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China Earnings Electric eMobility eV Nio

NIO reports weaker-than-expected Q1 earnings, gross margin falls to 1.5%

reported revenue of RMB 10.68 billion in the first quarter, below market expectations of RMB 12.275 billion, compared to RMB 9.911 billion in the same period last year.

Previous data showed that NIO delivered 31,041 vehicles in the first quarter, slightly above the lower end of the guidance range of 31,000 to 33,000 vehicles.

NIO's previous revenue guidance for the first quarter was between RMB 10.93 billion and RMB 11.54 billion.

Below is its press release, as the CnEVPost article is being updated.

otal revenues in the first quarter of 2023 were RMB10,676.5 million (US$1,554.6 million), representing an increase of 7.7% from the first quarter of 2022 and a decrease of 33.5% from the fourth quarter of 2022.

Vehicle sales in the first quarter of 2023 were RMB9,224.5 million (US$1,343.2 million), representing a decrease of 0.2% from the first quarter of 2022 and a decrease of 37.5% from the fourth quarter of 2022. The decrease in vehicle sales over the first quarter of 2022 was mainly due to lower average selling price as a result of higher proportion of ET5 and 75 kWh standard-range battery pack deliveries, partially offset by an increase in delivery volume.

The decrease in vehicle sales over the fourth quarter of 2022 was mainly due to a decrease in delivery volume, and lower average selling price as a result of higher proportion of ET5 and 75 kWh standard-range battery pack deliveries.

Other sales in the first quarter of 2023 were RMB1,452.0 million (US$211.4 million), representing an increase of 117.8% from the first quarter of 2022 and an increase of 11.3% from the fourth quarter of 2022.

The increase in other sales over the first quarter of 2022 was mainly due to the increase in sales of accessories, provision of repair and maintenance services, provision of auto financing services, sales of used cars and provision of power solutions, as a result of continued growth of our users.

The increase in other sales over the fourth quarter of 2022 was mainly due to the increase in provision of auto financing services, sales of accessories, provision of repair and maintenance services, provision of power solutions and sales of used cars, as a result of continued growth of our users, and partially offset by a decrease in revenue from rendering of research and development services.
Cost of Sales and Gross Margin

Cost of sales in the first quarter of 2023 was RMB10,514.2 million (US$1,531.0 million), representing an increase of 24.2% from the first quarter of 2022 and a decrease of 31.9% from the fourth quarter of 2022.

The increase in cost of sales over the first quarter of 2022 was mainly driven by the increase in (i) delivery volume, and (ii) cost from the sales of accessories, provision of repair and maintenance services, sales of used cars and provision of power solutions, associated with increased vehicle sales and expanded power and service network. The decrease in cost of sales over the fourth quarter of 2022 was mainly attributed to (i) the decrease in delivery volume, (ii) the decrease in average material cost per vehicle as a result of higher proportion of ET5 and 75 kWh standard-range battery pack deliveries, and (iii) the inventory provisions, accelerated depreciation on production facilities, and losses on purchase commitments related to the previous generation of ES8, ES6 and EC6 in the fourth quarter of 2022.

Gross profit in the first quarter of 2023 was RMB162.3 million (US$23.6 million), representing a decrease of 88.8% from the first quarter of 2022 and a decrease of 73.9% from the fourth quarter of 2022.

Gross margin in the first quarter of 2023 was 1.5%, compared with 14.6% in the first quarter of 2022 and 3.9% in the fourth quarter of 2022. The decrease of gross margin from the first quarter of 2022 and the fourth quarter of 2022 was mainly attributed to the decreased vehicle margin.

Vehicle margin in the first quarter of 2023 was 5.1%, compared with 18.1% in the first quarter of 2022 and 6.8% in the fourth quarter of 2022. The decrease in vehicle margin from the first quarter of 2022 was mainly attributed to changes in product mix and increased battery cost per unit.

The decrease in vehicle margin from the fourth quarter of 2022 was mainly due to (i) changes in product mix, and (ii) increased promotion discount for the previous generation of ES8, ES6 and EC6, which were partially offset by (iii) the inventory provisions, accelerated depreciation on production facilities, and losses on purchase commitments for the previous generation of ES8, ES6 and EC6 in the fourth quarter of 2022.

Operating Expenses

Research and development expenses in the first quarter of 2023 were RMB3,075.6 million (US$447.8 million), representing an increase of 74.6% from the first quarter of 2022 and a decrease of 22.7% from the fourth quarter of 2022.

Excluding share-based compensation expenses, research and development expenses (non-GAAP) were RMB2,711.6 million (US$394.8 million), representing an increase of 79.1% from the first quarter of 2022 and a decrease of 23.7% from the fourth quarter of 2022. The increase in research and development expenses over the first quarter of 2022 was mainly attributed to the increased personnel costs in research and development functions and the increased share-based compensation expenses recognized in the first quarter of 2023.

The decrease in research and development expenses over the fourth quarter of 2022 reflected fluctuations due to different design and development stages of new products and technologies.

Selling, general and administrative expenses in the first quarter of 2023 were RMB2,445.9 million (US$356.2 million), representing an increase of 21.4% from the first quarter of 2022 and a decrease of 30.7% from the fourth quarter of 2022.

Excluding share-based compensation expenses, selling, general and administrative expenses (non-GAAP) were RMB2,239.3 million (US$326.1 million), representing an increase of 24.3% from the first quarter of 2022 and a decrease of 31.2% from the fourth quarter of 2022.

The increase in selling, general and administrative expenses over the first quarter of 2022 was mainly attributed to (i) the increase in personnel costs related to sales and general corporate functions, and (ii) the increase in expenses related to the Company's sales and service network expansion. The decrease in selling, general and administrative expenses over the fourth quarter of 2022 was mainly due to the decrease in sales and marketing activities and professional services.
Loss from Operations

Loss from operations in the first quarter of 2023 was RMB5,111.8 million (US$744.3 million), representing an increase of 133.6% from the first quarter of 2022 and a decrease of 24.1% from the fourth quarter of 2022. Excluding share-based compensation expenses, adjusted loss from operations (non-GAAP) was RMB4,522.4 million (US$658.5 million) in the first quarter of 2023, representing an increase of 163.6% from the first quarter of 2022 and a decrease of 24.8% from the fourth quarter of 2022.
Net Loss and Earnings Per Share/ADS

Net loss in the first quarter of 2023 was RMB4,739.5 million (US690.1 million), representing an increase of 165.9% from the first quarter of 2022 and a decrease of 18.1% from the fourth quarter of 2022. Excluding share-based compensation expenses, adjusted net loss (non-GAAP) was RMB4,150.1 million (US604.3 million) in the first quarter of 2023, representing an increase of 216.9% from the first quarter of 2022 and a decrease of 18.1% from the fourth quarter of 2022.

Net loss attributable to NIO's ordinary shareholders in the first quarter of 2023 was RMB 4,803.6 million (US$699.5 million), representing an increase of 163.2% from the first quarter of 2022 and a decrease of 17.8% from the fourth quarter of 2022. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted net loss attributable to NIO's ordinary shareholders (non-GAAP) was RMB 4,141.8 million (US$603.1 million) in the first quarter of 2023.

Basic and diluted net loss per ordinary share/ADS in the first quarter of 2023 were both RMB2.91 (US$0.42), compared with RMB1.12 in the first quarter of 2022 and RMB3.55 in the fourth quarter of 2022. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted basic and diluted net loss per share/ADS (non-GAAP) were both RMB2.51 (US$0.36), compared with RMB0.79 in the first quarter of 2022 and RMB3.07 in the fourth quarter of 2022.

Balance Sheet

Balance of cash and cash equivalents, restricted cash, short-term investment and long-term time deposits was RMB37.8 billion (US$5.5 billion) as of March 31, 2023.

Business Outlook

For the second quarter of 2023, the Company expects:

Deliveries of vehicles to be between 23,000 and 25,000 vehicles, representing a decrease of approximately 8.2% to 0.2% from the same quarter of 2022.

Total revenues to be between RMB8,742 million (US$1,273 million) and RMB9,370 million (US$1,364 million), representing a decrease of approximately 15.1% to 9.0% from the same quarter of 2022.

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China Electric eMobility eV Nio NIO ES7 NIO ES8 NIO ET5

NIO offers new options for ET5, ES7 and new ES8

ET5 and ES7 add gold exterior option, ET5, ES7 and new ES8 all add front wiper defrost feature.

(Image credit: )

NIO (NYSE: NIO) today began offering more options for three models in an attempt to increase their appeal.

Both the ET5 sedan and ES7 SUV are adding a gold exterior option effective immediately, with the option both priced at RMB 10,000 ($1,400), according to an article posted today by the NIO App.

ET5, ES7 and the new ES8 all have a new front wiper defrost function, all priced at RMB 1,000.

In cold weather, the front wiper defrost feature helps the wipers return to normal operation more quickly to clear snow and maintain clear visibility, the article said.

Vehicles with the optional front wiper defrost feature will receive an OTA update to get the software that works with it.

NIO has also updated the ET5 with optional wheel and tire combinations. The 19-inch five-spoke wheels are standard on the model, while other options are available for a fee ranging from RMB 3,500 to RMB 9,500.

The NIO ET5 was launched on NIO Day 2021 in December 2021, with the first delivery on September 30, 2022.

NIO ES7 was launched on June 15, 2022, with the first delivery on August 28, 2022.

The new ES8 was launched on NIO Day 2022, December 24, 2022, with deliveries to begin later this month.

NIO will report first-quarter earnings later today and hold an analyst call afterward.

The company delivered 31,041 vehicles in the first quarter, slightly above the lower end of its guidance range of 31,000 to 33,000 vehicles.

($1 = RMB 7.1248)

NIO to launch 'brand new NIO models' in Europe on Jun 15

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China Electric eMobility eV Tesla XPeng XPeng G6 XPeng Stock

XPeng surges in HK as investors seem to like G6’s pre-sale price

's stock traded in Hong Kong continues to rally after the announcement of the G6's pre-sale price, currently up about 5 percent.

XPeng (NYSE: XPEV) shares traded in Hong Kong rallied quickly after pre-sales of the new SUV G6 began, suggesting investors may be bullish on the pricing.

At press time, XPeng was up 5.03 percent to HK$34.45 in Hong Kong.

XPeng's local peer (NYSE: NIO) is now down about 0.08 percent in Hong Kong, while (NASDAQ: LI) is up 0.8 percent. Hong Kong's Hang Seng Index is up 0.58 percent.

XPeng opened up more than 2 percent in Hong Kong, but then fell quickly, giving back all of its gains at about 10:20 am.

The company announced at 10:16 am today that the G6 was up for pre-sale, with a starting pre-sale price of 225,000 yuan ($31,610). Its stock price continued to move higher after that.

The pre-sale starting price for the XPeng G6 is RMB 38,900 less than its direct competitor, the Model Y, and RMB 84,900 less than the RMB 309,900 starting price for XPeng's flagship SUV, the G9.

It is important to note that the pre-sale price is not the final price and XPeng may provide new pricing based on consumer feedback when the G6 is officially launched.

G6 show cars are already available at XPeng stores, and the model will be officially launched on June 29, with deliveries starting in July, the company said.

Analysts believe the G6 will be critical for XPeng as the company continues to face weak sales and financial performance.

"With margins and cash burn looking materially worse following 1Q earnings, we believe management may be making its last stand with the G6," Deutsche Bank analyst Edison Yu's team said in a May 30 research note.

The team's previous view assumed XPeng could see stable natural margin improvement from the sharp drop in battery input prices, but those savings were mostly offset by incremental promotional activity and a poor mix.

" Therefore, the importance of the upcoming G6 has become even GREATER," the team wrote.

Weak delivery performance over the past year has dampened XPeng shares, and they are down about 11 percent year to date.

XPeng begins pre-sales of G6 with starting price significantly lower than Tesla Model Y

($1 = RMB 7.1187)

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China Electric eMobility eV Nio NIO ES6 Nio ET5 Touring NIO Europe

NIO to launch ‘brand new NIO models’ in Europe on Jun 15

could bring the ET5 Touring and the new ES6 to European customers at a launch event next week.

NIO (NYSE: NIO) will launch new models in Europe next week, and the latest information suggests it may be more than just the ET5 Touring.

"Brand new NIO models are coming. June 15, 19:00 CEST," reads the text of a picture on the front page of NIO's English-language website.

"Join us online and get a preview experience of the brand new NIO models www.nio.com #inspiredbylife," NIO says in the text included in the "Add to Calendar" button on its website.

The event's European start time corresponds to June 15 at 1:00 pm US Eastern Time, or June 16 at 1:00 am Beijing Time.

Recent information indicates that NIO is expected to launch the ET5 Touring at the event, a model that has been seen frequently in Europe as well as China over the past two months.

The ET5 Touring has been quietly arriving at NIO stores in China, longtime NIO follower and car blogger @肉肉爸比ev said on Weibo yesterday.

The model will enter NIO's showrooms on the evening of June 9, and those interested can check it out on June 10, the blogger said, without providing any further information.

NIO will report first-quarter earnings before the US stock market opens on June 9 and then hold an analyst call.

NIO's management had previously mentioned that this variant of the ET5 would debut in Europe, and the model was developed primarily for European customers.

It's not clear if NIO will hold a separate launch for the model in China, as the company said on June 1 that the ET5 Touring will be launched globally in June and start its delivery with Chinese market.

NIO used the word "models" instead of "model" in the event preview on its English website, suggesting that it will launch more than one model at next week's event.

In addition to the ET5 Touring, NIO may also launch the new ES6 to local customers at the European event.

NIO launched the new ES6 in China on May 24, and deliveries began that night.

The new ES6 has a starting price in China of RMB 368,000 ($51,740) including batteries, making it the cheapest NIO SUV.

NIO last held a launch event in Europe on October 8, 2022, when the company introduced the ET7, EL7 and ET5 to European customers.

The EL7 is the ES7 sold in China, and that new name is due to NIO's lawsuit with Audi. The ES6 is expected to be similarly known as the EL6 in international markets.

($1 = RMB 7.1122)

ET5 Touring said to be available at NIO showrooms in China starting Jun 10

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China Electric eMobility eV Ford Industry News Mustang Mach-E Tesla

Ford scaling back ambitions for Mustang Mach-E in China amid poor sales

The Mustang Mach-E team will be integrated back into Ford China and the separate entity running the project will be written off in the future, according to local media.

(Image credit: Ford Mustang Mach-E Weibo)

Ford once had high hopes for the Mustang Mach-E's performance in China and set up a separate entity to run the line.

Now, after a long period of weak sales, the US auto giant is reportedly scaling back its ambitions for the program.

Ford China is recently undergoing an organizational restructuring that will see the Mustang Mach-E team integrated back into Ford China and the separate entity that runs the program written off in the future, local media outlet Jiemian said today, citing several sources familiar with the matter.

The organizational restructuring will involve more than 2,000 employees and is expected to be completed in July, according to the report.

Because Mustang Mach-E sales are so poor, the separate company will have trouble taking on losses for long, a person familiar with the matter said.

The integration of the team does not mean the Mustang Mach-E will be withdrawn from China, and the model will continue to be produced by Changan Ford, Ford's joint venture in China, according to the report.

Ford launched the Mustang Mach-E in China in April 2021, with the first deliveries coming on December 26 of the same year.

Zhu Jiang, then head of the program, joined Ford China in June 2020 and was responsible for Mach-E-related operations and management of marketing, PR, sales, service and customer experience.

Zhu joined as vice president of user development in March 2017 and left in March 2020.

In November 2021, Zhu left Ford to join Auto, Baidu's car-building arm, and earlier today, Jiemian reported that Zhu had left Jidu to join Lucid Motors.

Ford had high hopes for the Mustang Mach-E, setting up a company called Ford Electric Mach Technologies, or FMeT for short, in September 2022.

It was the first independent company in the Chinese market to be established by a foreign auto brand with a deep focus on the development and operation of smart electric vehicles to fully accelerate electrification and intelligence development, Ford said at the time.

Ford will build on its strong R&D capabilities to create products that meet the needs of Chinese consumers, it said.

But Mustang Mach-E sales in China have been weak, well below those of China's major electric vehicle startups.

Mustang Mach-E sales peaked at 1,535 units last December and then declined, selling just 332 units in April, less than a fraction of rival 's Model Y, Jiemian's report said.

Notably, last December's sales peak appears to have been driven by incentives introduced by Ford.

On October 24, 2022, Tesla lowered the prices of the entire Model 3 and Model Y lineup in China, with the entry-level, rear-wheel-drive Model Y's subsidized starting price dropping to RMB 288,900 ($40,610), down from the previous 316,900.

A few days later, on October 31, Ford announced a price cut for the entire Mustang Mach-E lineup in China, with the subsidized starting price dropping from RMB 275,900 to RMB 249,900.

China's purchase subsidies for NEVs expired at the end of 2022 and had not been renewed.

($1 = RMB 7.1140)

Ford offers up to $5,740 discount on Mustang Mach-E in China

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China Electric eMobility eV Nio NIO ET5 Nio ET5 Touring

ET5 Touring said to be available at NIO showrooms in China starting Jun 10

The ET5 Touring has arrived at stores and will be available in NIO showrooms on the evening of June 9, and those interested can check it out on June 10, according to a blogger who has been following NIO for a long time.

(Image credit: @肉肉爸比ev)

The ET5 Touring, a derivative of NIO's (NYSE: NIO) ET5 sedan, hasn't been officially launched yet, but it's no longer a secret.

The ET5 Touring has quietly arrived in NIO stores, longtime NIO follower and car blogger @肉肉爸比ev said on Weibo today.

The model will enter NIO's showrooms on the evening of June 9 and those interested can check it out on June 10, the blogger said, without providing any more information.

Notably, NIO has not yet announced an official launch date for the ET5 Touring, and the electric vehicle (EV) maker will announce first-quarter earnings before the US stock market opens on June 9 and then hold an analyst call.

On June 2, car blogger Wu Ying, who has about 1 million followers on Weibo, said the ET5 Touring will be launched on June 15.

On June 5, the first slide on the front page of NIO's English website showed a picture of part of the interior details of a model, with the text "Inspired By Life."

The date on the image implies that the event will take place on June 15.

The information on NIO's website does not suggest that the model is the ET5 Touring, but the image shows that it does not appear to have a HUD (heads-up display), and the ET5 is currently the only one in NIO's product lineup that does not support HUD.

NIO plans to launch a new model based on NT 2.0, the ET5 Touring, a midsize smart electric wagon that will begin deliveries to customers in June, it said when it announced May deliveries on June 1.

The ET5 Touring will be launched globally in June and deliveries will begin in China, it said in a separate press release.

For the ET5 Touring, Deutsche Bank analyst Edison Yu's team expects pricing of RMB 335,000 ($47,030) - RMB 345,000, which would be slightly higher than the regular ET5's RMB 328,000.

NIO management aims to capitalize on the success of the 001, which proves there is a sizable local market for luxury sport EV wagons, the team said in a research note sent to investors on June 5.

The ET5 Touring has been seen frequently in Europe as well as China over the past two months.

($1 = RMB 7.1232)

NIO Q1 earnings preview: Struggling along for another quarter

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China Electric eMobility eV EV Data Industry News Quarterly Data Tesla

China contributes 56% of global EV sales in Q1, Counterpoint says

The US overtook Germany as the world's second-largest EV market in the first quarter, while China remained in the lead, Counterpoint said.

(Image credit: CnEVPost)

In the first quarter, the US overtook Germany as the world's second-largest electric vehicle (EV) market, while China still holds the lead, market research firm Counterpoint Research said in a report yesterday.

Global passenger EV sales grew 32 percent year-on-year in the first quarter, with one in seven vehicles sold in the quarter being electric, the report said.

Global EV sales were largely driven by China with 56 percent of total EV sales in the first quarter coming from this market, said Abhik Mukherjee, a research analyst at Counterpoint.

In China, while overall passenger vehicle sales fell 12 percent in the first quarter, EV sales rose a remarkable 29 percent year-on-year, the report said.

The removal of subsidies for NEV purchases in China led to lower-than-expected EV sales in January.

cut prices on its models globally in January, and then other car brands announced similar price cuts on their models starting in February, which led to improved sales of EVs, the report said.

During the February-March period, nearly 40 automakers, including , , , Volkswagen, BMW, Mercedes-Benz, Nissan, Honda and Toyota, cut the prices of their vehicles by hundreds to tens of thousands of dollars, which eventually stoked a competitive price war in China, the report noted.

Initially, it was thought that the price war would soon be over and the automakers would benefit from increased sales. However, as the price war continues to stretch, several Chinese automakers have reported reduced earnings or even losses, according to the report.

Globally, battery electric vehicles (BEVs) accounted for 73 percent of all EV sales in the first quarter, while plug-in hybrid electric vehicles (PHEVs) made up the rest.

The top 10 EV models accounted for 37 percent of total passenger EV sales in the first quarter, with Tesla's Model Y remaining the world's best-selling model, followed by Tesla's Model 3 and BYD's Song, Counterpoint said.

In the first quarter, Tesla's Model Y became the world's best-selling passenger car model, even surpassing traditional fuel cars, according to the report.

By the end of 2023, global EV sales are expected to exceed 14.5 million units, said Soumen Mandal, senior analyst at Counterpoint, adding that US EV sales are expected to grow significantly this year with the implementation of the tax credit subsidy.

China NEV retail up 10.5% MoM to 580,000 in May, CPCA data show

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China Electric eMobility eV Industry News Lucid Lucid Team Tesla

Lucid prepares for China entry, hires ex-NIO, Ford exec Zhu Jiang

Zhu Jiang, a former executive at , Ford and Auto, has joined Lucid to head up its China operations, and he said Lucid is starting to prepare for its entry into the country.

(Image credit: Lucid Motors)

US electric vehicle (EV) startup Lucid Motors (NASDAQ: LCID) has hired an auto industry veteran in China, as it began hiring for a slew of positions late last year.

Zhu Jiang, who previously served in executive roles at NIO (NYSE: NIO), Ford (NYSE: F) and Jidu Auto, the car-making arm of Baidu (NASDAQ: BIDU), has joined Lucid to head up its China operations, local media outlet Jiemian reported on June 7.

Lucid is just starting to prepare for its entry into the Chinese market, Zhu told the outlet.

Since April, Zhu has been sharing information about Lucid in the status of his personal WeChat account, according to the report.

Lucid said on May 31 that it was raising about $3 billion through a new stock offering, most of which came from Saudi Arabia's Public Investment Fund (PIF), which controls it.

The financing is aimed at allowing Lucid to accelerate bringing state-of-the-art EV technology and product experiences to users across the industry and around the world, and China is looking forward to it, Zhu said recently, according to Jiemian.

Zhu is a Chinese automotive industry veteran who joined BMW Brilliance in 2003 to head marketing activities and served as Mini brand director from November 2008 to 2012.

He left BMW to join Lexus in 2013 and helped the automaker achieve its first 100,000-vehicle annual sales in China in 2016.

Zhu joined NIO in 2017 as vice president of user development.

He left NIO in the first half of 2020 and joined Ford China on June 1, 2020, as chief operating officer of the EV business unit.

During his time at Ford, he led the team through the production and launch of Ford's first all-electric vehicle, the Mustang Mach-E, in China.

In November 2021, Zhu joined Jidu as vice president and head of user development and operations. Jidu was officially launched on March 2, 2021 and the first model has been unveiled but has not yet hit the market.

Lucid was co-founded in 2007 by Bernard Tse, former vice president and director of , and Sam Weng, a former Oracle executive. In December 2016, Lucid's first production car, the Lucid Air, was launched.

Lucid is targeting the high-end luxury EV market, with the Lucid Air starting at a current price of $87,400.

In July 2021, Lucid went public on NASDAQ through a merger with a special purpose acquisition company (SPAC) and currently has a market cap of $14.5 billion.

In November 2021, Lucid said in its first earnings report after listing that it planned to enter the Chinese market in 2023.

The company's CEO, Peter Rawlinson, said in a CNBC interview at the time that Lucid will build a factory in China by "mid-decade".

In December 2022, Lucid's website opened up 14 jobs in China, all of them in Shanghai, in areas including hardware engineering, supply chain, retail, logistics, digital, and legal.

Three of the 14 jobs were related to localization, implying that Lucid was launching preparations to enter China at that time.

US EV startup Lucid hiring for 14 jobs in China

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CATL China Electric eMobility eV Insights Research Note

CATL shares plunge after Morgan Stanley downgrades rating to underweight

Second-tier battery makers may adopt a more aggressive pricing strategy to gain market share in the second half of the year, and could face increasing risks to its market share and margins in the domestic market, Morgan Stanley said.

Morgan Stanley downgraded its rating on CATL, citing market share risks, sending shares of the Chinese power battery giant tumbling in morning trading.

"We downgrade CATL to UW as we think second-tier battery makers may adopt more aggressive pricing strategies to gain market share in 2H23," analyst Jack Lu's team said in a research note sent to investors earlier today.

As of press time, CATL shares traded in Shenzhen were down about 6 percent to near their lowest point of the year.

Earlier this year, Morgan Stanley upgraded CATL to equal weight, while being bearish on most battery material makers, as it believes CATL is better able to respond to slowing demand and leverage its cost advantages and bargaining power across the broader value chain.

Now, Lu's team believes that the dual-sourcing battery strategy of local EV companies may help the Tier 2 battery makers achieve their goals, while CATL may face increasing risks in terms of market share and margins in the domestic market.

In February, CATL launched a lithium rebate program to trade cheap lithium resources for market share. However, the subsequent plunge in lithium prices to below RMB 200,000 per ton has led to significant uncertainty about the program, the team said, adding that they have not received any further news about the program.

Meanwhile, battery makers have been offering fairly significant price cuts against the backdrop of falling lithium prices in the second quarter, the team noted.

"Our checks with tier-two battery makers indicate that the price cuts could be in the range of 10-20% during the quarter, with some battery makers likely offering more aggressive cuts than others," the team wrote.

Such actions could threaten CATL's market share in its domestic market, and market share potential is an important stock price driver, the team said.

CATL's power battery installed base in China was 10.26 GWh in April, ranking first with a 40.83 percent share, but down from 44.95 percent in March, China Automotive Battery Innovation Alliance (CABIA) data from last month showed. Data for May is Expected to be available in a few days.

(NYSE: NIO) and (NASDAQ: LI) are bringing in new battery suppliers instead of making CATL their sole supplier, Lu's team noted.

"With many new models being launched in the domestic EV market, we think CATL's domestic market share could come under pressure," the team said.

As background, since late last year, regulatory filings for NIO's new NT 2.0-based models have shown battery suppliers that include the smaller CALB in addition to CATL.

Last month, NIO filed to use semi-solid-state batteries from Beijing WeLion New Energy Technology in its models.

On February 8, Li Auto officially launched its first five-seat SUV, the Li L7, and announced the introduction of Sunwoda Electric Vehicle Battery and Svolt Energy as new battery suppliers.

More and more Tier 2 companies are adopting increasingly aggressive pricing strategies, and CATL may have to do the same, according to Lu's team.

Despite a short-term recovery in value chain orders, there will still be excess battery capacity in the short term and price competition is inevitable, the team said.

In addition to the market share pressure it faces domestically, Lu's team believes CATL's overseas path is increasingly uncertain.

"Some investors have argued that CATL's market share overseas is yet to see signs of decline; however, in our view CATL's overseas market is under increasing scrutiny and becoming more and uncertain, limiting visibility," the team wrote.

CATL has tried to penetrate overseas markets through exports and localization of production, but both pathways are increasingly at risk due to geopolitical tensions, particularly in the US, the team said.

Notably, Lu's team stressed that if the cost of battery materials and minerals continues to fall, this could give car companies more room to pursue new technologies and other battery performance metrics.

"If this is the case, CATL could regain any lost market share and continue to dominate the global battery market, leveraging its strong R&D capabilities and bargaining power over the supply chain. Our bull case scenario assumes 60% global market share in the long term," the team wrote.

Global EV battery market share in Jan-April: CATL 35.9%, BYD 16.1%

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Neta shipping new batch of 4,000 EVs to overseas markets

is actively preparing for entry into the European market and will release a heavyweight global model, it said.

(Image credit: Neta)

Neta Auto, the electric vehicle (EV) brand of Hozon Auto, is sending a new shipment of thousands of EVs to overseas markets for the second time in three months.

A total of 4,000 Neta EVs are being sent abroad, the latest new batch after 3,600 vehicles were sent to overseas markets in March, the company said yesterday in a WeChat post.

Neta did not mention which countries the vehicles will be sent to, although it's possible they will still be in Southeast Asia. A total of 3,600 of the compact SUV Neta V vehicles were sent to Thailand on March 21.

Thailand is Neta's home base for expanding into the ASEAN market, and the Neta V is trusted and loved by local consumers, Neta said yesterday.

From January to April, Neta V ranked second in Thailand with a 16.5 percent share of all-electric vehicle license plate registrations, Neta said, citing data from Thai website AutoLife.

Neta is now actively preparing for its entry into the European market and will participate in the Munich auto show in Germany later this year, and the Neta GT sports car will be launched in overseas markets in the near future, it said.

Neta will also release a heavyweight global model that will accelerate bringing high-quality electric smart cars within reach, it said, without giving further details.

Neta has been seen as a budget EV maker since its inception in October 2014, as its vehicles are priced primarily to target the lower end of the market. The company is trying to create a higher-end image with its flagship sedan, the Neta S, and its sports car, the Neta GT.

As the EV market in China becomes more competitive, local car companies including Neta and (NYSE: NIO) are starting to make more efforts to expand overseas.

Unlike NIO, which is targeting the more developed European market, Neta is focusing its initial efforts on overseas expansion in Southeast Asia.

On August 24, 2022, the right-hand drive version of the Neta V was launched in Thailand as its first model to be offered there.

On March 10, 2023 Neta laid the foundation stone for its factory in Bangkok, Thailand, which will be its main manufacturing base for building right-hand drive electric vehicles for export to ASEAN.

On May 11, Neta announced its entry into Malaysia, officially launching the right-hand drive version of the Neta V for local consumers at the largest auto show in the region.

Neta delivered 13,029 units in May, up 18.35 percent from 13,029 units in the same month last year and up 17.59 percent from 11,080 units in April, according to data released by the company on June 1.

From January to May this year, Neta delivered 50,285 vehicles, up 0.62 percent from 49,974 in the same period last year, data monitored by CnEVPost showed.

Neta deliveries up 18% MoM in May, denies HK IPO plan

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