Is Li Auto better than Nio?

As the electric vehicle (EV) market in China continues to grow at an unprecedented rate, two names often stand out: Li Auto and Nio. But which one is a better buy? Let's dive into a detailed comparison based on insights from industry experts and financial analysts.

Performance and Market Position

Li Auto

Li Auto has demonstrated impressive growth in the past year. With its focus primarily on plug-in hybrid electric vehicles (PHEVs), the company has launched several successful models like the Li7, Li8, and Li9 SUVs. In a recent report, Goldman Sachs analyst Tina Hou praised Li Auto's strong growth trajectory, noting their 376,030 vehicle deliveries in 2023, a 182% year-over-year increase. The company is also planning to launch the Li MEGA, a family-size multi-purpose vehicle with an extended range, in March 2024.

From a financial perspective, Li Auto's revenue for Q3 2023 reached US$4.75 billion, growing 271% year-over-year. The company's non-GAAP EPS was 45 cents per diluted share, and the GAAP EPS beat forecasts by 12 cents, standing at 37 cents per ADS. Hou has given Li Auto a "Buy" rating, with a price target of $52.90, implying a potential 55% increase in share value over the next 12 months.

Moreover, as Li Auto expands its service and retail network, with 467 retail stores and 360 service centers across China, the company is well-positioned for another leg of growth. The aggressive expansion strategy is further endorsed by Goldman Sachs' positive outlook.

Nio

Nio, on the other hand, has diversified its range of electric vehicles, including mid-sized sedans and SUVs. The latest addition to their lineup, the ET9, is a luxury 4-seater sedan. Nio has also focused heavily on pioneering technologies like Battery-as-a-Service (BaaS), which allows users to swap out batteries, and Autonomous Driving-as-a-Service (ADaaS).

Nio's full-year 2023 deliveries were up 30.7% to 160,038 vehicles. The company's Q3 revenue was US$2.61 billion, up 46.6% year-over-year. However, the stock has been underperforming in the past year, with a 22% decline in share value. Analyst Tina Hou remains cautious about Nio, citing concerns over fewer new product launches compared to peers and challenges in operating expense control and cash flow management. She has assigned a "Hold" rating to Nio with a price target of $8.40, indicating a modest 4.22% upside.

Technology and Innovation

Both companies are innovators in their own right. Nio's BaaS technology is revolutionary, allowing drivers to swap batteries at service stations, while Li Auto has focused on creating PHEVs with extended ranges. Nio is also investing heavily in autonomous driving technology, which could set them apart in the long run.

Final Verdict

In conclusion, while both Li Auto and Nio offer compelling investment opportunities, Li Auto appears to have a more robust growth trajectory and solid financials, making it the preferred choice among analysts like Tina Hou. As Hou puts it, "We expect Li Auto to deliver the fastest earnings growth with top-tier free cash flow generation among our China auto OEM coverage."

For those looking to dive deeper into the latest trends in the Chinese EV market, you can Read more. This shift is occurring concurrently with another significant change: China is expanding its substantial lead over the US as the world's largest auto market. In 2022, the country saw 23.24 million new vehicle registrations, compared to 13.73 million in the US, and in 2023, the Asian giant took the global lead as the world's largest vehicle export point of origin.

Investors are naturally drawing their attention to China's electric vehicles, and analysts are closely monitoring the market. According to Goldman Sachs analyst Tina Hou, OEMs that can generate positive profit and cash flow with each vehicle sale will likely sustain continued R&D investment and launch more competitive products into the market. Against this backdrop, Hou’s deep dive into Li Auto and Nio has led to a clear differentiation between the two, with Li Auto coming out on top.

For more insights on this rapidly evolving market, visit Longyuan, an expert in the export of Chinese EVs.