??(#14) Electric Vehicles & EV battery producers: market analysis

Hello,

In this analysis my focus was on the EV market & EV batter market. I fund interesting information about the sector and about the main players including Tesla & BYD but also CATL (on the battery production). I also did an analysis on Tesla and one for CATL focusing on profitability.

The purpose of this newsletter is to connect the story with the numbers, or sometimes the numbers with the actual story. It is, of course, my own view on the topics without any investment recommendation. I hope we can start conversations around the points below.

The EV market is growing. This graph from International Energy shows the estimated number of electric vehicles in use. It is estimated that more than 40 million EVs were in use at the end of 2023. This is an increase with 14 million. 95% of this increase was in China, Europe and United States. 21,9 million were only in China. It is estimated that 10,1 million cars out of the 16,6 million new EV sales in 2024 will be made in China.

The estimated market for 2022 was 384 billion $, while for 2024 and beyond, Statista estimates the following:

• in 2024 > 623,3 bn $ in revenues worldwide
• a compound annual growth rate of 9,82%.
• projected volume of 906,7 bn $ by 2028
• estimated average unit price of 52.900 $ in 2024

The largest EV market is, as mentioned earlier, China. Check this video showing the evolution of the EV markets between 2010 and 2022.

When it comes to the share of electric vehicles in new passenger car registration, Norway had 79,3% of new car registrations as being electric vehicles. In 2023 the record was broken with 82,4% of the new car registrations being for electric cars as pointed here: https://elbil.no/english/norwegian-ev-market/#:~:text=Another%20record%20for%20EV%20sales,from%2079.3%20percent%20in%202022 .

The weight of EV in total registration increased in the last 10 year from 12,5% in 2014 to this record value in 2023, while the fleet is above 700.000 cars with the following models toping the first 3 places: Tesla Model Y: 23.088 units , Volkswagen ID.4: 6.614 units and Skoda Enyaq: 5.737 units.

In the same time, as we will see with Tesla, the EV market is followed by the rapid development of the infrastructure, energy generation & storage with a forecast for 2027 of 8 billion $.

The Global BEV market (Battery Electric Vehicles) for 2023 has 2 main players (Tesla & BYD). While Tesla has 19,9% of the market BYD and other Chinese companies have a cumulated market share of 29,5% of the entire market.

But, Tesla managed to bring forward impressive sales with Model Y and Model 3 selling in more than 1,1 million units in 2023. This numbers could soon increase with the launch of cheeper models or with the launch of Tesla Robotaxi expected to be presented in August 2024.

Tesla's ambitions are influenced by how other manufacturers will react and adapt by launching new models. Even the challenge with BYD is powerful as seen in the numbers below. At the end of Q4 in 2023, it was BYD that had higher sales.

Tesla & BYD are way ahead other players, as seen below with data for the first half of 2023.

The sales of EVs is influenced by the available models, new launches and the preferences of the market. For instance in United States 60% of the EV sales in 2022 were for the SUV models, while the World average was 39%.

The estimated electric vehicle sales per 100.000 population is estimated to reach 997, higher than the same value for United States (556). This can show still the preference of Americans for gas cars, but in the same time the huge potential of the market to grow in United States.

The EV market slowdown can be seen also in the EV stock performance for Q1 2024.

Tesla analysis

I wanted to find out more about Tesla's performance so I did a short analysis below. First Tesla's revenues tripled in the last 4 years from 31,5 bn. $ in 2020 to 96,77 bn. $ in 2023.

Because of the new model launch, the average revenue per unit (average price per unit) dropped from 75.602 $ in 2018 (when Model X and Model S were in the spotlight) to 45.571 $ in 2023 (when Model Y & Model 3 are the top sellers).

As 2023 showed an increase from 1,31 million units to 1,8 million units, the beginning of the year showed a lower value of deliveries, which was eventually highlighted by investor with lower stock price for the company (-29,96%) > for more details on this check this CNN article here: https://edition.cnn.com/2024/04/07/business/tesla-ev-sales-slowdown-stock/index.html#:~:text=Tesla's%20stock%20price%20has%20dropped,but%20investors%20had%20expected%20more .

When it comes to the evolution of the models, in this visual from Visual Capitalist we can see the evolution of units and models.

Tesla Revenues increased to 96,77 billion $ in 2023 compared to 53,8 billion $ in 2021. This increase was triggered by the double number of cars sold but also by higher revenues in energy generation and services. the revenues increased with 80% while the automotive revenues increased with 74%.

The Gross Profit Margin for total automotive segment decreased from 28,5% in 2022 to 19,4% in 2023. This decrease was because of an increase in total automotive revenues with 15% while the gross profit for this segment decreased with 21%. This trend is similar for the total automotive & services segment, as well for the total gross profit margin. At the company level, the Gross Profit decreased with 3,19 billion $ (or 15%) while the total revenues increased with 19% (15,3 billion $). The Gross Profit decreased because of higher increase in Cost of revenues (31%) compared to the increase in revenues.

The Gross profit margin for energy generation & storage increased from 7,4% in 2022 to 18,9% in 2023 because the Gross Profit for this segment increased with 853 mil. $ or 296% while the revenues for this segment increased with 54% (lower than the gross profit) or 2,13 billion $.

Research & Development expenses increased from 2,59 bn. $ in 2021 to 3,97 bn. $ (an increase of 1,3 bn. $ or 53%). As a percentage of revenue we can notice a decrease from 4,8% to 4,1% because the revenues increase with 79,8% while R&D increased with a lower percentage (53%). The automotive sales have 81,1% of the total revenues.

Below, I calculated some relevant indicators that show the performance of the company. While the ROA decreased because of lower values for the Operating Profit. The value of current liquidity increase, as well for the other liquidity ratios. Meanwhile, the Days Payable outstanding decreased because of lower value of Accounts Payable.

The Operating Profit decreased with 4,8 bn. $ in 2023 leading to a decrease in the Operating Profit margin to 9,2%. One of the reason, besides the decrease in Gross Profit is also the increase in the fixed operating expenses with 1,57 bn $ (or 21,84%). The operating expenses increase because both Research & Development increased with 29% as well for SG&A expenses (21,6%).

EV battery sector

According to Fortune Business Insights "The global electric vehicle (EV) battery market size is projected to grow from $67.78 billion in 2024 to $111.20 billion by 2032, at a CAGR of 6.4%" Read More at:

https://www.fortunebusinessinsights.com/industry-reports/electric-vehicle-battery-market-101700

The market share of battery cells was 32% for CATL in 2022, followed by LG Energy. In 2023, BYD increased the battery capacity manufactured to 116000 megawatt-hour.

The majority of the battery capacity is manufactured in China as seen in this visual from Visual Capitalist. The cumulated value for the Chinese player is 413 megawatt-hours.

The capacity increase is the highest for BYD that moved from 3rd place to 2nd surpassing LG Energy Solution. BYD increased with 59% while CATL increased with 48%.

When it comes to CATL (Contemporary Amperex Technology Co) the revenues increased from 20,9 bn. $ in 2021 to 56,1 bn $ in 2023. In the same time both gross profit and operating profit more than doubled (Gross Profit + 135%; Operating Profit +126%).

The Gross Profit Margin and Operating Profit margin decreased from 2021 to 2022 because of higher increase in revenues (169%) compared to the results. This led to a Gross Profit margin of 22,9% and 12,9% Operating Profit Margin in 2023.

The Cost for 1000$ of Sales decresed from 797,5 $ in 2022 to 770,9$ in 2023 because of higher revenues (+22%) than cost of sales (+18%) between 2022 and 2023.

Things to watch:

• evolution of the EV market as more and more models are produced
• Tesla's new step with the robotaxi announcement
• rise of BYD and Chinese EV market
• how traditional producers like Toyota, VW, Ford or GM will develop a solid EV strategy for gaining some competitive advantage

Before I go, here's a video on the battle between BYD & tesla over the EV market.

Thanks for reading and take care,

Costin Ciora, PhD.

P.S. I'm already planning the next editions. The articles take a couple of weeks so I'm working in the same time to collect information and analyse to make it here.

Next edition: Artificial Intelligence - investments & market analysis

Soon to come:

• hotel sector
• travel agencies
• tennis tournaments
• ice cream :) and much more.

Don't forget to subscribe to get notified for the next one.

Also, if you like this one, please share & comment with your thoughts.

References & interesting resources:

[1] https://elements.visualcapitalist.com/ranked-the-top-10-ev-battery-manufacturers-in-2023/?utm_campaign=later-linkinbio-visualcap&utm_content=later-42544569&utm_medium=social&utm_source=linkin.bio

[2] https://www.visualcapitalist.com/visualizing-global-electric-vehicle-sales-in-2023-by-market-share/

[3] https://www.visualcapitalist.com/electric-vehicle-sales-by-model-2023/

[4] https://www.visualcapitalist.com/tesla-is-once-again-the-worlds-best-selling-ev-company/

[5] https://www.visualcapitalist.com/charted-teslas-global-sales-by-model-and-year-2016-2023/

[6] https://www.visualcapitalist.com/almost-every-ev-stock-is-down-after-q1-2024/

[7] https://www.statista.com/chart/17344/electric-vehicle-share/

[8] https://www.statista.com/chart/32181/countries-regions-with-the-highest-sales-of-new-2w-3w-evs/

[9] https://www.statista.com/chart/30452/countries-with-the-most-bev-sales-per-year/

[10] https://www.statista.com/chart/30758/most-popular-plug-in-electric-car-brands/

[11] https://www.statista.com/chart/28292/worldwide-electric-vehicle-infrastructure-revenues/

[12] https://www.statista.com/chart/27431/ev-unit-sales-per-capita-eu-vs-us/

[13] https://www.statista.com/chart/28292/worldwide-electric-vehicle-infrastructure-revenues/

[14] https://www.statista.com/chart/28211/electric-vehicles-revenue-projections/

[15] https://www.statista.com/statistics/1101415/number-of-electric-vehicles-by-type/

[16] https://www.statista.com/statistics/272120/revenue-of-tesla/

[17] https://www.statista.com/statistics/502208/tesla-quarterly-vehicle-deliveries/

[18] https://cleantechnica.com/2024/01/19/top-10-battery-producers-in-the-world-2023-provisional-data/

[19] https://www.fortunebusinessinsights.com/industry-reports/electric-vehicle-battery-market-101700

[20] https://www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-cars#:~:text=Almost%2014%20million%20new%20electric,year%2Don%2Dyear%20increase

[21] https://www.statista.com/outlook/mmo/electric-vehicles/worldwide

[22] https://elbil.no/english/norwegian-ev-market/#:~:text=Another%20record%20for%20EV%20sales,from%2079.3%20percent%20in%202022

[23] https://edition.cnn.com/2024/04/07/business/tesla-ev-sales-slowdown-stock/index.html#:~:text=Tesla's%20stock%20price%20has%20dropped,but%20investors%20had%20expected%20more

[24] https://www.visualcapitalist.com/almost-every-ev-stock-is-down-after-q1-2024/