16 Apr 2021 CMB International Securities | Equity Research | Sector Initiation China NEV Sector NEV New Forces: leading the wave of vehicle OUTPERFORM (Initiation) electrification China NEV Sector We see enormous growth potential in China’s NEV market in the next 5-10 years, highlighted by a 34% NEV sales CAGR during 2021-25E and a penetration rate Jack Bai nearly quadrupling from 5.4% in 2020E to 20% in 2025E. We think NIO, XPENG (852) 3900 0835 (“XPEV”) and Li Auto (“LI”) are leading the vehicle electrification wave for their
[email protected] proven successful NEV models, first-mover advantages, and sound financing Robin Xiao capabilities. Looking ahead, we expect those three NEV New Forces to (852) 3900 0849 outperform peers in vehicle intelligence and new model development. We initiate
[email protected] China NEV sector with OUTPERFORM rating. Our sector top pick is LI. Our pecking order in the sector is LI >XPEV>NIO. 2021E shipment projection NEV sales volume to surge at 34.2% CAGR during 2021-25E. We forecast NIO 87,175 NEV sales volume will achieve 1.92mn units in 2021E, up 40.1% YoY, XPEV 48,499 LI 57,092 supported by favorable policies such as the extension of subsidies and the Source: CMBIS estimates implementation of double credit policy. As the Chinese government is dedicated to develop the NEV market for leapfrogging, we project NEV sales 2021E Revenue – RMB mn volume in China to reach a CAGR of 34.2% during 2021E-25E, on the back NIO 33,069 of Chinese government’s ambitious 20% NEV penetration target by 2025E.