Source: Beast Finance Author: Beast Finance
Electric cars are eating the world
Electric vehicles have long been a fringe technology in the U.S. (at the time largely concerned by environmentalists and tech circles in California). Even Tesla (TSLA), which is now in full swing, only released the first chapter of its secret ambition in 2006, three years after its establishment, and for a long time, Tesla was on the edge of the auto industry.
It wasn't until after the outbreak that investor sentiment was exceptionally high that Tesla's stock price hit new highs again.
And 12 years later, in 2015, Tesla's competitor in the Chinese market, Li Auto (LI), was established and successfully listed on the US stock market during the epidemic (2020).
In this article, Boldbeast Finance will conduct a comprehensive and in-depth analysis of Tesla and Li Auto in terms of revenue, profitability, operating capabilities, 2023 and future prospects for these two companies.
According to data from the Travel Association, 22% of China's new car sales in 2022 are pure electric vehicles, and sales in December increased by 83% year-on-year. In 2020, the market share of pure electric vehicles in China is only 5.1%, but the market share of pure electric vehicles has increased by 4.3 times in just two years.
In the UK market, sales of electric vehicles will also surpass those of petrol vehicles for the first time in 2022. The sales of electric vehicles in the U.S. market in 2022 have also exceeded 750,000, an increase of 57% over the previous year. Sales of electric vehicles have accounted for 5.6% of the overall U.S. auto market.
Comparison of Revenue, Profitability, and Operating Capability
In terms of operating capabilities, Tesla has now become a behemoth with a market value of $511.5 billion, and is the best-selling electric vehicle brand in countries such as China, Germany, Norway, Denmark, the United States, and the United Kingdom.
Li Auto, with a market capitalization of $24.4 billion, is the third best-selling EV brand in China after years of development.
In terms of sales, Tesla delivered a total of 412,180 electric vehicles in the first quarter of 2023, an increase of 36.4% over the same period last year (310,048 sales in the same period last year).
In the first quarter of 2023, Ideal Auto delivered a total of 52,584 electric vehicles. Although the sales volume of Ideal Auto is not as high as that of Tesla, the growth rate of Ideal Auto is faster than Tesla. The sales of Ideal Auto in the first quarter of 2023 An increase of 65.8% over the same period last year.
Li Auto's extended-range hybrid SUV Li ONE will sell 78,792 units in 2022, while Tesla's high-end SUV Model Y will sell 315,607 units in 2022, making Tesla the best-selling car in China. One of the electric car brands.
In terms of revenue, Tesla’s revenue in the fourth quarter of fiscal 2022 was US$24.32 billion, a year-on-year increase of 37.2%, in line with consensus expectations. Revenue from the auto business was $21.3 billion, up 33% from $15.9 billion in the same period last year, and drove Tesla to generate a gross profit of $5.5 billion in the fourth quarter of fiscal 2022, but the gross margin was only 25.9%. That was down about 466 basis points from a year earlier.
Ideal Auto's revenue in the fourth quarter of fiscal year 2022 was US$2.56 billion, an increase of 66.2% over the same period last year, which was US$10 million higher than the market's consensus estimate, but the gross profit margin of Ideal Auto in the fourth quarter of fiscal year 2022 Only 20%, lower than 22.3% in the same period last year, and about 590 basis points lower than Tesla.
At present, the gross profit margin of these two companies is declining, and the price cut will further accelerate the decline of their respective gross profit margins.
In terms of profitability, Tesla's overall gross profit margin is also much higher than that of Li Auto, and Tesla's scale is also 24.4 times that of Li Auto. Tesla's GAAP net income in the fourth quarter of 2022 was US$3.7 billion, a year-on-year increase compared with the same period last year. The US$2.3 billion increased by 59%, and the profit margin was 15.27%. This makes Tesla's overall profitability much stronger than that of Li Auto.
This is also the second biggest difference between the two companies besides the market and scale.
In terms of profit margins, Tesla’s profit margin is also more than 12 times higher than that of Li Auto. In the fourth quarter of 2022, Tesla achieved net operating cash of US$3.3 billion and free cash flow of US$1.4 billion. That brings Tesla's profit margin to 17.7%. In contrast, Ideal Auto’s net profit in the fourth quarter of 2022 was US$38.5 million, a year-on-year decrease of 10.2%, and the profit margin was about 1.46%, which was single digits. However, Ideal Auto’s net cash from operating activities ($714.1 million) increased by 28.4% compared with the same period last year, and free cash flow ($472.3 million) also increased by 101.6% compared to the same period last year.
2023 and beyond
In terms of profitability, Tesla is rated A+ by Wall Street, and its profitability metrics are well above the median of its peers. In particular, Tesla's common stock yield has reached 33.6%, which is 185% higher than its peers.
In terms of profitability, Li Auto was rated B+ by Wall Street.
Although Li Auto's profitability is poorer and its profitability indicators are lower than Tesla's, Li Auto has been able to convert more revenue into positive operating cash flow and generate $8.2 billion in cash and cash in the fourth quarter of 2022. Short-term investment balance ($7.3 billion in Q3).
Tesla's cash and short-term investment balance in the fourth quarter of 2022 was US$22.2 billion (US$17.7 billion in the same period last year), an increase of 5.1% compared to the same period last year.
ING, the world's 11th largest asset management company, predicts that by the end of 2023, the share of China's electric vehicle market will increase by at least 50%, and by the end of the 2020s, the sales of electric vehicles in the Chinese market will also exceed Gasoline vehicles (China is a huge market and both companies will see substantial growth over the next decade). Although Li Auto has lower profitability metrics than Tesla, Li Auto is growing faster than Tesla and earning more cash from operations.
ING also predicts that by 2027, the sales of electric vehicles in the US market will grow at a compound annual growth rate of 22.8%.
In some respects, the United States is equivalent to China in 2020, and the growth rate of the US electric vehicle market will be very obvious in the next few years, especially with the support of the electric vehicle credit policy provided by the "Inflation Reduction Act", so, Tesla's growth could still accelerate.
in conclusion
Since the current growth rate of Li Auto in the Chinese market is faster than Tesla, in terms of growth rate, Boldbeast Finance is optimistic about Li Auto, but in terms of profitability, we are optimistic about Tesla.
But Tesla has reduced the risk of a slowdown in China by building new factories in various countries around the world, and countries such as the United States and Europe are now rolling out massive subsidy programs to promote the adoption of electric vehicles and develop a gradual A specific date for phasing out gasoline cars, so that could help further boost demand for EVs and also help accelerate Tesla's growth in the global market.