In 1994, George Costanza made television history when he dove into the water to save a struggling whale.
"The sea was angry that day, my friends - like an old man trying to send back soup in a deli," the Seinfeld character told his friends.
The sea's disposition hasn't improved much as far as some Chinese electric vehicle makers are concerned. 20 years later, almost to the day after the Seinfeld episode aired, He Xiaopeng, the CEO and founder of XPeng (XPEV) warned his employees about a "bloody sea" of competition.
"Facing the pessimistic macroeconomic situation, many business partners are drawing back and afraid to invest. I think this is an opportunity for our development," He said in February, according to Reuters, while describing 2024 as the first year of the "knockout round" for Chinese auto brands.
"In 2024, we will buck the trend and enter a high-speed positive cycle in the fourth quarter or earlier," the CEO wrote.
XPeng is one of four Chinese EV makers that Macquarie analysts have resumed covering in April.
Analysts Eugene Hsiao and Fergus Kwan raised concerns about the company's future, writing that "entering its tenth year, XPeng is at a crossroads."
Chinese market 'brutally competitive'
Hsiao and Kwan, who have a neutral rating on the company and a $7 price target, said, "2024 is shaping up to be a tough year for XPeng, with key launches only in 2H; any meaningful volume ramp looks likely to be a 2025 story."
"Early success was driven by emulating the unique go-to-market strategy of Tesla driven by technology differentiation," they wrote. "Now, in a brutally competitive market for China EVs, the company needs to transform its strategy to become more like traditional mass-market auto OEMs."
Related: Analysts overhaul Tesla stock price targets ahead of earnings
The analysts' report comes at a time when the EV market is contending with a slowdown in sales.
Elon Musk's Tesla (TSLA) , the world’s biggest EV maker, is letting go of more than 10% of its global headcount to "prepare the company for [its] next phase of growth."
The analysts give Nio (NIO) a neutral rating with a $5 price target, saying it was "near a turning point, but we think 2024 will be a transition year as the company refocuses on margins in spite of rampant competition."
"Nio has blazed its own path in the EV market offering a range of unique services from its Nio House lounges to the leading global battery swap network, "Hsiao and Kwan said, "but recent volumes have not come easy. China's EV market is rife with me-too models driving heavy competition."
Nio has been expanding its battery swap partnerships in an effort to relieve drivers’ concerns about range anxiety.
"The X-factor will be the upcoming mass-market Onvo L60 model, targeting the battleground Tesla Model Y category," the analysts said. "At the same time, we think Nio's quixotic quest for wider adoption of battery swaps may finally be reaching fruition, supporting its one-of-a-kind BaaS business model."
"This helps the company stand out in a relatively homogenous market," they added.
The analysts said Li Auto (LI) was the "range anxiety winner" as it has a "first mover advantage" for extended-range electric vehicles, or EREVs.
Analysts cite BYD's overseas expansion
"EREVs remain an attractive solution for high-end buyers who are looking to reap benefits of EVs like tax breaks, local subsidies, and license plates, but remain worried over range/charging bottlenecks of [Battery Electric Vehicles] BEVs," they said.
The analysts, who gave Li Auto an outperform rating with a $40 price target, said the company now stands alone among China's new wave of EV entrants, with the highest volumes, best vehicle margins, and rising cash generation.
Related: Tesla hit with 'unexpected delay' for delivery of newest model
"Management has a proven strategy to attack the domestic plug-in EV market with a user-first approach, leading it to successfully dominate the space for EREVs and premium plug-in EV SUVs," they wrote.
While the analysts said they foresee "teething problems" as the company shifts to BEVs and slightly lower price points, they believe the timing is ripe to pivot, and forecast only limited vehicle margin dilution due to the product mix.
The company has a clear product focus, with a targeted line-up of about 10 models by FY25 to sustain growth and profitability over the medium term.
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The analysts also gave an outperform rating to BYD (BYDDY) , and a $280 stock price target.
BYD, which surpassed Tesla for total EV sales for the first time in Q4 last year, is backed by Warren Buffett, the chairman and CEO of Berkshire Hathaway (BRK.A) (BRK.B) .
The analysts said the "Build Your Dreams" company's better cost base and rapid overseas expansion could support long-term global market share growth amid fierce competition within China.
Earlier this month, BYD said first quarter of 2024 sales fell 43% compared with the fourth quarter of 2023, handing back the title of the world's biggest EV seller to Tesla
BYD has responded since February to the price war Tesla started early last year in China by cutting prices on the latest versions of its lineup by 5%-20% from earlier iterations, Reuters reported.
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