With NIO, Li Auto already publicly traded in the US, and Xpeng set to go public in the US this month, there's a direct and measurable differentiation between these three Chinese EV companies based on their first half of 2020 performance.

Overall, NIO is still far ahead in terms of delivery and revenue size.

Li Auto is gaining market share with the Li ONE's unique range-extended technology.

Xpeng lagged slightly in the first half, but has a chance to gain market share in the second half with its differentiated sedan model, the P7.

NIO, Li Auto and Xpeng were founded around the same time and their founders have similar backgrounds. There has been a long-standing debate about which of them is better.

The different ideas and styles of the three companies determine their different product features and audiences.

To judge the business performance of the three companies, one needs to look for clues in the comparison of performance data over the same period.

In terms of revenue scale, NIO has a clear advantage, with Xpeng being overtaken by Li Auto.

NIO's revenue of RMB 5.091 billion in the first half of the year topped all three companies, and was much higher than Li Auto and Xpeng.

Li Auto has seen steady sales performance since deliveries began in December 2019, recording an operating income of RMB 2.752 billion in the first half of this year.

Xpeng, despite successfully following NIO in delivering vehicles in 2018, will only generate revenue of RMB 1.003 billion in the first half of 2020. That's only about 1/5th of NIO's and was surpassed by the later Li Auto.

NIO's revenue for the first half of 2020 will be RMB 5.091 billion, up 62.1% from the same period last year, mainly due to the steady increase in the number of NIO vehicles delivered.

2020 is already the third year that NIO has achieved vehicle production, and it already has two models on sale, the ES8 and ES6, and its third model, the NIO EC6, was released in the first half of this year and will begin deliveries in the near future.

The NIO's vehicle deliveries have been relatively smooth and delivery capacity is starting to climb, so revenue is showing a rapid upward trend.

Li Auto's pace of development is relatively slow due to its early product positioning, but it has gained momentum this year.

Although Li Auto is the latest of the three new car makers to achieve production vehicle deliveries, Li ONE has received high market acceptance since its launch.

Since its delivery last December, it has shown rapid revenue growth in every quarter. In the second quarter of this year, Li Auto generated revenue of RMB 1.9 billion, up 128.6 percent quarter-on-quarter from the first quarter. The company has also delivered more than 10,000 vehicles in the first half of the year.

The Li ONE's rapid market acceptance after its launch is in large part due to its range-extended plug-in hybrid powertrain energy output.

The so-called range-extended powertrain is an electric-only powertrain with a range extender (i.e. a conventional fuel engine) that burns gasoline to charge the battery under feeder conditions.

As there are still bottlenecks in battery storage and charging technology, and the density of public charging stations is not evenly distributed in domestic cities, consumers have varying degrees of "mileage anxiety" when buying electric vehicles.

Due to its special mechanical structure, Li ONE can run on both electric and fuel range, so there is no mileage anxiety. This is also an important reason why Li ONE has gained market share so quickly since its launch.

Even though the Li Auto is likely to be the only production car to be sold in the next year or two, given its technology and the current external environment, the Li Auto will still be able to maintain its sales momentum for a long time.

In contrast, Xpeng's performance in the first half of the year was a bit weaker.

Xpeng's first-half 2020 revenue of RMB 1.003 billion not only lagged far behind NIO and LI Auto, but also fell 18.6 percent year-over-year.

According to Xpeng's prospectus, the reason for its year-on-year revenue decline in the first half of the year was mainly due to the fact that many of the vehicles delivered in the first quarter of 2019 were orders accumulated in 2018, thus resulting in high revenue in the first quarter of 2019.

Also, the company's vehicle deliveries slowed down due to health events in the first quarter of this year, which led to a decline in first-half revenue.

However, this sluggish revenue growth could soon be broken for Xpeng as deliveries of the P7 model, which Xpeng introduced to compete with the Tesla Model 3, began in May, and is currently the only production sedan model among the three companies.

The P7 model has a significant advantage over Xpeng's original G3 model, both in terms of product positioning and differentiation, so you can expect Xpeng, with two production models, to have a strong chance to compete in the second half of the year.

For carmakers, revenue is often positively correlated with the number of vehicles delivered, and this rule is no different for the big three.

In the first half of the year, NIO delivered 14,169 ES8 and ES6 vehicles, far more than Li Auto's 9,500 and Xpeng's 5,499.

Despite being affected by a health incident in the first quarter, which shut down the plant and prevented offline deliveries of vehicles, NIO's vehicle deliveries exploded into the second quarter when production resumed.

The NIO's total deliveries for the first half of the year were up 87.9 percent compared to the same period last year, while the second quarter alone saw a 191 percent year-on-year increase, with 10,331 units delivered.

NIO continued its strong vehicle delivery momentum into July, delivering 3,533 vehicles in the month of July, up 322.1 percent year-over-year.

According to NIO's latest Q2 results, the company expects deliveries to be in the range of 11,000-11,500 units for the entire third quarter, representing an increase of 129.2%-139.6% year-over-year.

NIO's third production model, and the first of the three companies' coupe SUVs, the EC6, was successfully launched in July, and its production deliveries will begin in September.

Delivery of the EC6 will also allow NIO to diversify its product mix even further ahead of its competitors, as well as cater to a wider range of consumers.

However, it is worth noting that the popularity of coupe-based SUVs has not been high in the last two years. Whether it is BMW's X6, X4 or Mercedes-Benz's GLE, GLC coupe models, the annual sales figures are much lower than those of their regular versions, while showing a year-on-year downward trend. This also brings some uncertainty to the EC6's sales prospects.

As for Li Auto, the Li ONE is the best-performing product in the domestic new car segment in terms of initial delivery performance.

Since its official delivery in December last year, the number of Li Auto deliveries has increased rapidly. Excluding the impact of the health incident in the first quarter of this year, Li ONE delivered an average of more than 2,200 units in the second quarter, while in July, the company delivered 2,516 units, about 1,000 units short of the NIO's 3,533 units.

Unlike NIO and Li Auto, which went mid-to-high-end right off the bat, Xpeng's earliest compact SUV, the G3, is a low- to mid-range utility model with a 2020 price range of 146,800 yuan to 199,800 yuan (before subsidies), less than half the price of the NIO ES6 and EC6 (360,000-520,000 yuan).

While the Xpeng has a clear price advantage over the NIO and Li Auto, the price advantage does not translate directly into a sales advantage in terms of the final number of units sold.

The Xpeng G3 model delivered 12,728 units in all of 2019, well below the NIO's 20,565.

Unlike Li Auto and the NIO, which are riding high in the first half of 2020, Xpeng's deliveries in the first half of this year have instead fallen sharply. The company delivered just 5,499 vehicles in the first half of the year, down 23.3 percent from the previous year, and that's almost half the number of vehicles delivered by Li Auto and one-third of the number of vehicles delivered by NIO.

The good news for Xpeng is that deliveries of its latest production sedan, the Xpeng P7, climbed to 1,641 units by July, after deliveries began in May.

Xpeng also delivered 2,451 units in July overall, which is about the same number as Li Auto's July deliveries. We can expect the two companies to be extremely competitive in the number of vehicle deliveries in the second half of the year.

The biggest positive news for the first half of 2020 is that the gross profit levels of the leading players have improved significantly, with Li Auto and NIO gross margins already turn positive.

Xpeng has achieved a significant improvement in its gross margin, although it is still -3.6% in the first half of the year, compared to -24.3% in 2018 and -24% in 2019.

Li Auto is the best performer in terms of gross profit control.

Li Auto's gross profit has been in positive territory since volume deliveries, and has shown a consistent improving trend in the first two quarters of this year.

The company's gross profit margin was 8% in the first quarter and 13.3% in the second quarter, reflecting the company's ability to sustain the economies of scale of cost compression in the face of improved vehicle delivery volumes.

Of course, the range extended powertrain in the Li ONE has an advantage over the pure electric systems of the NIO and Xpeng in terms of overall manufacturing costs.

The entire drive system of "small battery + fuel engine + drive motor" of the range extended electric car is cheaper than the pure electric drive system of "one large battery + dual inverters + dual drive motors". This has resulted in Li Auto being gross margin positive since delivery.

Nonetheless, the continued improvement in gross margins despite high volume sales is a testament to the strength of Li Auto's cost control.

NIO's gross margin turnaround in the second quarter of this year was much higher than the market expected, and Li Bin exceeded its "ambitions" for the last quarter.

For the quarter, NIO's consolidated gross margin was 8.4 percent, compared to -33.4 percent in the year-ago quarter and -12.2 percent in the prior-year quarter. The company's vehicle sales margin reached an all-time high of 9.7 percent, compared to -24.1 percent in the year-ago quarter and -7.4 percent in the prior-year quarter.

The company's excellent cost control performance in the second quarter also contributed to NIO's consolidated gross margin of 2.9 percent in the first half, up from -23 percent in the same period last year.

Moving into the second half of the year, the company will have even more room for cost optimization with the gradual delivery of the EC6 and continued ramp-up of the ES6 and ES8 models.

For Xpeng, although the consolidated gross margin for the first half of the year was still -3.6%, it did not turn positive as successfully as NIO. However, compared to the same period last year, the company's gross margin improved by a net 34.6 percentage points, which is even more than the NIO.

As a result, with the launch of the new Xpeng model and the improvement of product strength, it is only a matter of time before the company's gross profit level is further enhanced after the sales volume is increased and the gross profit margin turns positive.

Although NIO and Li Auto both delivered excellent sales figures in the first half of the year, and the company's gross margins on the vehicle sales side have turned positive, there is still a long way to go before the company can achieve full profitability.

In the first half of the year, NIO, Li Auto and Xpeng posted losses of RMB 2.869 billion, RMB 152 million and RMB 796 million respectively. With the exception of Li Auto, which relies on a plug-in hybrid powertrain for its cost advantage, the losses were smaller, while NIO and Xpeng, as representatives of pure trams, still suffered larger losses. However, it cannot be denied that each company has made substantial improvement in its loss margin compared to previous years.

NIO has narrowed its losses to -56.3% in the first half of the year, compared to -188.2% in the same period last year, and -144.4% for the full year 2019, a significant narrowing of losses.

At the same time in the loss narrowing, NIO in the second quarter of this year for the first time in history to achieve positive cash flow from operating activities, which also marks the NIO to achieve a positive own hematopoietic capacity, relying solely on "financing to survive" the era also ended.

Li Auto has always insisted on cost control and is the closest among the three companies to achieving profitability on the profit side.

Li Auto's net losses for the first and second quarters of 2020 were only RMB 77.1 million and RMB 75.2 million respectively, just one step away from turning a profit. As with NIO, Li Auto's cash flow from operations also turned positive in the second quarter, reaching RMB452 million.

Compared to NIO and Li Auto, Xpeng's losses have been significantly reduced, but it still lacks the ability to produce its own blood.

In the first half of 2020, Xpeng's net outflow from operating activities was RMB 1.213 billion, higher than the size of its net loss, which means that Xpeng is still burning through money.

However, considering that the company delivered new models in May, the overall expenses in production, R&D, channels and sales are relatively high, thus pushing up the cash outflow from operating activities to some extent.

In terms of capital reserves, influenced by China and various local support for the new energy vehicle industry, the three companies have completed a huge amount of financing in the first half of this year.

NIO's financing with the Hefei government in the first half of the year has gradually landed on the ground. By the end of June this year, the company's cash reserves amounted to RMB 11.2 billion, with no risk of cash flow in the short term.

Li Auto successfully completed its IPO in the United States at the end of July, successfully raising over US$1.1 billion, and with the company's over US$500 million in financing completed at the end of June, the company's capital reserves are also strong.

Even Xpeng, which is temporarily lagging behind, recently announced it had raised nearly $800 million in Series C+ funding, including $300 million from Qatar Sovereign Fund and $500 million from Aspex, Coatue, Hillhouse Capital and Sequoia China.

But challenges continue to mount.

Since Tesla announced its stock split on Aug. 11, the stock price has been hitting new highs and the total market capitalization has exceeded $340 billion.

Tesla's rising popularity has reignited investors' enthusiasm for new energy vehicles, but at the same time it has repeatedly squeezed the living space of domestic new energy vehicle brands.

As Li Xiang, founder of Li Auto, said, China-made new energy car companies compared to Tesla, "compared to range, to intelligence, to price, all three have already won and did not change any results."

WM Motor has also never given up on making a push for the Top 3. According to media reports, WM Motor has also started the IPO process and will land on China's Nasdaq-style sci-tech innovation board, also known as the STAR market, at the earliest by the end of the year.

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