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Barclays has rated several of China’s electric vehicle newcomers as “Hold” on the back of excellent sales performance, driven by national policy and technological innovation.
Barclays analyst Jiong Shao started tracking NIO-US, XPEV-US and LI-US with an ‘Overweight’ rating on Tuesday.
Shao said concerns about NIO’s growth “should now be alleviated” as the company will double the capacity of all its current factories in March. He has a target price of US$34 on NIO stock. Shao gives $38 target price on Li Auto stock. For Xpeng, Shao said he has a US$45 price target on it, taking into account the company’s market positioning.
“We believe that the rapid global penetration of electric vehicles and booming EV sales have created a unique opportunity for Chinese EV manufacturers. They can take a sizable market share not only in China’s domestic market but also on the world stage with a market share of around 25-30 per cent.”said by Shao.
The analyst team also noted that NIO has a strategic partnership with Chinese electric vehicle battery manufacturer CATL, which uses the latest technology jointly developed by the two companies to produce special batteries for NIO. In addition, NIO’s battery swap and battery leasing options were described as incredibly innovative.
However, he questioned the current one-model strategy of Li Auto, saying that it would not work and that Apple (AAPL-US) was the only exception to the ‘one-model strategy’. Shao also said that the hybrid operating strategy (direct stores and third party dealers) of Xpeng is very wise.
While all three EV companies have higher price targets than current prices and are rated as ‘Overweight’, only Xpeng is rated as entirely positive, with market concerns over the productivity of NIO and the business model of LiAuto.
Barclays is not unanimously positive on all three individuals, but is very optimistic about the overall EVs environment, as the development of advanced EV and self-driving technology and global export is a priority for the Chinese government.
The report reflects that even in the face of government policy and the global environment, Chinese EV companies will still be able to capture a significant share of the world’s market, and that ultimately, companies will need to work on their own to address market concerns.
Government policy will change one day, and when it does, companies will need to equip themselves to face any potential crisis that comes their way.