New energy electric vehicles become a new investment hotspot. How to divide the leading pattern of automotive stocks?

In recent years, the electric vehicle industry has become a focal point in the capital markets, much like how smartphones revolutionized traditional communication and streaming media displaced physical rentals. New energy vehicles are rewriting the entire automotive landscape. With global carbon reduction commitments and government policies banning the sale of fuel-powered cars, the electric vehicle market is entering an unprecedented growth opportunity, and the next few decades will be a golden era for this industry.

Electric Vehicle Market Landscape: Who Are the True Leaders in Auto Stocks?

Currently, the electric vehicle industry is vying for dominance, with China and the US becoming the main competition stages. However, not all players have a solid profit foundation. Looking at the US stock market, several high-performing companies are worth noting:

Tesla: Solidifying Dominance Through Technological Monopoly

When discussing leading electric vehicle stocks, Tesla (TSLA.US) inevitably comes to mind. This company launched its first product as a supercar, successfully establishing a high-end brand image, then opened its patents for licensing to set industry standards. After turning profitable in 2020 and being included in the S&P 500, its stock price soared multiple times, making its founder the world’s richest person.

Tesla currently holds over 20% of the global electric vehicle market share, ranking first. With highly automated production, labor costs are relatively low, and net profit margins reach 15%, far above second-place BYD’s 3.9%. However, it’s worth noting that Tesla’s advantage in the Chinese market is being eroded; in Q1 2023, sales growth was only about 50%, much lower than local competitors.

BYD: A Chinese Powerhouse with a Complete Industry Chain

BYD (1211.HK) is a leader among Chinese electric vehicle stocks. Founded in 1995, the company started with battery manufacturing and later entered the automotive sector. After receiving Warren Buffett’s investment in 2008, it entered a stable growth phase. It is now the second-largest global electric vehicle manufacturer by sales and the top in China.

Compared to Tesla, BYD has more comprehensive control over its upstream supply chain. Although gross margins are similar (around 20%), operating profit margins differ, mainly because Tesla benefits from more global policy incentives. BYD primarily benefits from Chinese government subsidies. In Q1 2023, BYD’s sales increased by over 100%, far surpassing Tesla, indicating its growing competitive advantage in the domestic market. Warren Buffett recently reduced his holdings in BYD, making its stock more attractive for long-term investors to focus on.

Li Auto: Profitability Leader Among New Car Makers

Li Auto (LI.US) is the first among emerging electric vehicle manufacturers to achieve profitability. Alongside NIO and Xpeng, it is considered part of the new force in car-making, supported by Meituan’s capital, mainly targeting the mid-to-high-end market around 350,000 RMB.

Of the three new car-making forces, Li Auto was the first to break through losses; NIO (supported by Tencent) leads in high-end positioning (above 400,000 RMB) and growth potential; Xpeng (supported by Alibaba) adopts a low-price market strategy. In the current environment where consumers are price-sensitive, Li Auto and NIO’s mid-to-high-end strategies are relatively more resilient.

New Realities Facing Auto Stock Investments

Industry Entering the Elimination Round

As traditional automakers aggressively enter the new energy sector, market supply is rapidly increasing. Recently, BYD Chairman Wang Chuanfu pointed out at the shareholder meeting that the supply of new energy vehicles has become oversaturated, and the next 3 to 5 years will see even fiercer competition.

In this battle, only companies with complete supply chains or ample financial backing can survive. Consumers are resistant to price hikes, but upstream raw material costs may rise due to increased demand, making cost control a key to victory.

Automation Becomes the New Battlefield

Beyond range, “smart cars” are also a focus of industry competition. Under current regulations, autonomous driving is limited to Level 2, but manufacturers can continue to innovate in other smart features—such as integration with smartphones, charging stations, and parking systems. Controlling the smart platform ecosystem will be a future competitive advantage.

Why Are Electric Vehicle Stocks Worth Long-Term Attention?

The growth of the electric vehicle industry is an inevitable choice under the global goal of carbon reduction. Many governments have set timelines for banning fuel vehicles, ensuring continuous demand for electric cars. Compared to saturated industries like smartphones and computers, the electric vehicle market offers both growth potential and future prospects, aligning with Buffett’s “wet snow” and “long enough slope” criteria in the snowball theory.

Investing in electric vehicle stocks not only creates wealth through industry expansion but also offers a chance to witness an industrial revolution. Over the next ten to several decades, this sector is expected to remain highly prosperous.

Key Questions to Understand Before Investing in Electric Vehicles

What are the main constraints on industry growth?

Currently, the insufficient density of charging infrastructure is the biggest obstacle. Many consumers live in apartments or high-rise buildings with a lack of charging facilities, which still lags far behind the convenience of gas stations. The level of infrastructure development will directly impact market penetration.

Will oil price fluctuations affect electric vehicle development?

Oil price volatility has no direct impact on EV growth. During the early pandemic, oil prices even turned negative, yet it was precisely during this period that EVs experienced explosive growth. Environmental and carbon reduction goals have become a global consensus, and government policies support EV development, making it an inevitable trend rather than a result of oil prices.

Although most EV companies are still operating at a loss, they are backed by substantial shareholder funds. However, having money does not guarantee ongoing investment; it must be strategically meaningful to the parent group. Therefore, investors should thoroughly understand the overall layout and operational status of the parent company, not just focus on the subsidiary’s performance.