Shulou(Shulou.com)11/24 Report--

After winter, the new energy automobile market hit a "chill."

According to the association, the wholesale sales volume of new energy vehicles in October was 680,000, an increase of about 87% year-on-year. This growth rate seems to be faster, but it is the third consecutive month in a downward trend. From July to October, the year-on-year growth rates were 123.7%, 103.9%, 94.9% and 87% respectively.

Not only the growth rate slowed down, but also the differentiation between different automobile enterprises was very obvious.

Take October data as an example, some new energy automobile enterprises wholesale sales month-on-month growth rate fell sharply, for example, Weilai month-on-month decline 7.53%, ideal decline 12.83%, Xiaopeng drop 39.76%, zero run drop 36.35%; And the sales of other new energy automobile enterprises are still soaring, such as BYD, its October sales volume announced for 217,500 vehicles, has exceeded 200,000 vehicles for two consecutive months. BYD's monthly sales volume can catch up with the one-year level of automobile enterprises such as Wei Xiaoli.

This year is coming to an end, and many automobile enterprises are still facing a big gap from the completion of annual KPI.

From the data point of view, in the first three quarters, only BYD, Nezha, Ai 'an three automobile enterprises, KPI completion rate exceeded 70%. Tesla, and even other new forces, are under tremendous KPI pressure.

(Except BYD, Nezha and Ai 'an, other automobile enterprises are facing greater annual KPI pressure.) From past experience, the fourth quarter is worth looking forward to. Compared with the first three quarters, the fourth quarter is the traditional automobile market consumption season. Moreover, the fourth quarter of this year is even more urgent because the national new energy subsidy policy is about to expire.

In order to "last sprint" in the fourth quarter, China's new energy automobile enterprises not only rushed to launch new models, but Tesla, Xiaopeng and other automobile enterprises in October have begun to cut prices. Tesla, in particular, launched its first "price cut" after six consecutive price increases. After the price reduction of Model Y rear-drive version, it has returned to less than 300,000 yuan and has entered the price range of state subsidies for new energy vehicles.

However, human calculations are not as good as God's calculations. According to the observation and analysis of various institutions, Chebai think tank found that the sales market in the fourth quarter of this year may not be as good as in previous years.

Mainly because the current consumption environment is not good. After entering the fourth quarter, the local epidemic situation once again showed a frequent trend, and the number of newly added cities involved in the epidemic increased. In order to effectively prevent epidemic diseases, dealers are statically managed and consumer mobility is blocked. For example, some cities had to postpone auto shows scheduled for September and October to late October and November. As a result, the pace of sales has shifted back. In the fourth quarter, the automobile market "consumption peak season," there is a possibility of "empty."

The decline in sales growth has affected the performance of new energy vehicles in the capital market, with share prices of some auto companies slashing or even knee-slashing. Even in order to revive the stock price, China's new energy automobile industry urgently needs to tell a new story.

This article attempts to answer three questions:

1. What is the valuation logic behind the rise and fall of new energy vehicle prices?

2. New energy car companies go to Europe, why can't they cause resonance in the capital market?

3. What should the new story of the future of new energy automobile enterprises say?

The traditional valuation logic of new energy vehicles in the capital market is that new energy vehicles will definitely replace fuel vehicles in the future, which will be a trillion-magnitude market. The logic behind this is that traditional car companies will be completely replaced by several new energy car companies (Tesla, Wei Xiaoli, etc.); these car companies will monopolize the entire car market and it will be difficult for new entrants to challenge them.

Therefore, investors attach great importance to the sales volume of new energy vehicle enterprises as an important valuation anchor point. New energy automobile enterprises have also "increased sales at low prices, and then pushed up valuations," which has created a sharp rise in the share prices of new energy automobile enterprises before.

Take A shares as an example, in 2021, Wind new energy automobile index rose 42.72% for the whole year, greatly outperforming Shanghai and Shenzhen 300, China Securities 500 and automobile index. Tesla is among the top electric car stock gainers in the United States in 2021, up about 44%, while Tesla's cumulative gain in 2020 is an astonishing 743%.

At present, the sales volume of some new energy automobile enterprises is slowing down, and the number of entrants is increasing constantly, including the second generation automobile enterprises of traditional automobiles, such as Ai 'an of GAC, polar krypton of Geely, Lantu of Dongfeng, etc., as well as the newer car-building forces, such as Nezha, Wenjie, etc., all of which are "dividing up" this market that used to belong only to Wei Xiaoli and other "first-mover."

This led to a decline in market concentration, with the market share of the top 10 NEV sales companies falling from 75% in 2020 to 71.7% in the first half of 2022. Wei Xiaoli's total market share in the first half of this year was about 8%, down from 10.2% in the same period last year and 9.3% in 2020.

As a result, the valuation logic of "a few giants monopolizing the entire auto industry" began to break down.

Many investors still take sales volume as the anchor to analyze, superimposed on the Federal Reserve interest rate rise, global liquidity tightening and other reasons, in Hong Kong stocks and U.S. stocks listed domestic new force car enterprises share prices, mostly fell sharply.

Specifically, in the Hong Kong stock market, Xiaopeng listed on the Hong Kong Stock Exchange in July last year when the issue price was 168 Hong Kong dollars/share, Later sales rose rapidly, At the end of last year the highest share price reached 220 Hong Kong dollars/share; However, With this year's sales decline, By November 11, The share price has fallen to 30.45 Hong Kong dollars/share, Down nearly 86%.

The ideal offering price at the end of August last year was HK $118/share. As sales rose, the share price rose accordingly. In June this year, it rose to HK $165/share, but now the share price has fallen to HK $71.7/share, down about 57%.

As the second echelon of the new force of car building, zero run, also on September 29 six Hong Kong Stock Exchange. On the first day of listing, the share price fell by 30%, and the market value evaporated by 24 billion yuan in one day, which was the biggest first-day drop for a listed company of the same size or larger in Hong Kong's history. On November 11, the share price of Zero Run fell to HK $20.4/share, down about 58% from the issue price of HK $48/share.

In the U.S. stock market, Xiaopeng reached a year-high of $56.45/share in July due to good sales before, and then began to fall. On November 11, the stock price was $8.49/share, down about 85%. Weilai's share price, like its rapid decline in sales, fell about 73% from a high of $43.12 per share this year to $11.56 per share on Nov.11.

(Photo source: Changjiang Business School) Even the supply chain enterprises of new energy vehicles, such as Ningde Times, have seen a big drop in share prices in the A-share market, from 691 yuan/share at the highest point this year to 402.48 yuan/share on November 11, down 42%. And Guoxuan High-tech, Yiwei lithium battery manufacturers, share prices are also almost halved this year.

At present, some investors have begun to divide the new energy automobile industry from a high-growth industry into mature industries, changing the observation anchor point.

According to Kechuang Board Daily, an industry with a penetration rate of more than 50% is usually considered a mature industry. According to the data of the Association, in September 2022, the retail penetration rate of domestic new energy vehicles has reached 31.8%. Earlier, Wang Chuanfu had predicted that the penetration rate would reach 35% by the end of the year. Although there is some distance from the penetration rate of 50%, the market is worried that under the background of high base, the growth rate next year may be relatively limited, and it is difficult to support higher valuations.

Mature industries will no longer have rapid growth, investors care about profitability as an important indicator of analysis. However, domestic new energy vehicle enterprises, such as Wei Xiaoli and other new forces, are still in the dilemma of "building one car and losing one."

Is there a way to change this dilemma?

Profitability is based on cost reductions. In the automotive industry, the best way to reduce costs is to reach a certain sales volume and spread out the cost per vehicle. According to the current cost and gross profit margin of Wei Xiaoli, the annual sales volume of Wei Xiaoli needs to be increased to 204,000 vehicles, 360,000 vehicles and 121,500 vehicles respectively in order to achieve break-even.

In the first three quarters of this year, Wei Xiaoli's sales were 82,400, 98,600 and 86,900 respectively. This year, it is almost impossible for Wei Xiaoli to achieve break-even annual sales.

(Wei Xiaoli distance break-even difference is still very large) Wei Xiaoli and other car enterprises are still facing the dilemma of rising costs. At present, the power battery, which occupies a large cost of new energy vehicles, is rising continuously because of the rising prices of upstream raw materials, such as nickel, cobalt, lithium carbonate, lithium hydroxide, lithium hexafluorophosphate, etc. Zeng Qinghong, chairman of GAC Group, once publicly complained: "Power batteries account for 40%-60% of the cost of the whole vehicle, and they are still rising in price. "

The "third blow" to Wei Xiaoli and other automobile enterprises is the whole vehicle price reduction tide. At present Tesla's price reduction, has disrupted the domestic new energy automobile market, the media have asked, Wei Xiaoli and other automobile enterprises whether to follow up the price reduction. If the price reduction is followed up, the gross profit will inevitably be lost, which will lengthen the profit timeline; if the price increase is not followed up, the sales volume will be affected.

To take a step back, even if these new energy vehicle enterprises achieve profitability, it does not mean entering the "safe zone."

Take BYD as an example, BYD's new energy automobile business has been profitable, and this year's sales "skyrocketing," but Buffett, who bought BYD H shares in 2008, is still significantly reduced this year. According to the Hong Kong Stock Exchange, as of the close of Nov.11, Buffett had reduced his holdings of BYD shares four times, cashing in about HK $9.638 billion.

BYD's share price also fell to some extent. As of the close on November 11, BYD's share price listed in A shares was 268.8 yuan/share, down 25% from its peak of 358.76 yuan/share, and its market value shrank by more than 260 billion yuan. BYD's share price in H shares also fell slightly from its peak.

In order to revive the stock price, new energy automobile enterprises can not be entangled in sales volume, nor can they pursue profit as the only goal. The capital market pays more attention to the future space of enterprises, and new energy vehicles should tell investors a bigger new story about the future.

At present, domestic new energy automobile enterprises have told stories about going to sea in Europe. But the story didn't seem to resonate with capital markets and didn't stop share prices from falling.

In fact, new energy vehicle enterprises go to sea, sales promotion effect, temporarily is not very big. According to JATO and eu-evs data, 200 vehicles will be delivered in Europe in 2021. In addition, Xiaopeng delivered 474 vehicles in Europe in 2021, while BYD delivered only 1247 vehicles. Entering 2022, according to the broadest statistical caliber, as of September, the cumulative delivery volume of Weilai in Norway has just exceeded 900 vehicles.

In the face of the future sales volume of new energy vehicle enterprises, there have been research institutions "pouring cold water." On Oct.31, Fitch pointed out in a recent rating report that the auto market will be "cold" as a series of favorable policies such as tax breaks for fuel vehicles and subsidies for new energy vehicle purchases exit at the end of 2022, as well as persistent chip shortages. In view of this, 2023 will still be a difficult year for Chinese automobile enterprises.

Therefore, it is particularly urgent for new energy automobile enterprises to tell new stories accepted by the market.

According to the existing trend, the trend of electrification of new energy vehicles in the first half has been set, and the intelligent competition in the second half has started.

Some investors who pay attention to new energy automobile enterprises have turned their eyes to intelligence. Huatong, manager of Zhengyuan Investment Fund, believes that "it can be said that electrification as a whole is at the end of valuation expansion, and intellectualization has just entered the early stage of growth." "

New energy vehicles are intelligent, including intelligent driving and smart cockpit, while the real autonomous driving technology (L3 and above) is not mature enough. Although it has extremely high commercial potential in the future, it is limited by legal policies and social ethics in the short term, and the market is uncertain. At this stage, investors 'eyes are mainly focused on the field of smart cockpit.

As the earliest intelligent landing form, the intelligent cockpit has diversified functions to meet the changing needs of consumers for automobiles. According to IHS survey data, among the key factors for domestic consumers to buy cars, cockpit intelligent technology level is the second key factor after safety configuration, exceeding power, price, energy consumption and other factors.

ICVTank predicts that China's smart cockpit market will reach 103 billion yuan by 2025;IHS predicts that China's smart cockpit market will reach 160 billion yuan by 2030.

(Source: Capital Securities) In the development of smart cockpit, an important observation point is on-board software. IDC Industry Research Institute data show that in-vehicle software services currently contribute 50% of the value of smart cockpits. New energy vehicles will bring increasingly prominent service income through the establishment of perfect intelligent services. Previously, the U.S. stock market gave Tesla a premium valuation, largely based on its prospects for service revenue such as charging and software.

In the first half of this year, Tesla's service revenue reached 18.058 billion yuan, up 48.9%. And Morgan Stanley believes Tesla will eventually make more money selling software subscriptions than selling hardware. In Morgan Stanley's view, this shift will help push Tesla stock revaluation.

There is no doubt that it is necessary for new energy automobile enterprises to tell a new story of smart cockpit.

China's new energy vehicle enterprises, Wei Lai has joined the ranks of software charges, Xiaopeng Automobile has previously tested the water charging service. BYD has high sales volume in the electric era. Although it temporarily lacks service revenue in the intelligent era, the imagination space for future development should not be underestimated. Deloitte's 2020 survey shows that more than 90% of consumers say they are willing to pay for IOV-related technologies, of which 25%-30% are willing to pay more than 5000 yuan.

At present, the smart cockpit technology of China's new energy vehicles has been in an international leading position. Lin Shi, secretary-general of China-Europe Association Intelligent Network Automobile, believes that intelligent network connection is a big selling point of China's new energy vehicles.

For the future, according to CITIC Securities Research News, similar to the transformation that the smartphone market has experienced, the penetration rate of automobile intelligence will continue to increase; in the next 5-10 years, it will be the dividend period of automobile intelligence. Wang Yang of Cathay Pacific Fund said that in another five years, 10 years or in a medium and long-term cycle, China's automobile industry may become China's largest industry.

In short, the future market value of new energy vehicle enterprises will still be high, full of imagination space.

by reference in its entirety

[1]New energy vehicles are in full swing, but why does the valuation of new forces plummet? Cheung Kong Graduate School of Business

[2]How to define the valuation of trams at this point in time? tianfeng securities

[3]Reconstruction: From "autonomous driving" to "smart cockpit," the development of intelligent vehicles accelerates Citic Securities

[4]Why is Wei Xiaoli no longer popular? How long can the product level keep short board and burn money mode? Financial Eleven

[5]New energy vehicle development overview and valuation analysis

[6]Market value looks down, stock price is difficult to return blood, why automatic driving suddenly can't save new forces? Luka Auto

[7]Ten Years of Butterfly Change of Intelligent Automobile: Intelligent New Energy Vehicle in the Second Half Beijing News

The market is risky and investments need to be cautious. This article does not constitute investment advice, not as practical advice, trading at your own risk.

This article comes from Weixin Official Accounts: Chebai Think Tank (ID: EV100_Plus), Author: Chen Zhongshan

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