Thoughts on China’s “Big 5” smart EV startup July deliveries

It’s early August and July delivery numbers are out for China’s “Big 5” smart EV startups: NIO, Xpeng, Li Auto, NETA (Hozon) and LeapMotor.

Quick recap of the numbers, in order of July & YTD delivery volume:

Li Auto: 8,589 (+11.4% MoM, +251.3% YoY); 38,743 YTD

Xpeng: 8,040 (+22%MoM, +228% YoY); 38,778 YTD

NIO: 7,931 (-2% MoM, +125% YoY); 49,887 YTD

NETA: 6,011 (+17% MoM, +392% YoY); 27,115 YTD

LeapMotor: 4,404 (+12% MoM, +666% YoY); 17,449 YTD

We now have two camps within the “Big 5:

Top 3 which have joined the 8K going on 10K camp and all three have a chance to get to 10K within the next couple months (Li Auto has already said specifically it can do so in September)

Bottom 2: 4K-6K camp, low base hence high YoY, but unlikely to get to 10K.

The big “surprise” was obviously NIO ceding its leadership position to Li Auto and falling behind Xpeng.

From the perennial №1 to №3, psychologically this is defeating, and given the recent accident involving an EC6 catching fire and killing the driver, it’s adding salt to the wound. On the other hand, Li Auto & Xpeng have better momentum.

Credit needs to be given for Li Auto doing it all with just the ONE, and Xpeng with the P7 (over 6K in July), where as NIO’s numbers are spread out over 3 models (lacking a star or standout model, so to say).

Speaking of momentum, Xpeng is the best set up out of the three in terms of near-term product pipeline: G3i already on the market and P5 starting deliveries in Q4.

Therefore I think Li Auto & Xpeng actually have better chance of getting to 10K/month first than NIO.

Having said that, no need to hit the panic button for NIO based on one month of numbers. Remember all the FUD over Tesla back in April? NIO, in particular “doesn’t care about its delivery being overtaken by Xpeng, Li Auto,” according to a report from cnevpost.com, quoting an insider as saying “the floods in Germany this year affected the supply of air suspension shock absorbers, thus affecting NIO’s production capacity this month.”

Whatever the case, all five should have stronger H2 performance than H1 due to: supply chain/chip improvment, overall NEV market momentum and seasonality.

By this time on September 1/2, I bet there will be another shuffle among the top 3.

What I’m saying is look at these numbers with a grain of salt by zooming out over several months rather than focusing on one single point in time. We’ve seen this story play out so far this year with other brands.

NIO & Li Auto, though, still needs to deal with the fallout from the EC6 incident & “mercurygate”.

NETA/LeapMotor have largely held their ground in the sub-RMB150K segment and avoided direction competition from the top 3. They will be on the move to go up market.

NIO, on the other hand, is on the move to go down market with the rumored “ALPS” plan (though that won’t have any effect on volume until at least late 2022 or early 2023).

Will current success carry over?

The “Big 5,” Tesla & Wuling Hongguang MINIEV combined will account for more than a third of China’s NEV sales this month (between 250K-300K) and in the months thereafter for the foreseeable future, each with roughly 30K-40K in monthly sales.

So in summary:

NIO’s month-on-month drop is psychologically annoying, but longer-term probably not a big deal;

Overall momentum is positive for all five smart EV startups, though inherently each faces slightly different trajectory/speed, with Xpeng the best positioned for further growth the remainder of the year;

Look at these numbers with a grain of salt and look at them over a longer period of time to make any kind of conclusion.