The rising number of COVID-19 cases in China has worried investors around the world. China is an important market for electric vehicles, accounting for more than half of global EV sales.
But assuaging concerns, Chinese EV makers posted strong shipments in December. lee auto (Lee -9.33%) delivered 21,233 vehicles in December, in line with expectations. Lee’s monthly deliveries increased him 50.7% year-on-year.
EV makers seem poised to establish themselves as major players in the EV market. Let’s discuss the top three reasons the stock looks like a buy in 2023.
1. Increased number of deliveries
Li Auto, which started mass production in November 2019, has delivered 257,334 vehicles to date. This is an impressive increase for young EV companies. In 2022, Li Auto’s annual shipments increased by 47%. Sales of Li’s two top models, the Li L9 (6-seater flagship SUV) and Li L8 (6-seater premium SUV) each exceeded 10,000 units in December.
Data source: Li Auto. Charts by author.
Li Auto’s revenue increased in line with the company’s increased number of deliveries. The company still suffers an eventual loss, but that’s to be expected from a young EV maker.
LI Revenue (TTM) Data by YCharts
Li Auto could become profitable once deliveries increase and initial capital and R&D investments are nearly complete.
2. Huge market with favorable government policy
Global EV sales are expected to exceed 10 million units in 2022. By 2021, China will account for more than half of global EV sales. Therefore, China is the fastest growing market for electric vehicles. The Chinese government aims to peak CO2 emissions by 2030 and achieve carbon neutrality by 2060. Electrification of transport will help achieve this goal. However, the greater reasons for the rapid growth and government support of EVs in China are high pollution levels, rising oil and gas prices, and cost competitiveness of EVs compared to ICE.
The government is providing subsidies for the purchase of EVs under the new Electric Vehicle (NEV) subsidy program. The NEV credit obligation, introduced in 2017, has been a key driver of EV sales growth in China.
The country has extended the 5% purchase tax exemption on EVs until the end of 2023. Additionally, there are policies to encourage the development of EV charging infrastructure.
3. Commitment to products and technology
Li Automobile has successfully commercialized an EV with extended cruising range in China. The company’s range extension vehicles can be recharged using slow charging, fast charging and refueling, completely eliminating range concerns.
Li invests heavily in vehicle design and engineering, intelligent systems, and autonomous driving technology. Targeting the premium SUV segment of the Chinese market, we aim to invest in products and technologies to differentiate our products and make them attractive to the premium market. Additionally, Li Auto plans to launch his first fully battery-electric model in 2023.
Overall, there is a lot to expect from Li Auto in the years to come.
Rekha Khandelwal has no positions in any of the mentioned stocks. The Motley Fool has no positions in any of the companies mentioned. The Motley Fool’s U.S. headquarters has a disclosure policy.
