Will Chinese EVs pull a TikTok on Tesla?
By now we are all familiar with the growth story of TikTok and how it grew way faster than all western social networks, now Chinese EV stocks have been on a massive bull run and yesterday, possibly the most hyped EV company -NIO- announced their 2020 Q3 results:
Sales increased 147% YoY, margins finally went positive, all that good stuff.
But how does young NIO compare to Tesla’s early days? The deliveries per quarter tells the growth story:
After 10 quarters of deliveries, NIO is sitting at a rate of 12.2k deliveries per quarter, this is in contrast to Tesla’s end of first 10 quarters of delivering cars (back in Q4 2014) where they hit a rate of 9.8k deliveries per quarter.
NIO’s deliveries have been growing at an average rate of 40% QoQ, versus Tesla’s deliveries back in the day growing at 20% QoQ. This is despite NIO’s early ramp having to deal with the pandemic and yet still managing to beat young Tesla vis-à-vis.
So who is winning? It’s hard to tell right now. As Tesla has shown us, linear growth and exponential growth look the same in the early days. NIO’s CEO William Li talks about raising production quantities in 2021 to 150k-300k per annum (37.5k-75k per quarter), this would put NIO way ahead of Tesla’s historic ramp up.
The assumption is that the Chinese market is bigger (just based on population), but also easier to build up: Wealth is spread much less evenly in China in contrast to North America or Europe. Most of Chinese EV customers are located in coastal cities, while rural China is poor in comparison. This means that current EVs with not-so-great range present a stronger value proposition, and the reach of the charging network does not have to be as extensive as that of the US.
While NIO gets to lean on the technology and product awareness Tesla developed over the years, they also have to deal with the increased pressure of directly competing with it as well as many other Chinese EVs (Li, XPeng, BYD, et al).
A wave of price cuts for Tesla’s MIC (Made in China) vehicles is on the horizon as they continue to ramp up production. The price cuts could be greater than expected, with rumours of a Lithium Iron Phosphate battery pack in the cards for Tesla. This chemistry was previously written off for its low performance, but the increased efficiencies of powertrains and the pursue for cheaper EVs may have made them viable again. This would be a strong blow to NIO’s momentum, stirring up an intense rivalry.
