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Why investing in China electric vehicle market?

Over years of development, China became the largest single-country auto market in 2010 and the development is still going on. In 2019, China ranked the highest in the Roland Berger’s e-mobility index, together with United States and Germany. According to Wikipedia, China was the top-selling light-duty plug-in electric vehicle country markets in 2019. However, plug-in electric car ownership per capita in China is still very low. It just shows the potential of electric vehicle market in China. By active investment in listed China electric vehicle maker or passive investment in related ETFs, investor can enjoy the future growth of this market.

NIO Limited (NIO)

NIO limited is a pioneer in China’s premium electric vehicle market which listed in New York Stock Exchange on 12 September, 2018. NIO introduced its first model EP9 supercar in 2016. After the success of EP9, NIO continuous to diversify its product portfolio, which including a 7-seater electric SUV ES8, a 5-seater electric SUV ES6 and a new model SUV EC6.

According to NIO 2020 Q2 quarterly result, deliveries of vehicles were 10,331 which increased by 190% yoy. Total revenues were RMB3,718.9 million which increased 146.5% yoy. Net loss was RMB1,176.7 million which narrowed 64.2% yoy.

Li Auto Inc. (LI)

Li Auto Inc. is an new energy vehicle maker in China which listed in Nasdaq on 30 July, 2020. Currently, Li Auto only offer one 6-seat SUV LI ONE which was launched in November 2019 and delivered over 10,400 units.

According to its August 2020 delivery update, 2020 Q2 delivery was 6,604 which increase 128% when compare with 2020 Q1. From its IPO prospectus, total revenue for Q1 2020 was RMB 851.67 million which increased 199% from Q4 2020. Net loss for Q1 2020 was RMB 77.11 million which narrowed 96.8% from Q4 2020.

XPeng Inc. (XPEV)

Xpeng Inc. is a leading Chinese smart electric vehicle company which listed in New York Stock Exchange on 27 August, 2020. Currently, Xpeng product portfolio including SUV model G3 and a four-door sports sedan P7. A new sedan model was expected to launch in 2021.

According to its IPO prospectus, Xpeng delivered 2,451 Smart EVs to customers in July 2020. Total revenue as six months ended 30 June, 2020 was RMB 1,002.85 million which decreased 18.56% yoy. Net loss as six months ended June 30, 2020 was RMB 795.8 million which narrowed by 58.5% yoy.

BYD company (01211)

BYD company is a lending electric conglomerate which listed in Hong Kong Exchange. BYD produces both internal combustion engine vehicle and new energy vehicle. Its business units including automobile, handset components and assembly, rechargeable batteries and photovoltaic. According to its 2020 interim report, 52% total revenue was from automobile, 40% total revenue was from handset components and assembly, 8% total revenue was from rechargeable batteries and photovoltaic. One of the main advantage of BYD is its cutting-edge battery technology. In March 2020, BYD released and mass-produced its next-generation battery product, the “Blade Battery”.

From its 2020 interim report, total revenue was RMB 58,028 million which decreased 2% yoy. Earning per share was RMB 0.56 which increased 14.2% yoy.

Geely Auto (00175)

Geely auto is a leading auto maker in China which listed in Hong Kong Exchange. Same as BYD, Geely auto also produces both internal combustion engine vehicle and new energy vehicle. According to its 2020 interim report, 29,214 units of new energy and electrified vehicles (“NEEV”) models were sold during the first half of 2020 which account for 5.5% total sell of the group. New energy vehicles and SUV models remained the Group’s focus for future development.

From its 2020 interim report, total revenue for 2020 first half was RMB 36,819 million which decreased 22.5% yoy. Earning per share for 2020 first half was RMB 0.2473 which decreased 44.28% yoy.

Global X China Electric Vehicle ETF (02845/09845)

Global X China Electric Vehicle ETF listed in Hong Kong Exchange which provide both USD and HKD traded units. The aim of this passive ETF is to seek for investment results that, before deduction of fees and expenses, closely correspond to the performance of the Solactive China Electric Vehicle Index NTR.

According to its fact sheet as of 31/08/2020, 32.65% asset invested in electric equipment, 26.28% asset invested in chemical and 14.39% asset invested in machinery. Only 10.49% asset invested in automobiles.

There are two advantages using ETF over single stock for investing China electric vehicle market. Firstly, the ETF invest mainly in China stock market which may difficult to access for individual investor. Secondly, the ETF cover the whole supply chain over the electric vehicle market in China. It is well diversify and able to reduce the risk from any single stock.

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