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Electric Vehicles: Are They The Future?

MQTrader Jesse
Publish date: Fri, 27 May 2022, 04:26 PM

Introduction

Cars have been playing a pivotal role in the field of human development, as it is the common way of transportation for most people.  At the beginning of the 20th century, the automobile industry was mainly divided into three categories: steam vehicles, electric vehicles, and internal combustion engine vehicles. Due to the widespread application of petroleum, and the technological growth of internal combustion engines, internal combustion engine vehicles gradually replaced steam cars and electric vehicles. They became the mainstream car in the world. And ever since, Electric vehicles did not return to the public’s eye, only until the end of the 20th century.
 
In the post-industrial revolution era, the public begins to look for other energy alternatives, as several adverse impacts were identified from the consumption of oil and gas. Aside from their being in limited supply, burning them releases a large amount of carbon dioxide into the atmosphere. It becomes the main cause of global warming, and its wide usage is causing ever-rising levels of heat-trapping carbon dioxide in the atmosphere. This causes the commitment of the public to reach net-zero arise, which directly drives the global shift toward emissions-free motoring and causes the electric vehicle (EV) market starts to gain momentum worldwide. In recent years, the exponential growth in the number of new electric vehicle companies such as Tesla, Lucid, Rivian, Xiaopeng, Ideal, NIO, etc has created rising competition for traditional car companies. As a result, there are getting more traditional car companies such as GM, BYD, Ford, and Volkswagen have entered the EV market as well to overcome the challenges of the EV rivals.
 
According to a report by the IEA, the total global sales of electric vehicles have been growing tremendously. Especially in the past two years, the total sales of electric vehicles have more than doubled, from 3 million in 2020 to 6.6 million in 2021. This implies that electric vehicles have occupied nearly 9% of the global car market.
 
 
Source: IEA
 
According to the charts above, we can find that the overall trend of the electric vehicle industry is upward growth, especially in the period from 2019 to 2021, when the sales have doubled every year. This is mainly due to the fact that governments of various countries have been offering incentives to the EVs industry, in order to make a contribution to reducing carbon emissions. It is achieved by giving different subsidies and tax reduction policies to electric vehicle companies to a certain extent, pushing more car companies to develop and manufacture electric vehicles. Not to mention, consumers can also enjoy different levels of tax reduction policies, which also greatly enhance everyone's willingness to buy electric cars.
 
In this chart, we can notice that China has the fastest growth among all regions. Mainly because despite China's vast and abundant resources, its oil resources are still insufficient to meet the local demand. The rise of electric vehicles will ease the oil demand from traditional vehicles, and it will reduce China's excessive dependence on oil. What’s more, the development of electric vehicle technology allows China to finally put itself at an advantageous starting point against the West when it comes to engine-type technology. Previously, China’s internal combustion engine technology is considered to be a late joiner, due to them only rising in recent decades. Which causes them to have a big gap to fill when compared to the West’s internal combustion engine technology, which has more than a hundred years of history. Therefore, electric vehicle technology may be an easier fresh start for China to compete against the West rather than trying to catch up with the internal combustion engine technology.
 
In near future, we believe that these new electric vehicle companies will be able to achieve the mass production mode along with economies of scale. If economies of scale are achieved, the manufacturing cost of electric vehicles will also decrease significantly. Since the year  2020, some countries and regions have started to plan the complete ban of sales of fuel vehicles in the next few decades (most of the planned ban dates range from 2025 to 2050), which also shows that governments of various countries are eager to reduce carbon and implement new energy. Therefore, electric vehicles will definitely revolutionize the next automotive field.
 

NIO Inc.

NIO Inc. is a pioneer and leading company in the premium smart electric vehicle market. Founded in November 2014, NIO’s mission is to shape a joyful lifestyle. NIO aims to build a community starting with smart electric vehicles, to share the joy and grow together with users. 
 
Let’s find out more about NIO Inc with a SWOT analysis,
 
Strengths
  • Independent research and development of “San Dian” three electric core components: battery, motor, and electronic control; “San Zhi” three intelligent techniques for the self-developed intelligent cockpit, assisted driving, and an intelligent digital gateway.
  • The user service experience is ahead of the industry level. NIO mainly gathers mainstream high-end markets such as BMW, Mercedes-Benz, and Audi. Therefore, NIO will pay more attention to the user experience of serving high-end customers. In general, NIO's strategy is to build brand value to attract the high-end market.
  • Full direct retail system and all-weather marketing model. NIO has made changes at the channel and marketing level, abandoning the traditional distribution model, turning to the unified management of directly-operated stores by car companies, and marketing innovation through various online and offline methods. The directly affiliated company of the brand’s direct-sale store, not only ensures the uniform price of the models in the early stage but also ensures the quality of the maintenance and marketing activities in the later stage. The direct sales model is gaining the favor of the younger generation consumer group.
  • A complete NIO’s SMART ecosystem for electric vehicles, which includes core components, smart electric vehicles, charging and replacing, used cars, and energy.
 
Weakness 
  • Unable to achieve profitability, due to R&D expenses, marketing expenses, and operating expenses remain high. Until today, NIO is still a loss.
  • The capacity issue. This issue is a nightmare for every electric vehicle company. Due to the inability to keep up with the production capacity, it is difficult for the company to achieve a mass-production scale, which will also keep the cost of production vehicles high and thus directly affecting the profitability.
 
Opportunities
  • The trend of carbon neutrality makes green energy vehicles more attractive to the public sooner than ever.
  • New energy-related support policies issued by various governments will greatly affect the trend of consumers switching to electric vehicles
  • The preemption of the battery-swap market, unlike most electric car companies, NIO chooses the battery-swap method instead of the charging method. The battery-swap method makes up for the deficiency of the charging method to a certain extent, and it only takes a few minutes to complete a swap, which also greatly reduces the charging anxiety of electric vehicle drivers. In addition, the battery-swap method takes a shorter time than the charging method, and the battery-swap method adopts a slow charging method, which will minimize the damage to the battery.
 
Threats
  • With the threat of competition from the new leading car manufacturers and other traditional BBA car companies, more and more high-end traditional car companies have begun to develop their own electric vehicles. Besides, other new electric car companies have also begun to plan to seize the high-end EV market share. It will pose a considerable competitive threat to NIO, which focuses on high-end market share also.
  • In the raw material crisis, all car manufacturers will face the risk of insufficient raw materials or rising costs in terms of the shortage of raw materials for various parts and chips.
  • The penetration rate of high-voltage fast-charging platform vehicles and supercharging stations has increased, resulting in a decline in the advantages of the battery swap mode.
 
If you want to know more about the trend of EV & NIO Inc? Don't miss out MQ Trader's upcoming webinar  in June.
 
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Stay Tuned】MQ Trader will launch a webinar about EV and NIO at the upcoming JUNE.

 
In this webinar, MQ Trader invited Nick Foo as the speaker. Nick  is a former prominent Malaysia Investment Bank Equity Analyst, Chief Course Instructor, Trader, and Speaker in the equities market. He has more than 10 years of experience in the stock market industry. He has conducted more than 100 investment market talks and educational workshops for private and institutional investors.
 
If you would like to learn more on the trend of EV and know more on NIO Inc, Please do not miss out this webinar which on the upcoming JUNE. 
 
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