XPEV - Tesla NIO XPeng Li And BYD Deliveries: Who's Best?

Summary

• The major EV players have announced their deliveries for December and the fourth quarter.
• While all benefit from market growth, there are vast differences when it comes to execution and consumers' demand.
• BYD has again delivered the best growth rate and has managed all macro headwinds exceptionally well so far.

Article Thesis

Over the last couple of days, many of the major electric vehicle players that are active in China have released their delivery numbers for the most recent month, December 2022, and the fourth quarter of the year. BYD ( BYDDY )( BYDDF ), Li Auto ( LI ), NIO ( NIO ), Tesla ( TSLA ), and XPeng ( XPEV ) are some of the most important players in the EV space. In this report, we'll look at how these companies have done, and what recent trends might mean for their shares going forward.

Delivery Numbers For December, Q4, And 2022

Going with these five EV players in alphabetical order, let's start with BYD.

BYD, which stands for Build Your Dreams, has experienced explosive growth in its home market China in 2022, apart from also expanding internationally. The company, again, set a new record with its deliveries in December, as it had done regularly in 2022. Overall, the company delivered 235,000 new energy vehicles during the month, which was up by a massive 150% year over year. I have never heard of any automobile company delivering a growth rate this high when already selling such a high number of vehicles per month -- neither among EV players nor among legacy automobile companies.

BYD does not only sell pure battery-electric vehicles, but it also sells some plug-in hybrids. The company's total deliveries are roughly split 50:50 between BEVs and PHEVs, which means that even when we fully neglect PHEV sales, the BEV run rate is still well north of 1 million already, thanks to monthly sales of more than 110,000 BEVs.

In Q4, BYD sold 683,000 new energy vehicles, again roughly split 50:50 between BEVs and PHEVs. At this run rate, BYD will sell close to 3 million vehicles in 2023, even without any further growth. I believe that this is an unlikely scenario, as BYD should experience ongoing growth this year. Sales will not rise by 150% per year forever, as that is basically a mathematical impossibility. But even if the run rate were to improve by just 30%-40% in 2023, which would be way below the 2022 growth rate, BYD could sell around 4 million vehicles this year. No matter what, it's pretty clear that BYD has turned from a battery company into a huge and powerful EV player. The majority of its sales are made in China, but BYD has been expanding internationally, e.g. in Europe, where it started deliveries of some of its EV models in 2022. The company plans to add new models in overseas markets such as the EU, which is why its international business should be a growth driver going forward, while the company will also continue to benefit from market growth in its home market China.

Li Auto reported monthly deliveries of 21,000 vehicles for December. That was a new record for the company and represents an attractive growth rate of 51% year over year. Quarterly deliveries totaled 46,000, which was up 32% year over year. Li also hit a new record with its 2022 deliveries, which totaled 133,000, which was up by close to 50%. Compared to BYD, however, both its growth rate and its overall sales numbers aren't too impressive.

NIO reported that it sold 16,000 vehicles in December, which was a record for the company. Sales were up 51% year over year, which was a similar growth rate compared to Li Auto. For the fourth quarter, NIO reported 40,000 deliveries, which represents an attractive growth rate of 60% compared to the previous year's period. The company hit 122,000 deliveries in 2022, which was up by 34% year over year, which was not too impressive -- that was mainly due to a slowish delivery growth rate during the first half of the year.

Tesla, still the largest EV player by market capitalization, despite its hefty share price drop over the last year, didn't announce deliveries on a per-month basis. During the fourth quarter, the company delivered 405,000 vehicles, however. That makes for a 135,000 monthly average (usually backloaded in each individual quarter, thus December deliveries likely were higher than October and November deliveries). Compared to the previous year's fourth quarter, Tesla generated a deliveries growth rate of 31% -- that's the lowest deliveries growth rate among these companies so far, slightly behind Li, which reported a 32% increase. Tesla sold around 60% of the vehicles BYD sold, but at a higher average sales price, which is why Tesla will report a higher revenue number for Q4 relative to BYD. When we look at pure BEV sales only and exclude PHEV deliveries, Tesla is still the market leader for now, but BYD's much higher growth could make BYD overtake Tesla in 2023.

XPeng, finally, had a strong end to the year. The company delivered a little more than 11,000 vehicles in December, which almost doubled the weak November deliveries number. That being said, growth wasn't compelling on a full-year basis, at least compared to its EV peers. Total deliveries in 2022 came in at 121,000, which was up by just 23% compared to the previous year. Relative to the growth shown by Tesla and XPEV's Chinese peers, that is the least compelling growth performance.

To sum up this section, I believe we can say that BYD is the winner in the deliveries race so far. Not only has it delivered the largest number of new energy vehicles among these five companies, but it also is showing the strongest growth rate by far -- which is an impressive feat, as maintaining a high relative growth rate becomes harder for a company as it grows. Nevertheless, BYD is seemingly not running into any execution problems and manages to control its supply chains effectively, unlike some of its Chinese peers that argued that their 2022 performance was negatively impacted by supply chain problems. BYD is also, unlike Tesla, seemingly not running into any demand cliffs so far -- consumers buy up everything that BYD can produce. That also positions the company well for the current year when it comes to further deliveries growth. Tesla, on the other hand, has recently experienced a slowdown in its year-over-year growth rate and has been increasing incentives while lowering prices in order to shore up demand.

Investment Implications

For EV companies, deliveries are important, but they are not the only factor to consider. Sales are not 100% correlated with deliveries, for example, due to different average sales prices and due to some companies also operating non-auto business units, such as BYD with its battery business and Tesla with its energy business.

None of these five companies have announced their Q4 revenue and profit yet. That should happen a couple of weeks from now, however. Tesla, with a high average sales price, will likely take the sales crown, as analysts forecast a revenue increase of 43% year over year. Importantly, analysts predict that the revenue growth rate will drop in the current quarter, Q1 2023, as the current consensus estimate implies that revenue will improve by "only" 32% year over year. Potentially even worse, analysts believe that Tesla's growth will be negative on a sequential basis, as forecasted Q1 revenues are below the expected Q4 level. Due to increased discounting and an overall sales slowdown for Tesla, that could make sense. Meanwhile, BYD is forecasted to grow its revenue by a much more impressive 54% year over year during the current quarter, but due to a lower average sales price, Tesla's revenues should still stay ahead of those of BYD. Li, NIO, and XPeng will generate lower revenues for sure, due to their deliveries numbers being considerably lower than those of the two EV giants.

On a valuation basis, Tesla still is the most expensive stock among these five, despite the massive share price slump in recent months. It now trades for a little more than 3x forecasted revenues. That being said, it has become less expensive on a relative basis -- at the end of the third quarter, it traded at around 3x the valuation the other companies traded at, while it now trades at a little more than 2x the valuation of its peers. Due to its profitability, a premium valuation seems justified, although that premium shouldn't necessarily be as large as it is. Nevertheless, Tesla's steep share price fall has increased its relative attractiveness over the last couple of months. I still prefer BYD for now, which trades at ~1.2x this year's expected revenue according to Seeking Alpha's data. That's not only the lowest valuation in the peer group, but BYD also has the best growth and it looks like it has the fewest execution problems -- despite an economic downturn, COVID measures in China, and supply chain issues, BYD performs exceptionally well. BYD is forecasted to become profitable this year, thanks to the impact of massive sales growth and operating leverage, which could be an important milestone for both the company and its stock.

Takeaway

Strong market growth allows almost all EV companies to report rising deliveries and sales. Still, there are vast differences between individual players. BYD has performed best in December and Q4 and is on track to become meaningfully profitable this year. Tesla remains the king in the industry in terms of sales, and its valuation has come down, although it still trades at a hefty premium versus its Chinese peers. Among the three smaller Chinese EV players NIO, LI, and XPEV, NIO has performed best in Q4 while its premium pricing and unique battery-swapping technology could also be advantageous.

For further details see: