The landscape of the Hong Kong stock market reflects a series of fluctuations influenced by recent economic data and external factorsFollowing a trading halt due to unfavorable weather conditions last Friday, the market faced a downward shift mirroring the trends seen in U.Sstocks over the weekendWhile the three major indices experienced declines, one notable exception emerged: NIO Inc(NIO.W), which demonstrated a remarkable 13.1% surgeThis surge starkly contrasted with the performances of two other prominent players in the new energy vehicle sector, XPeng Motors (XPEV) and Li Auto Inc(LI), which recorded dips of 2.4% and 1.64%, respectively.

Analysts attribute NIO's exceptional performance primarily to its recently announced quarterly earnings, which surpassed expectationsThis announcement was made the previous Thursday, September 5, while the market remained closed on the subsequent trading day

With significant gains recorded in the U.Smarkets—a staggering 14.4% and 3.5% day-over-day increase following the earnings release—Monday's performance of Hong Kong stocks aligned with this upward adjustment in the U.S., highlighting a synchrony across global markets.

NIO’s Quarterly Performance and Future Outlook

In the second quarter of 2024, NIO achieved noteworthy milestones in vehicle deliveries, reaching a count of 57,000 units, which reflects an impressive year-on-year increase of 143.9% and a quarterly growth of 90.9%. Revenue derived from automotive sales reached approximately RMB 15.68 billion, marking a year-on-year rise of 118.2%. The gross margin from automotive sales also improved, rising by 6 percentage points to 12.2%.

The upward trend in both revenue and gross margin during the second quarter indicates a significant recovery compared to earlier periods

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Furthermore, the adjusted operating loss has narrowed to RMB 4.699 billion, reflecting a 14% reductionInterestingly, NIO has managed to decrease its research and development expenditures by 3.77% year-on-year, while simultaneously improving its cost management—sales expenses as a percentage of revenue dropped from 32.6% to 21.5% over the same period, contributing to the improved operating loss metrics.

Looking forward, NIO anticipates delivery figures for the third quarter of 2024 to range between 61,000 and 63,000 units, translating to a year-on-year growth of 10.0%-13.7%. Revenue projections for this upcoming period are estimated between RMB 19.109 billion and RMB 19.669 billion, reflecting a mere 0.2%-3.2% annual increaseThe disparity between unit delivery growth and revenue projection raises concerns about potential declines in automotive unit pricing in the latter half of the year.

An additional factor to consider is NIO’s recent announcement on May 16, 2024, regarding the launch of its sub-brand, Lido Automotive, which aims to cater to the family vehicle segment with its new smart mid-size electric SUV, the L60. Priced starting at RMB 219,900, the vehicle has sparked interest and is set for release in September

This strategic move is part of NIO's approach to upscale its delivery volume despite potentially lower income contributions from its budget sub-brand.

Importantly, NIO’s push for an increased contribution from its lower-tier sub-brand could be a contributing factor to its revenue growth lagging behind delivery numbersHowever, this strategy has the potential to enhance production capacity utilization, thereby facilitating an overall increase in car deliveries, a factor analysts are closely monitoring.

During the earnings conference, the management team expressed their commitment to further reducing operating costsThey project that the gross margin on cars will increase to 15% by the fourth quarter, which would represent a significant boon for investors and is considered a critical factor behind the stock's positive momentum.

Comparative Analysis of the “New Forces” in the Industry

In the first half of 2024, NIO recorded a total of 87,000 vehicle deliveries, reflecting a 60.2% year-on-year increase, with automotive sales revenue reaching RMB 24.06 billion, up by 46.6% from the previous year

The vehicle sales gross margin of 11.1% marked a substantial improvement from 5.6% in the same period last year, demonstrating a robust 5.5-point enhancement.

In stark contrast, XPeng managed to deliver 52,000 vehicles during the same interval, yielding a year-on-year growth of 25.6%. Total revenue from automotive sales tallied RMB 12.36 billion, increasing by 55.7%. Notably, XPeng also turned around from a negative gross margin of -5.9% last year to a positive 6.0% in the current period.

Meanwhile, Li Auto excelled with a delivery count of 189,000 vehicles in the first half, signifying a growth rate of 35.9%. Their automotive sales revenue hit RMB 54.571 billion, reflecting a 17.9% increase year-on-year, although their gross margin slipped slightly to 19.0% from 20.5% in the previous year.

As of the first eight months of 2024, NIO's cumulative vehicle deliveries stood at 128,000, up by 35.8% from the previous year, while XPeng's deliveries increased to 77,000, a 16.8% annual growth

Li Auto maintained a robust performance with 288,000 units delivered, translating to 38.4% year-on-year growth.

The latest months have witnessed a notable deceleration in growth for both NIO and XPengEstimates indicate that their respective year-on-year increments in June through August hovered around 2.2% and 2.0%, while Li Auto continued to demonstrate a vigorous growth output at a remarkable 43.6% during the same period.

In a show of strength, XPeng unveiled its smart electric hatchback, the XPeng MONA M03, during its 10th-anniversary gala held on August 27, 2024. With three models priced between RMB 119,800 and RMB 155,800, this vehicle represents the company’s first offering under RMB 200,000 equipped with advanced ADAS functionalities, and deliveries commenced on August 30. The market response to this release could significantly influence XPeng’s performance moving into the next quarter.

Conversely, NIO’s budget sub-brand’s first vehicle is also poised to enter the market in September, and its financial results will likely become apparent in the latter part of the year.

This backdrop sets the stage for a true face-off between XPeng and NIO from Q4 onward