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Last week, Xpeng Motors (XPEV) and Nio (NIO) released their fourth-quarter earnings, and both stocks fell after their respective reports. However, on a year-to-date basis, Xpeng Motors is outperforming Nio and other Chinese electric vehicle (EV) peers by a wide margin. In this article, we’ll analyze the recent earnings of Nio and Xpeng Motors and examine which of these is a better buy.
Nio and Xpeng Motors Delivered Record Vehicles in Q4
Both Nio and Xpeng Motors delivered a record number of vehicles in Q4, with shipments rising by 45.2% and 52.1% year-over-year, respectively. Both companies showed significant improvement in their gross margins, and while XPEV’s gross margin rose to 14.4% in Q4, the corresponding number for Nio was 10.7%.
Looking at the Q1 guidance, Xpeng Motors expects its sales to more than quadruple in the current quarter while Nio’s guidance implies a year-over-year rise of around 40% at the midpoint. While the steep rise in Xpeng Motors’ deliveries is arguably coming from a low base, it expects its absolute deliveries to be 92,000 at the midpoint which is over twice what Nio has guided for.
Looking at the full-year guidance, both Nio and Xpeng Motors expect their deliveries to double this year and are targeting a breakeven in the final quarter of the year. It would however be fair to say that Xpeng Motors’ management sounded more optimistic about the company’s ability to hit these numbers.
Nio’s Onvo Brand Did Not Perform Well
The divergence in financial and operating performance of Nio and Xpeng Motors is primarily due to how their new models have fared. Xpeng Motors’ Mona M03 has been a success story and the model’s monthly sales have topped 10,000 for three consecutive months. The company’s P7+ also achieved the milestone of 30,000 cumulative deliveries in the first three months of its launch.
However, Nio failed to achieve scale with its Onvo brand – a sub-brand the company created to target the budget market. During the company’s Q4 2024 earnings call, CEO William Li admitted that Onvo’s “sales performance starting this year didn't meet our expectation” and said that the company is struggling with fresh orders for the brand. He attributed Onvo’s poor performance to poor brand awareness, “fierce competition” and “PR attacks.”
Xpeng Motors Is Progressing Well with Its AI Strategy
Notably, Xpeng Motors is positioning itself as an artificial intelligence (AI) play and boasts of among the most advanced autonomous driving systems in China. It is hopeful of achieving L3 autonomy later this year and L4 – or fully autonomous driving – in “low-speed scenarios” next year. Xpeng Motors is perhaps the most ambitious emerging new energy vehicle (NEV) company in China and aims to mass-produce humanoid robots and flying cars by 2026.
During the Q4 earnings call, UBS analyst Paul Gong questioned Nio management about its AI strategy and said that while the word “AI” was mentioned 49 times during one of its peers’ earnings calls – a reference to Xpeng Motors – it hardly featured during the company’s call.
In response, Li said that Nio was the first company to come up with an AI companion in its vehicles and added that its Nio capital has invested in several AI startups. While he listed AI as a long-term driver, Li said that “for the short term, our primary focus is still our core business as well as our operating targets.”
To sum it up, Xpeng Motors has impressed with its execution, and the strong performance of its new models helps it focus on long-term growth drivers like autonomous driving and robotics. Nio on the other hand still needs to prove its mettle with new launches.
XPEV Versus NIO: Which Is a Better Buy?
Xpeng Motors looks better placed than Nio when it comes to operating and financial performance. XPEV’s partnership with Volkswagen (VWAGY) is another reason to bet on the company.
Meanwhile, markets have also taken note of Xpeng Motors’ performance and the stock has gained almost 81% for the year to date while Nio is barely in the green. The divergence in price action has widened the valuation gap between the two and XPEV trades at a forward price-sales multiple of 1.87x which is twice that of Nio’s.
However, Xpeng Motors has earned these higher multiples. While Nio does not look like a terrible investment on a standalone basis and seems to offer good value at these prices, I would choose XPEV between the two given its stronger growth trajectory and solid execution.
On the date of publication, Mohit Oberoi had a position in: NIO , XPEV . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
