The Chinese EV Surge of 2020

There are a lot of things going on with the sudden surge of the Chinese EV stocks. I am looking at 2 key indicators of what has happened in the past and probably a signal of what is up ahead. One is the coming US Biden term and the news regarding the covid-19 Vaccine.

With Joe Biden as the President of the Unites States, the Democratic Party of US will be able to push their agenda to boost the green energy shift. Both US and China could potentially work together which may result in boosting the EV market. As we all know, China is currently the home of many great EV companies. With the news regarding the vaccine for covid-19 coming sometime in 2021, there have been hopes ignited that an economic recovery might come sooner. This has caused a big boost on the stock market but greatly on the Chinese EV stocks.

Chinese EV companies are coming in hot. If EVs are going to replace ICEv, there must be a place where this technology can mature. Where can it mature? It will be in a country where there is a great competition and out of the influence of the big oil industry. This is set in China. China is a big oil importer, and it will be more economical if they rely less on oil and produce solar energy instead. With the current pollution in China, they have made switching to EVs a solution for this problem. China has been the most aggressive country in leading the shift to clean energy and they have heavily subsidized the New Energy Vehicles (NEV) which gives EV companies an edge over ICEv companies. This NEV subsidy extends all the wat to 2022.

Nio is currently leading China’s EV brands which is followed by Xpeng, Li Auto and BYD. While Tesla is leading the global EV race and electrification, the Chinese counterparts are showing a strong resilience in the EV market. The competition among all the companies mentioned above will be the true beginning of the EV transition. In 2019, there was only a recorded 4.9% EV market share in the entire vehicle market in China. There is lots of room for growth and development as China aims to reach a 20% EV market share by 2025.

The Rise of Tesla, Nio and Xpeng Begins in 2020

There are many doubts about the future of GM and Ford in the EV space. Those who do not compete in China will be in a disadvantaged position due to lack of understanding of what autonomy truly is and its future value. The importance of transportation technology and affordable energy seem to be not in the minds of Ford and GM. These two big companies may find themselves struggling to survive the transition as their main goal is only for the best interest of their investors and to just survive enough. Both GM and Ford are in a battle against other companies who are not only working hard to thrive but also leading in technology, software and free from the chains of the oil industry.

Tesla, Nio and Xpeng understand the true value of autonomy, the future of ride hailing and car ownership. Both Tesla and Nio have energy solutions where others failed to consider solving. Tesla designed the powerwall and solar to reduce the need of the unreliable power grid which is effective outside China. Nio created the battery swapping station as a solution for the lack of charging stations, parking space and infrastructures in China. Nio also offer a mobile service which allows people to charge their vehicles anywhere in the range of their services. (Nio is known to provide energy services to all EV brands.)

While there are other Chinese EV companies worth recognizing, Nio and Xpeng are the brands that has made the biggest move and recognition in 2020. This is the perfect year that has set our attentions to these two new companies about to emerge from China. I believe that there will be a great number of eyes watching these underdogs and will roof for them the same way many have rooted for Tesla. The younger generation could be more welcoming to the new technology and very unforgiving to anything that has anything to do with the oil industry.

Respect is well placed for Nio. This is a company that has come close to bankruptcy in mid of 2020 but was luckily saved by Tencent and received a bailout from the Chinese government. At that time, Nio has executed the impossible perfect execution and become the most recognized luxury brand in China. Elon Musk also have recognized Nio by giving a cheeky remark on Twitter. According to Elon, 420 is ten times better than 42. Tesla stock price was around $420 at the time and Nio was at $42. It is safe to say, “It is ON!”

The Phases of Growth for China’s Top EV Companies

There will be stages of transitioning to EV from ICEv. For the Chinese EV companies, they will go through key phases before they are recognized and accepted by the global market. Phase one is the expensive and risky investments to develop new tools and technology to enhance the user experience of EVs. This is to make cars smarter and provide a much greater safety features that extends the human senses. Phase two will be to increase market share and boost the data received by companies for analysis. This will give companies a chance to solve problems, improve efficiencies for level 4 and 5 autonomous driving and improving the technology within all electric vehicles. I believe that phase 2 is the key stage to enhance EV productions and quality. Communications between machines to AI and to human will be the key factor to teach EVs capable of solving intricate problems and take complicated turns. Phase 3 will be expansion. Phase 4 would be the 50% EV global market share mark. In this stage, it should already be evident that it is more economical to own an EV than an ICEv. Charging infrastructures should already be common. In this phase, more data will be analyzed, and companies will be able to add more useful features. Tesla is a big company, but they will never be able to convert the world to EV alone. Nio, Xpeng, Li, BYD, Geely and few more other probable companies will truly begin to compete. The EV market could create new multiple services that can generate revenues and make transportation a productive part of human lives.

Tesla is the undisputed leader not just in electric vehicles but also in the green energy solutions. It would take the combined effort of Nio, Xpeng and BYD to match Tesla and thrive in the next 20 years of eliminating gas cars. As of 2020, only Nio and Xpeng comes close to the technology that Tesla have. We just can not take this lightly because if we look at Ford and GM, they have nothing to show but promises. While Tesla is many years ahead of Nio and Xpeng, both Nio and Xpeng are many years ahead in technology and engineering if you compare them with the legacy automakers. I believe that Nio and Xpeng have the tools to become one of the common vehicles around the world along side Tesla.

What we see today can be small if you compare them to the greater common things. All the new technologies we have today in the development of electric vehicles are just the beginning. We are just creating tools that can create even greater EVs in the future. The global market share of EV might only be around 3% but this is a sign how infant the EV market truly is. I am optimistic of the future and I believe that we will see EV dominance. It will start in China and then spread around the world.

This is my outlook of China and the coming shift to EV.

Market Observation: November 2020

Here are the companies that started rallying right after Xpeng’s Q3 ER on November 12, 2020. The Rally proceeded with:

Nio – China

Xpeng – China

Li – China

BYD – China

Kandi – China

Fisker – US

Citron’s short report targeted Nio on November 13, 2020. It saw a drop but managed to recover half the losses. The stock started recovering in November 16.

A few 3-wheeler EVs also managed to gain momentum from the EV surge. Here is a shortlist:

Arcimoto – US

Ayro – US

Electrameccanina Vehicles Corp. – Canada

Last but not the least, it was announced on November 16, 2020 that Tesla is about to be added in the S&P 500. The addition is scheduled on December 21, 2020.