with 36,721 vehicles produced in 2020 alone – a 111% increase on its 2019 volumes.
Another reason why NIO could trigger traders’ interest is its global expansion strategy. Over the next two to three years, the company is preparing to enter the European market, which is also the highest growth market for electric vehicles. Demand for electric vehicles on the continent rose by 44% in 2019 and by 25% in 2020, while the US and China have both experienced a slowdown over the last year.
NIO made its NYSE (New York Stock Exchange) debut on 12 September 2018, with an initial quote of $6.25 per share, giving the company a valuation of approximately $6.4 billion. During its first year, NIO shares fell to an all-time low of $1.32. But while its initial price and performance caused some uncertainty in the market, NIO shares have rebounded strongly, reaching a high of $61.95 in January 2021.
Li Auto (NASDAQ: LI)
Another pioneer in the electric vehicle market is Beijing-based car maker Li Auto.
Like its competitors, the company designs and produces electric vehicles, specialising in high-end all-terrain cars which incorporate intelligent technology and self-contained solutions.
Unlike its competitors, Li Auto develops and produces hybrid electric vehicles that also include a petrol engine. The main advantage of this system is that it reduces the reliance on electric charging stations, which has been named as a key challenge for the industry, and is responsible for the so-called ‘distance anxiety’ experienced by electric vehicle drivers.
Li Auto started production of its first model, Li One, in November 2019. Despite its brief history in the sector, the company’s first and only model quickly won a significant market share in China. The company placed 32,624 units in 2020, with over 14,400 units delivered in the last quarter of the year. According to some estimates, Li Auto could report revenue in the range of $1.4 billion by 2020, with a 112% growth outlook predicted for 2021.
Li Auto is the second Chinese electric vehicle company to be listed on a US Stock Exchange. The company debuted on the NASDAQ on 30 July 2020 with an approximate $10 billion valuation and an initial price of $11.50 per share.
Li Auto (NASDAQ: LI) saw its share value rise by 151% between IPO and the end of 2020, with a historical high of $43.96 per share.
6-month performance
Xpeng (NYSE: XPEV)
Xpeng Motors is another competitor from China which has recently caught the eye of savvy investors and traders.
The company incorporates a range of cutting-edge technologies, using the internet, autonomous conduction and artificial intelligence in its models. Xpeng was founded in 2015 in Guangzhou, launching the pre-series of the Identity X 1.0 in 2016. Xpeng started production from its first series in October 2017.
2020 was a great year for Xpeng, with a 326% inter-annual increase in vehicle deliveries. Xpeng delivered a total of 27,041 units in 2020, increasing its sales by 112% against the previous year.
According to its latest financial report, the company earned $419 million in revenues in the fourth quarter of 2020. This represents an increase of 375.7% over the same period of 2019, and a rise of 44.1% from the third quarter of 2020.
Like NIO, Xpeng made its debut on the New York Stock Exchange (NYSE). The company launched its IPO on 31 August 2020 with an initial price of $15 per share and an valuation of $9.17 billion. Xpeng ended 2020 at $42.83 per share, and a revaluation of 186%. As of 26 January 2021, the share is priced at $54 – a 260% increase from its IPO price.
Why are traders interested in electric vehicles?
Rising interest in clean energy, government incentives, the development of new technologies, and the increasing affordability of electric models are just a few of the reasons why this sector is worth watching. The electric vehicle market is estimated to reach a value of over $1.2 billion by within the next six years, with a yearly growth rate of 38.1% between 2020 and 2027.
Another aspect that attracts traders is the impact the market has on other sectors. For example, according to AIG estimates, the use of electric vehicles could reduce global oil consumption by 2.5 million barrels per day by 2030.
How to trade and invest in electric car stocks
When you trade electric car stocks with us, you are speculating on the company’s share price without owning the shares directly. Instead, you’ll be opening a position with CFDs, which are leveraged derivatives. Start trading NIO, Li Auto and Xpeng shares by following these five steps:
Buying (going long on) electric vehicle shares
- Create an account or log in
- Select your preferred market
- Choose your type of trade: buying (going long) or selling (going short)
- Select your position size and your stop and limit levels
- Confirm your position
Selling (going short on) electric vehicle shares
- Create an account or log in
- Select your preferred market
- Choose your type of trade: buying (going long) or selling (going short)
- Select your position size and your stop and limit levels
- Confirm your position
Top electric car stocks summed up
- The electric car sector is set to grow, thanks to government intervention, new technologies and the rise of clean energy solutions
- Beyond Tesla, there are several stocks and shares that offer access to this growing market
- NIO, Xpeng and Li Auto are just three of the most attractive electric vehicle stocks globally
- You can trade or invest in these stocks via our platform
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