Category: Research Note

Shanghai auto show: Deutsche Bank’s preview

While auto shows have generally started to lose some significance as automakers turn to dedicated launch events, this year's Shanghai auto show could be an exception, said Deutsche Bank analyst Edison Yu's team.

(A file photo taken by CnEVPost at the Shanghai auto show two years ago shows an ET7 wrapped in a blanket.)

The Shanghai auto show will begin in less than 10 hours, and it will be interesting to know what analysts expect from the event.

"While auto shows have generally started to lose some significance as OEMs shifted to dedicated launch events, this year's Shanghai Auto Show (starts officially tomorrow) could be an exception," Deutsche Bank analyst Edison Yu's team said in a research note sent to investors today.

Most notably, this will be the first auto show since Covid reopened, bringing together many executives and industry observers from overseas for the first time in years, the team said.

Product cycles for electric vehicles are significantly faster compared to internal combustion engine vehicles, as automakers struggle to maintain customer attention and loyalty, meaning many of the vehicles unveiled at the show will begin delivery in short order, the team noted.

NIO (NYSE: NIO), (NYSE: XPEV) and (NASDAQ: LI) all have new announcements coming this week, with NIO set to officially unveil its new ES6, historically its best-selling SUV, Yu's team wrote.

NIO's sales have been sluggish in recent months due to customer expectations of a platform changeover, so the new ES6 will be a very important product, with deliveries likely to begin in June, the team said.

In addition to the new ES6, NIO will also unveil the new ET7 at the Shanghai auto show, the flagship sedan whose sales in the past few months have been well below its performance in the second half of last year.

The updated version of the NIO ET7 will feature some improvements to its interior and deliveries are expected to begin in a few months, Yu's team said.

For XPeng, it will unveil its G6 SUV at the show, which Yu's team believes is the most important model for the company's ambition to reignite volume growth.

"Pricing details will likely not be finalized though as management gauges the initial consumer response. Deliveries are set to begin in June," the team wrote.

Li Auto will launch its dual-energy strategy by unveiling its all-electric solution tomorrow.

The company's first BEV will be a premium MPV and production is expected to begin by the end of this year, Yu's team noted.

Li Auto management recently said it plans to spend RMB 10 billion yuan to build 3,000 supercharging stations by 2025, and further details of this roadmap are to be expected, the team said.

In addition to these three Chinese upstarts, traditional Chinese OEMs have been very active over the past year, the team said.

So far, GAC and have been the most consistent in terms of volume, according to the team.

Zeekr plans to bring the recently launched Zeekr X compact SUV to Europe along with the Zeekr 001 shooting brake model, and more details on the European strategy will be provided this week.

Also, BYD has been quite active, showing off its new Yangwang U9 electric supercar with the new DiSus-X body control system last week.

This week, BYD will unveil the Song L BEV and also begin taking pre-orders for the U8, a premium off-road SUV.

" The company is clearly trying to move upmarket by establishing bold 'halo' vehicles for its new brand," Yu's team wrote.

BYD also announced that the Dolphin and Seal BEVs will be available in Europe later this year. Both models will be smaller and cheaper and should compete more effectively in the low end of mass market, the team said.

In addition to local Chinese carmakers, global OEMs are also showing off new products, and upcoming new models will include the Polestar 4, Smart #3, Lexus LM and Maybach SUV BEV, the team noted.

Shanghai auto show: Full schedule of 150 press conferences for exhibitors

The post Shanghai auto show: Deutsche Bank's preview appeared first on CnEVPost.

For more articles, please visit CnEVPost.

China auto sales sluggish on consumer sentiment, improvement expected in Q2, says Deutsche Bank

Price wars have now become the consensus among investors, setting a relatively low bar for EV makers to beat.

(Image credit: CnEVPost)

Low consumer sentiment in the wake of the Covid wave has led to weak auto sales in China, though the situation is expected to see relief in the second quarter, and the launch of new models and lower lithium carbonate prices are also encouraging, according to Deutsche Bank.

The underlying cause of sluggish auto sales in China can be mostly attributed to consumer sentiment. After a quick Covid reopening, consumers prioritized spending on services but reduced purchases of durable goods, Deutsche Bank analyst Edison Yu's team said in a research note sent to investors today.

In the first two months of the year, China saw a 12 percent year-on-year increase in the dining and lodging sector, and spending on food, clothing, jewelry and even furniture also increased, the team said, adding that the only exceptions were cars and smartphones, with the former falling 13 percent year-on-year.

In addition, as automakers cut prices, consumers felt more compelled to wait for better deals, the team said.

Price wars are now the consensus among investors, which has set a relatively low bar for electric vehicle (EV) makers to beat, the team said.

"In particular, and XPEV will see a clear sales/margin trough in 1Q followed by a large upswing from new model launches and lower lithium carbonate prices (4-6% points gross margin tailwind)," the team wrote.

Looking ahead, Deutsche Bank's China macro team believes consumer spending on durable goods should normalize in the second half of this year.

The job market is expected to improve due to a strong recovery in the service sector, and the real estate market is also on track to recover, benefiting from substantial excess household savings and favorable lending policies, according to the note.

These could lead to an increase in consumer confidence, which in turn could lead to a recovery in spending on cars and other consumer durables.

While the price war initially focused on EVs, traditional internal combustion engine automakers have also begun offering big promotions to clear their inventories, especially for vehicles that do not meet China's new emissions standards.

As a sign of the height of the price war, there were reportedly Toyota dealers offering a free gasoline car with the purchase of its bZ4x EV, which has been suffering from sluggish demand. Volkswagen has also cut prices on internal combustion engine and EV models in its lineup, the team noted.

This has led to an even more challenging pricing environment that should last at least through the end of April, Yu's team said.

"Ultimately, we expect weaker players to get squeezed out of the market (e.g., Enovate, Leap Motor, WM) and more stable pricing to emerge," the team wrote.

For the second quarter, the team continues to see industry volume growth and has raised its NEV retail sales forecast from 1.65 million to 1.75 million, implying a 32 percent quarter-on-quarter increase, a 49 percent year-on-year increase, and a 35 percent penetration rate.

Here's the team's take on the performance of the major EV makers that have already announced March deliveries.

March OEM recap

Li Auto delivered 20,823 vehicles (+25% MoM, +89% YoY), below our forecast. However, this still translated to nearly 20% market share of the 300-500k RMB premium SUV market in China. The new L7 five-seat SUV began deliveries in March and will see volume grow sequentially.

The company exited the month with 299 retail stores and 318 servicing centers.

NIO delivered 10,378 units (-15% MoM, +4% YoY), below our forecast. De-stocking of older 866 gen-1 models seems to be nearing an end.

Additionally, a face-lift is coming for the ET7 which is likely suppressing demand for that model. NIO exited the month with 1,339 battery swap stations and 1,285 fast charging stations.

XPeng delivered 7,002 units (+17% MoM; -55% YoY), below our expectations. P7 did sell 3,030 units though, representing a 32% sequential improvement. The P7i face-lift should help volume in 2Q as management expressed confidence in the initial order book.

also began the rollout of the first part of its XNGP high level ADAS platform in Guangzhou, Shenzhen, and Shanghai, enabling city pilot capabilities for its newest models.

Initially, the systems will still use HD mapping but this will be phased out in 2H23 allowing the full capabilities of XNGP to work in greater number of cities.

The company believes its software perception running on XNET deep neural network training will allow it to reduce reliance on HD mapping which only a few large cities have available.

delivered 6,663 vehicles (+22% MoM; +271% YoY).

NIO delivers 10,378 vehicles in Mar, down 14.6% from Feb

The post China auto sales sluggish on consumer sentiment, improvement expected in Q2, says Deutsche Bank appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Analysts explain how falling lithium carbonate prices affect EV costs

For an EV with a 70-kWh pack, the cost of the battery is now RMB 12,300 - RMB 14,500 lower than when lithium carbonate prices were at their previous high, analysts say.

Analysts explain how falling lithium carbonate prices affect EV costs-CnEVPost

Falling lithium carbonate prices are known to benefit the profitability of electric vehicle (EV) makers. So how will this price change affect the cost of EVs? A new research note provides a good analysis.

An EV powered by a lithium iron phosphate (LFP) battery typically uses 30-40 kilograms of lithium carbonate, while an EV with a ternary lithium battery consumes 50-70 kilograms of the material, said Haitong International Securities analyst Yang Bin's team in a research note today.

When the price of lithium carbonate drops by RMB 100,000 ($14,540) per ton, the cost of ternary lithium batteries and LFP batteries will see marginal decreases of RMB 60 to RMB 70 per kWh, respectively, the team's calculations show.

In this case, the battery cost would be RMB 4,200 to RMB 4,900 lower for an all-electric vehicle with a 70-kWh battery capacity.

This means that the current battery cost of an all-electric vehicle with a 70-kWh battery capacity is already RMB 12,300 - RMB 14,500 lower than when lithium carbonate prices were at their previous high, the team said.

As a backdrop, lithium carbonate prices have never seen a single day of gains in China this year and continue to fall by several thousand RMB today, according to data from Mysteel.

The average price of battery-grade lithium carbonate per ton in China fell by RMB 7,500 to RMB 256,500 today, down about 57 percent from RMB 590,000,000 last November. The average price of industrial grade lithium carbonate per ton also fell by RMB 7,500 to RMB 210,000 today.

Falling battery costs will drive down the overall cost of EVs, which will allow automakers to see their gross margins repair, according to Haitong's research note.

However, the team also noted that in the long run, automakers need to achieve technology upgrades, reduce costs and improve competitiveness in order to capture sufficient market share and profitability, considering EV penetration is already high in China.

With lower lithium carbonate prices, EV makers will have more room for pricing as they gain greater profit margins, the team said, adding that this is expected to allow them to gain greater market share by cutting prices.

Although the price of lithium carbonate has fallen by more than half from its high a few months ago, the team believes there is still room to fall.

In 2022, China's lithium resource supply was 727,000 tons and demand was 796,000 tons, the team said.

In 2023, China's lithium resource supply is expected to reach 1.088 million tons and demand is expected to be 1.034 million tons, according to the team.

With the supply of lithium resources outstripping demand, there is still room for lithium carbonate prices to fall, with the price of battery grade lithium carbonate expected to fall to around RMB 200,000 per ton by the end of 2023, the team said.

($1 = RMB 6.8772)

Panic selling of lithium carbonate just won't stop

The post Analysts explain how falling lithium carbonate prices affect EV costs appeared first on CnEVPost.

For more articles, please visit CnEVPost.

China EV industry sell-off creates opportunity, says Morgan Stanley

leads the pack with superior execution, but risk-reward increasingly favors and after a drastic sell-off this year, Morgan Stanley said.

Shares of major Chinese electric vehicle (EV) makers have generally suffered a sell-off so far this year, as the sector's weak sales at the start of the year and recent widespread price wars have raised investor concerns.

However, in Morgan Stanley's view, the sales potential of China's EV companies in the second half of the year is underestimated at a time when costs are sliding.

"We think YTD stock corrections should have discounted competition risks but underrate the cost-driven upside to EV margin/volume in 2H, " Morgan Stanley analyst Tim Hsiao's team said in a research note sent to investors on March 19.

As of Monday's close, NIO's (NYSE: NIO) US-traded ADR was down 10 percent this year, XPeng was down 8 percent, and Li Auto was up about 12 percent.

Hsiao's team believes that significant margin pressure from price wars will fuel market concerns about industry profitability and cash flow, especially among new energy vehicle (NEV) heavyweights, namely and China, which can afford to initiate another round of price cuts in the second quarter.

That, combined with weak full-year sales following the stimulus withdrawal, could dampen sales volumes and margins for EV brands in the first half of 2023, the team said.

Still, the production potential of China's NEV industry in the second half of the year and beyond appears to be underestimated as the decline in prices of batteries and key components accelerates following aggressive capacity expansion in 2022, the team noted.

This could translate into potential margin relief for NEV makers and potentially increase NEV penetration in the second half of the year in a cost-effective manner, the team said.

Hsiao's team estimates a 20-25 percent drop in battery costs for major NEV makers, implying a 6-10 percentage point cost savings.

The price drop of lithium carbonate, a key raw material for batteries, has accelerated in recent days and saw its biggest one-day drop so far this year on March 20, according to a CnEVPost report yesterday.

The average price of both industrial-grade lithium carbonate and battery-grade lithium carbonate fell by RMB 12,500 per ton on March 20, with the latest average price at RMB 272,500 per ton and RMB 312,500 per ton, respectively.

NIO's management said in a call with analysts after the March 1 earnings announcement that they expect lithium carbonate prices to fall back to around RMB 200,000 per ton this year, boosting gross margins back up.

EV makers that can take full advantage of this will not only enjoy margin relief, but also have more flexibility to price their models to further boost NEV penetration in mass markets and lower-tier cities, Hsiao's team wrote in their report.

"That said, the tailwinds from falling input costs may take time to kick in as our checks with major OEMs suggest they are still in discussions with battery suppliers on new terms," the team added.

The team believes that a tougher operating environment will accelerate market reshuffling, with leading EV manufacturers weathering the downturn better than their peers, while the growth of smaller, lagging EV startups could be slowed by a depletion of liquidity in 2023.

Growing investments should also push up cash burn rates. As a result, the ability to optimize working capital and access to market funding will play a more important role in ongoing operations in 2023, the team added.

"Our analysis suggests EV trio (NIO, XPeng, and Li Auto) will still hold fast, backed by healthy balance sheet conditions and better connections to capital markets," Hsiao's team wrote.

The team said they're fully aware of investor worries about EV startups' cash burn that may rapidly deplete their liquidity.

But they believe the EV trio can remain self-funded for the next 18 months, even under the stress-test scenario of a prolonged price war.

"We believe continuous investment would further solidify their technology leadership and enable them to have a better chance of winning out in the next up-cycle," the team wrote.

The team believes that trough valuations mean the market has lowered expectations for EV startups' operational performance and financial resilience in an industry downturn, making any marginal improvement in their sales a meaningful stock catalyst.

Li Auto leads the pack with superior execution, but risk-reward increasingly favors XPeng and NIO after this year's sharp dip, the team said.

Lithium prices see biggest drop this year in China as decline accelerates

The post China EV industry sell-off creates opportunity, says Morgan Stanley appeared first on CnEVPost.

For more articles, please visit CnEVPost.

XPeng Q4 earnings: Deutsche Bank’s first look

delivered weak 4Q results, accompanied by a muted 1Q outlook that shows March demand still under pressure, Deutsche Bank said.  |  XPeng US | XPeng HK

XPeng (NYSE: XPEV) reported weaker-than-expected fourth-quarter earnings today, and as usual, Deutsche Bank analyst Edison Yu's team provided their first impressions.

Here's the full text of the note the team sent to investors today.

XPeng delivered weak 4Q results (even softer than our preview), accompanied by a muted 1Q outlook that shows March demand still under pressure.

Deliveries for 4Q were already reported at 22,204 units, leading to revenue of 5.1bn RMB, below our 5.4bn and consensus 5.7bn on lower vehicle pricing and "other sales."

Total gross margin declined 480bps QoQ to 8.7%, missing our 11.5% estimate (consensus 12.1%), driven by much lower vehicle margin (5.7% vs. our 8.5% due to increased promotional activity; lowest since 2H20).

Opex of 2,986m RMB essentially matched our model as lower R&D offset higher SG&A.

All together, EPS of (2.57) came in worse than our (2.33) forecast. Management provided a slightly worse 1Q23 volume guidance than expected, calling for 18,000-19,000 deliveries, vs. our 19,500 forecast (translating into 4.0-4.2bn RMB in revenue).

This would imply March improving MoM to low 7,000 units at the mid-point.

ASP will continue to worsen following price cuts and unfavorable mix (G9 volume struggling).

XPeng Q4 revenue misses estimates, gross margin falls to single digit

The post XPeng Q4 earnings: Deutsche Bank's first look appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Fitch expects China’s NEV sales to maintain strong growth, while ICE vehicle sales to decline

Fitch expects sales of passenger NEVs in China to grow by more than 30 percent in 2023, while ICE vehicles will decline by the low teens.

The post Fitch expects China's NEV sales to maintain strong growth, while ICE vehicle sales to decline appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Deutsche Bank on China EV sales: Jan weak but price cuts should boost sales going forward

Deutsche Bank expects the latest round of price cuts to spur a big rebound in EV orders, with at least eight automakers already offering some type of price discount or promotion so far.

The post Deutsche Bank on China EV sales: Jan weak but price cuts should boost sales going forward appeared first on CnEVPost.

For more articles, please visit CnEVPost.

CICC expects China NEV sales to reach 1.5 million in Q1, with Jan as recent low point

CICC expects the first quarter to contribute 15.7 percent of China's 2023 NEV sales, with 20.7 percent, 27.6 percent and 35.9 percent from the second to fourth quarters, respectively.

The post CICC expects China NEV sales to reach 1.5 million in Q1, with Jan as recent low point appeared first on CnEVPost.

For more articles, please visit CnEVPost.

driive.com
All about Smart and Sustainable Mobility

Archives

May 2024
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
2728293031