Tesla's (TSLA 1.85%) record-high quarterly and full-year production and delivery numbers caught the market by surprise on Monday as its share price rose to within striking distance of its all-time high.
Investors who follow the Chinese electric vehicle (EV) market might be interested to see how Tesla's numbers compare to those of Chinese EV heavyweight Nio (NIO 0.25%). Here's the latest on each company and whether either is worth buying now.
Image source: Nio.
Understanding Tesla's production versus deliveries
Daniel Foelber (Tesla): According to reports by the China Passenger Car Association (CPCA), Tesla sold 54,391 China-made vehicles in October and 52,859 in November. Tesla didn't release its production and delivery numbers by region for the fourth quarter. But if we average the two CPCA numbers for December and multiply that figure by three (months in the quarter), we'll get about 160,875 China-produced vehicles for the fourth quarter. That's more than half of the total 305,840 vehicles Tesla produced in the fourth quarter.
Digging deeper into the numbers, however, we see that Tesla sold around 250,000 EVs in China from January to November. Extrapolating that for the full year, we can figure that around 29% of Tesla's 2021 deliveries were in China. That's a massive chunk of Tesla's total deliveries. In fact, its 2021 China sales from January to November 2021 were higher than its full-year 2018 total deliveries.
Separating Tesla's Shanghai gigafactory production from Tesla's China sales is an important exercise if we want to compare its growth to that of other Chinese automakers like Nio and XPeng (XPEV 2.87%). Tesla expects to increase its 2022 production capacity to 2 million annual units once production begins at its new factories in Germany and Texas.
Investors can continue to better gauge Tesla's sales by geography by not confusing any single factory's output with sales in that region. However, if the company streamlines production in all of its key markets, the number of cars it exports from any single factory should come down as it reduces costs by building cars closer to their end markets.
Nio is still small, but it has a plan
Howard Smith (Nio): It wasn't by chance that Tesla chose Shanghai for the site of its first manufacturing plant outside the U.S. China is the largest global automotive market, and it should continue that leadership during the transition to electric vehicles. Industry research firm BloombergNEF believes that China will account for about 13 million EV sales in 2030 and 18 million by 2040.
Investors looking at Nio might see faster growth than Tesla's, but it is off such a small base that direct comparison isn't very useful. As a group, however, Chinese EV makers are growing at a faster rate than Tesla is globally.
And while Nio and XPeng are only producing a fraction of what Tesla makes in its Shanghai facility alone, Chinese peer BYD (BYDDY -2.62%) is approaching Tesla's global production level with its new-energy-vehicle products. That category includes battery-electric as well as plug-in hybrid electric vehicles.
While all three Chinese EV companies are growing faster than Tesla, with more than 600,000 new-energy vehicle sales in 2021, it's BYD that offers the closest comparison.
*New-energy vehicles only. Data source: Company releases. Chart by author (Howard Smith.)
Nio has a long way to go to even match the production that comes out of Tesla's Shanghai plant alone. But the company does have a plan. It has new products coming in 2022 and began adding production capacity last year that it says could potentially allow it to reach 300,000 units annually.
While that still won't match Tesla's China production volume, there could be a partnership with BYD in the works that will help. Local reports say Nio representatives have been visiting BYD headquarters, and a deal to create a subbrand might be brewing between the two companies, according to reporting by CnEVPost.
Nio CEO William Li already told investors of general plans for such a subbrand. In its August 2021 second-quarter report, Li said, "The Nio brand has a similar relationship with this new brand as Lexus has with Toyota and Audi has with Volkswagen."
If Nio continues to grow production capacity and works with BYD on a brand with mass-market appeal, investors shouldn't count it out as it tries to reach Tesla's level of deliveries in China and beyond.
Two EV stocks worth considering now
Tesla and Nio are both growing production and sales in China. Rather than focusing on which company is delivering more cars, it's better to focus on the growth of the industry as a whole. The Chinese EV market, as well as the global electric car market, is certainly large enough for both Tesla and Nio to be successful.
Ultimately, we care about a company's ability to carve out a niche and build a brand that consumers will trust. Tesla has done that over the years, and it looks as if Nio has done a good job of it too. Therefore, both EV stocks deserve a place in a diversified EV portfolio.
