As these two companies compete for dominance in the biggest EV market on earth, we ask which is the better investment: XPeng or Nio?
Feb. 18, 2022
XPeng (NYSE: XPEV) was founded in 2014 and went public in August 2020, its stock price rising over 85% since then. Nio (NYSE: NIO) was founded in November 2014 and went public in September 2018, its stock price soaring over 288% since. In an effort to reduce greenhouse gas emissions, the Chinese government has been subsidizing EV companies and startups and both companies have benefitted. However, both have not been without controversy either; running the gamut from corporate espionage to unsafe autonomous vehicles to using forced labor. In light of this, we ask which is the better investment: XPeng or Nio?
XPeng: bulls and bears
As per the company's latest quarterly earnings report (Q3 2021), XPeng is firing on all cylinders with deliveries up nearly 200%, revenue growing by 187%, and gross margin soaring over 213%, year-over-year (YoY). The company also has over $7 billion in cash and equivalents, allowing it a long runway for growth and expansion. For the upcoming fourth quarter, XPeng expects a YoY increase of roughly 170% in deliveries and a 155% increase in revenue.
Recently, the company secured the highest amount of funding in the low-altitude flying vehicle sector ($500 million) for its upcoming flying vehicle (yes, finally, a flying car!). To expand production capacity and enhance supply chain management, XPeng is opening a third factory in Wuhan, which will produce 100,000 vehicles annually. And the company is making headways into the European market (the second-largest EV market on the planet), having sold 486 EVs there last year.
The highly competitive EV market inspires unscrupulous behavior and XPeng is not immune. In fact, the company is accused of stealing from not only Tesla but Apple as well to further its own autonomous vehicle (AV) ambitions. It avoided serious repercussions, but who's to say it won't happen again and be damaging this time. Also, ironically, lithium mining requires 2 million liters of water for every ton of lithium.
Nio: bulls and bears
According to Nio's last quarterly earnings report (Q3 2021), vehicle deliveries grew over 100%, revenue was up 117%, and gross margin climbed over 57%, YoY. Like XPeng, the company also has over $7 billion in cash and equivalents. For the upcoming fourth quarter of 2021, Nio expects deliveries to grow 40% and revenue to climb 46%, YoY.
The company has three models currently in production and a fourth to make its debut this year. Its sales growth has been consistent across all three models indicating high demand for the brand. Additionally, Nio is currently underpriced based on its revenue growth and price-to-sales multiple.
Before launching its IPO, Nio told investors that it was building a new factory in Shanghai-a total fabrication. Last year, a 31-year-old man died when his NIO crashed in self-drive mode. And finally, the company has been identified as being connected to forced Uyghur labor in Xinjiang.
Which stock is a better investment right now?
Both are good investments but I feel XPeng has the edge with its expansion into the European market.
