Press "Enter" to skip to content

Nio, BYD, China EV Makers Make Historic Push Into Europe | Investor's Business Daily – Investor's Business Daily

BREAKING: Tesla AI Day On Tap After Market Reverses To Lows

BYD has sold the Tang in Norway since late 2021, but will sell the SUV and two other electric vehicles across much of Europe starting in the fourth quarter. (Business Wire)
Nio and BYD won the hearts and wallets of Chinese consumers with sleek, smart electric vehicles. And they’ve already built a following among U.S. investors. Longer term, they could become the biggest challengers to Tesla and traditional automakers as the industry shifts to an all-electric future. But now comes the real test — winning car buyers abroad.
U.S.-listed Nio (NIO) and BYD (BYDDF) , two of the best-known China EV makers, are ramping up in Europe in a huge way, after starting sales in Norway in 2021. BYD presented three all-electric models for the European market at a virtual event on Sept. 28, and Nio is set for a similar event Oct. 7. A host of other Chinese car companies, virtually unknown in the West, are taking on beloved auto brands like Volkswagen (VWAGY), BMW (BMWYY) and Mercedes-Benz (DDAIF), as well as global EV giant Tesla (TSLA).
“Chinese automakers, for the first time, feel ready to establish themselves globally,” said Michael Dunne, CEO of auto consultancy ZoZoGo.
There’s reason for confidence. Sales are surging of electric cars made in China by homegrown companies. Chinese cars are now held up for masterful integration of hardware, software and EV technology, rather than mocked for poor build quality.
Other reasons exist to venture out. EV startups like Nio, Xpeng (XPEV) and Li Auto (LI), especially, have an eye on capital markets for new funds, which they need to sustain operations over the coming years.
“They’re young companies and not quite there yet,” Dunne told Investor’s Business Daily. “Funding tells the story: ‘We’re going global and we’re globally competitive.’ “
Why Europe? Overall, Europe is the world’s third-largest market for auto sales, after China and the U.S., shipping nearly 12 million vehicles in 2021. About 2.3 million of those were EVs, including all-electrics and plug-in hybrids, making the region the world’s second-largest market for EV sales, after China.
BYD, the largest seller of EVs in China and the world’s largest seller of EVs and plug-in hybrids, aims to sell four million vehicles in 2023, at least doubling this year’s estimated total. To do so, it has to gain a real foothold in Europe.
For Chinese EV makers generally, Europe is a huge opportunity. Not only is Europe the No. 2 market for electric vehicles, it has more room to grow than China and competition is less insane.
Unlike the U.S., which imposes prohibitive tariffs on Chinese autos, Europe is relatively open to Chinese imports. Lower Chinese labor costs offset much of the cost of shipping to the Continent.
The rollout is not without challenges. Nio CEO William Li told the Financial Times Tuesday that soaring energy prices are slowing its expansion and the rollout of battery swap stations across Europe.
Crippling energy costs and other challenges seem to be pushing Europe into a recession. That could weigh on demand for autos, especially pricey electric vehicles.
EV Battery Technology: The Road To A Breakthrough
The year ahead will be a litmus test for Chinese EV companies’ global bet.
They’re taking their latest and greatest models to Europe. They’re going on roadshows to impress EV buyers and investors.
On Wednesday, Warren Buffett-backed BYD unveiled its lineup of fully electric models for Europe — the Atto 3, Han and Tang EVs, with deliveries starting in October. The Atto 3 will start at 38,000 euros ($37,200), while the Han and Tang begin at 72,000 euros. Those are significantly higher than in China. BYD appears to be trying to establish a premium reputation in Europe
Nio will hold a similar unveiling Oct. 7 in Berlin, with its co-founders making a European road trip this month in — what else — a Nio electric car.
On Oct. 12, Polestar (PSNY) will reveal the Polestar 3 electric SUV in Copenhagen. Polestar is co-owned by China’s Geely and Sweden’s Volvo, which itself is controlled by Geely.
But most Chinese carmakers have no brand recognition or prior experience in most of the Continent. And Europeans, Germans in particular, are deeply loyal to brands like Volkswagen, BMW, Mercedes-Benz and Audi.
“It’s tough going. They have to persuade consumers to part with their money and trust these Chinese brands, which are still relatively unknown,” Dunne said.
American, Japanese and Korean carmakers have struggled to crack the European market. General Motors (GM) exited Europe in 2017 after years of losses, while Ford (F) has shrunk its footprint in the region.
“It’s a difficult market for new players to enter,” said Deutsche Bank analyst Edison Yu. “Tesla may be the exception to the rule.”
The European auto market encompasses 18 Western European countries, including the EU member states before the 2004 enlargement, plus Norway, Iceland and Switzerland and the U.K.
Tesla ruled the EV markets there in 2019, then lost sway. In 2021, its European EV market share fell to 14%, about equal with Fiat, Peugeot and Chrysler parent Stellantis (STLA) and well behind Volkswagen Group’s 25% share, according to Schmidt Automotive Research.
With a new Berlin plant that opened in March and is slowly ramping up, Tesla could regain ground. But right now Tesla is struggling for third place vs. Hyundai-Kia, with BMW and the Renault-Nissan-Mitsubishi alliance not too far behind. Amid the EV transition in Europe, Korea’s Hyundai-Kia has gained share with compelling new products like the Ioniq 5, a purpose-built electric vehicle.
Traditional auto incumbents are shifting to electric vehicles, but much of their business remains tied to gas and diesel cars for now, making them a less daunting target for China’s EV makers.
These Are The 5 Best EV Stocks To Buy And Watch Now
To date, China-made electric vehicles have just scratched the surface of the European market. Led by Geely and SAIC, China’s EV makers sold 37,700 all-electric vehicles in Europe over the first seven months of 2022, growing their share to 5%, according to Schmidt, a Berlin-based firm.
Geely’s Polestar 2 and SAIC’s MG brand accounted for almost nine in 10 of those sales. The rest was made up by companies like BYD, FAW Group, Nio, Xpeng and Aiways, which sold above a thousand units or mere hundreds of units each.
Some have called that a slow, or even disappointing, start. But analysts who spoke to IBD took a nuanced view.
They said a slow ramp was expected. China’s EV makers faced supply disruptions due to Covid lockdowns in their country. They’re starting to build dealer networks in Europe. They’re bringing their best EVs over, but there isn’t a major hole to fill.
For Nio with its premium branding, Yu doesn’t expect tremendous sales anytime soon.
“It’s much more about cultivating the brand than pushing out as much volume as possible,” he said.
In fact, Chinese startups have said they see Europe as a long game, anticipating a decade for any payoff.
They can afford to wait. Both Beijing and the China auto industry are aligned in a desire for global EV domination.
“Look for China to pull out all the stops to win overseas,” ZoZoGo’s Dunne said. As an example, he mentioned government subsidies to keep factories running.
Sales of all-electric vehicles (also known as battery electric vehicles, or BEVs) in western Europe totaled 812,000 during the first eight months of 2022, Schmidt Automotive Research finds. Total new passenger car sales reached 6.46 million units in the same period. The firm projects all-electric or BEV sales of 1.4 million to 1.5 million units in the region for the full year, up from 1.2 million in 2021, and making up one in seven overall new car sales in 2022.
Schmidt expects a big push from China’s EV makers, helping them overcome a slow start to 2022. For the full year, the firm expects their sales in Europe to reach 80,000 to 90,000 all-electric vehicles.
Chinese OEMs told Schmidt they expect an uptake in deliveries as supply headwinds ease. Both Nio and Xpeng have expanded production capacity in China. BYD, which has vastly boosted actual production in 2022, could increase its share dramatically if it delivers more models to a larger number of markets in Europe.
Volume brands like BYD are teaming up with local dealers, which could offer more of an opportunity to drive sales, according to Schmidt. In contrast, premium brands are going with direct sales to consumers but offer other novel perks, such as clubby Nio Houses and battery swap stations.
Both BYD and Nio are expanding from pilot market Norway. They plan to begin deliveries across much of Europe in the fourth quarter.
So far, BYD offers the Tang SUV and will add the Han sedan and small crossover Yuan Plus, renamed Atto 3 for most international markets.
Nio will show off several 2022 models at its European launch event: the luxury ET7 sedan, ES7 crossover and Model 3 rival ET5. So far only the ET7 has been shipped in numbers to Europe, joining an older ES8 SUV.
The Xpeng G9 SUV, which just debuted in China, will join three stablemates being sold in Norway.
Many more new entrants are on the way. They include Geely’s premium Zeekr 001 crossover, expected in 2023. Most efforts are now in the middle or high end, but Great Wall Motors’ Ora brand could open up the mass market when it arrives by the end of 2022.
For BYD, Europe is part of a massive global expansion. The Chinese EV and battery giant has entered Australia, New Zealand, India and several other markets in Asia in recent weeks. It’s also ramping up in Latin America and will launch in Japan in early 2023.
Overall, Europe remains “a bit of a wild card,” Deutsche Bank’s Yu told IBD.
Its EV market basically is split between Tesla and several legacy Western auto giants.
Yu says it’s unclear “how the market dynamics will play out” once more options are available. Or whether Chinese EV startups will be as well-received in Europe as they have been in China.
The analyst rates both Nio stock and Xpeng as a buy, expecting an uptick in sales as markets and models increase and supply challenges abate.
China EV startups will differentiate themselves with technology, experts say. Yu is especially impressed by their software integration across phone, car and charging infrastructure.
Five Best Chinese Stocks To Watch Now
In Europe, incumbent automakers may have tied their EV procurement process to the regional emissions strategy. That’s creating an opportunity for rivals.
Market watchers expect the European OEMs to have few EV models until 2025, when the next, stricter EU fleetwide carbon-dioxide emissions cut is set to take effect. Many of the incumbents’ current electric vehicles are sold out or have long waiting lists while they push hard on churning out traditional combustion vehicles to finance their electric future.
“The Chinese have a two- to three-year window to capitalize on,” analyst Matthias Schmidt of Schmidt Automotive Research told IBD by email. From 2025, he expects the incumbents to accelerate on electric cars.
A case study is Tesla, Schmidt says. He said that Tesla “got a grip on the market before 2020,” when a previous cut was introduced, seizing on the incumbents’ lack of EV preparedness.
Nio stock is working on a bottoming base but has tumbled since hitting its 200-day line in mid-September. BYD stock is at six-month lows. It tumbled in August and early September as Buffett’s Berkshire Hathaway (BRKB) sold a small portion of its big longtime position in the EV maker. Shares have kept sliding.
Polestar stock, which came public via a SPAC earlier this year, has tumbled to record lows.
Tesla stock has a bottoming base as well, but has hit resistance at its 50-day and 200-day lines.
YOU MAY ALSO LIKE:
Stocks To Watch: Top-Rated IPOs, Big Caps And Growth Stocks
Find The Latest Stocks Hitting Buy Zones With MarketSmith
Why This IBD Tool Simplifies The Search For Top Stocks
Bulls Try To Fight Back As Treasury Yields Fall; Dow Giant Plunges
Tesla Stock Vs. BYD Stock
Tesla’s Optimus robot morphed from a human in a suit at the last event to an actual robot at AI Day. (Tesla)
3:42 PM ET Tesla rolled out a prototype of its Optimus humanoid robot at AI Day on Friday. Tesla stock fell on Friday.
3:42 PM ET Tesla rolled out a prototype of its Optimus humanoid robot…
BYD has sold the Tang in Norway since late 2021, but will sell the SUV and two other electric vehicles across much of Europe starting in the fourth quarter. (Business Wire)
Get instant access to exclusive stock lists, expert market analysis and powerful tools with 2 months of IBD Digital for only $20!
Get market updates, educational videos, webinars, and stock analysis.
Learn how you can make more money with IBD’s investing tools, top-performing stock lists, and educational content.
Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice.
*Real-time prices by Nasdaq Last Sale. Realtime quote and/or trade prices are not sourced from all markets.
Ownership data provided by Refinitiv and Estimates data provided by FactSet.
© 2000-2022 Investor’s Business Daily, LLC. All rights reserved

source