Source: Barron's Chinese Author: Nicholas Jaskinski Evan Greenberg, CEO of Chubb Ltd, has a highly influential fan - Warren Buffet, CEO of Berkshire Hathaway. Berkshire Hathaway disclosed last month that it held 6% of the shares in Chubb, one of the world's largest insurance companies, by the end of 2023. Berkshire itself is a major participant in the insurance industry, but it is not the only buyer. In the past year, Chubb's stock return, including dividends, was about 40%, surpassing the S&P 500 index's total return of 25%, and making the company's market capitalization reach $110 billion. This increase in market capitalization reflects Chubb's outstanding performance, which is attributed to its prudent underwriting practices and conservative management of its investment portfolio of about $140 billion. The company's earnings per share increased by 48% in 2023 and its book value per share increased by 21%. Greenberg is the son of Maurice "Hank" Greenberg, the former CEO of American International Group (AIG). Greenberg worked at AIG for 25 years, rising through the ranks. He left the insurance company in 2000 and took over Ace Limited in 2004. The company merged with Chubb in 2016, the largest M&A in the property and casualty insurance industry at the time. Today, Chubb is the largest commercial insurance provider in the United States, and the company is also known for its high-end homeowner insurance for the wealthy. However, about half of the company's premiums last year came from outside the United States. Asia has always been a growth area where the company is bullish: Although Asia accounts for 40% of global GDP, the insurance industry accounts for only 26% of the global insurance market share. This gap is expected to narrow over time. Greenberg sits on the board of several nonprofits that focus on international and Asian affairs. Barron's recently interviewed Greenberg about his underwriting philosophy, the challenges of dealing with increasingly frequent climate disasters, and US-China relations. Following are the edited excerpts of the conversation.
Looking at the entire first half of the year, stocks of listed companies on the US and Hong Kong stock markets were generally weak, while stocks of two A-share companies rose.
Since July 1st, global new energy vehicle companies have successively announced delivery data for June and the first half of the year. Overall, most automakers have achieved year-on-year growth in delivery volume, but the growth rates vary widely. Among them, the delivery volume ranks second, and the one ranking third has the fastest growth rate. Unit: vehicles; Source: corporate announcement; Tabulation: Barron's Weekly Chinese edition. Sales growth mainly occurred in the second quarter. In April, the Ministry of Commerce, Ministry of Finance, and other departments issued the "Implementation Rules for Subsidies for Scraping Old Cars and Buying New Ones" to stimulate the growth of new energy vehicle demand. At the same time, major automakers took advantage of the "618" e-commerce promotion, and launched various price reduction activities to impact the semi-annual target, making the competition in the automobile market even more intense. After the delivery data was released, new energy vehicle stocks surged for three consecutive days, with NIO up more than 10%, Li Auto up nearly 15%, and Xpeng Motors up over 6%. In the first half of this year, due to the continuous price war and intensified market competition, most new energy vehicle stocks have been in a downturn. Overall sales volume rebounded in a single quarter after the first-quarter depression. Unit: vehicles; Source: corporate announcement; Tabulation: Barron's Weekly Chinese edition. As a leading company in the industry, BYD delivered a total of 986,720 new energy vehicles this quarter, a year-on-year increase of 40.25% and a month-on-month growth rate of 57.56%. Recently, the market's focus on BYD has been on its auto export business. On June 12, local time, the European Commission issued a statement stating that it plans to impose provisional anti-subsidy taxes on imported pure electric vehicles (BEVs) from China from July 4. BYD will be taxed at a rate of 17.4% to 27.4%. In June, BYD sold 26,995 new energy passenger vehicles overseas, accounting for about 8% of passenger car sales that month. This sales figure increased by 156% year-on-year, but decreased from May's export data (37,499 vehicles) and proportion (11%). The future impact of import tariffs is still uncertain, and investors will continue to follow up on export situations in the coming months. Compared with BYD's steady performance, Tesla finally brought surprises to the market in the second quarter—a delivery volume of 443,956 exceeded Wall Street's expectation of 420,000 vehicles, leading the global pure electric vehicle market. For this year's expectations, the consensus among Wall Street analysts covered by FactSet is 1.8 million vehicles, which is basically flat with 2023. At the same time, Tesla's auto production this quarter was 410,831 vehicles. The fact that production is lower than sales mean that inventory is reducing, which may alleviate the pressure of car model price reductions to some extent. In the Chinese market, Tesla's sales volume in June increased by 7% year-on-year to 59,000 vehicles. On July 1st, Tesla launched a 5-year zero-interest loan plan, attracting customers to purchase cars before August. In addition, after Tesla CEO Elon Musk visited China in April, more FSD (fully autonomous driving) functions will be introduced in China, which may drive demand growth.$BYD COMPANY (01211.HK)$, $Tesla (TSLA.US)$The delivery volume ranks second; the one ranking third has the fastest growth rate.$Chongqing Sokon Industry Group Stock (601127.SH)$The one ranking third has the fastest growth rate.
Sales growth mainly occurred in the second quarter. In April, the Ministry of Commerce, Ministry of Finance, and other departments issued the "Implementation Rules for Subsidies for Scraping Old Cars and Buying New Ones" to stimulate the growth of new energy vehicle demand. At the same time, major automakers took advantage of the "618" e-commerce promotion, and launched various price reduction activities to impact the semi-annual target, making the competition in the automobile market even more intense.
After the delivery data was released, new energy vehicle stocks surged for three consecutive days, with NIO up more than 10%, Li Auto up nearly 15%, and Xpeng Motors up over 6%. In the first half of this year, due to the continuous price war and intensified market competition, most new energy vehicle stocks have been in a downturn.
Overall sales volume rebounded in a single quarter after the first-quarter depression.
After the first-quarter depression, new energy vehicle sales volume rebounded in the second quarter.
As a leading company in the industry, BYD delivered a total of 986,720 new energy vehicles this quarter, a year-on-year increase of 40.25% and a month-on-month growth rate of 57.56%.
Recently, the market's focus on BYD has been on its auto export business. On June 12, local time, the European Commission issued a statement stating that it plans to impose provisional anti-subsidy taxes on imported pure electric vehicles (BEVs) from China from July 4. BYD will be taxed at a rate of 17.4% to 27.4%.
In June, BYD sold 26,995 new energy passenger vehicles overseas, accounting for about 8% of passenger car sales that month. This sales figure increased by 156% year-on-year, but decreased from May's export data (37,499 vehicles) and proportion (11%). The future impact of import tariffs is still uncertain, and investors will continue to follow up on export situations in the coming months.
Compared with BYD's steady performance, Tesla finally brought surprises to the market in the second quarter—a delivery volume of 443,956 exceeded Wall Street's expectation of 420,000 vehicles, leading the global pure electric vehicle market. For this year's expectations, the consensus among Wall Street analysts covered by FactSet is 1.8 million vehicles, which is basically flat with 2023.
At the same time, Tesla's auto production this quarter was 410,831 vehicles. The fact that production is lower than sales mean that inventory is reducing, which may alleviate the pressure of car model price reductions to some extent.
In the Chinese market, Tesla's sales volume in June increased by 7% year-on-year to 59,000 vehicles. On July 1st, Tesla launched a 5-year zero-interest loan plan, attracting customers to purchase cars before August. In addition, after Tesla CEO Elon Musk visited China in April, more FSD (fully autonomous driving) functions will be introduced in China, which may drive demand growth.
In the second quarter, the three new forces delivered a total of approximately 196,161 vehicles, a year-on-year increase of approximately 47%, far exceeding the delivery volume of 132,274 vehicles in the first quarter. Unit: vehicle; Source: Barron's Weekly Chinese edition.$NIO-SW (09866.HK)$, $XPENG-W (09868.HK)$ and $LI AUTO-W (02015.HK)$In the second quarter, the delivery volume of new energy vehicles for the three new forces increased by about 47% year-on-year, far exceeding the delivery volume of 132,274 vehicles in the first quarter.
Specifically, Ideal sold 108,581 cars, a YoY increase of 25.48% and MoM increase of 35.05%. As CEO Li Xiang disclosed, in June, the new model L6 sold over 20,000 units. In the second quarter, under the double effect of the L6 launch and store efficiency improvement, the company returned to the top of the China new energy vehicle brand sales list.
Among the three new forces, NIO's growth was the most obvious. The YoY and MoM growth rates were 143.93% and 90.91%, respectively, with a delivery volume of 57,373 units. Since March, NIO has launched a new series of vehicles and promoted the BaaS battery rental policy, driving the growth of deliveries in the quarter. In the second half of the year, the second brand, Lovol, is expected to achieve deliveries.
XPeng delivered 30,207 cars in the second quarter, with YoY and MoM growth rates of 30.17% and 38.43%, respectively. On July 3, XPeng released the new brand model MONA M03, which is expected to be launched in the third quarter.
In addition to NIO and XPeng, Chongqing Sokon Industry Group Stock, also known as Seres, had an impressive performance in the second quarter, with YoY growth rates of 327.45%, 100.05% and 56.76%, respectively, exceeding Ideal and XPeng. The main driving forces came from AITO Question series, XK001, and Leapmotor C10 and C11. $ZEEKR (ZK.US)$ and $LEAPMOTOR (09863.HK)$Xiaomi's self-developed SU7 was officially launched on March 28, with over 10,000 deliveries in June and cumulative sales exceeding 25,688 units. Xiaomi's auto unit said that it is expected that the SU7 deliveries will continue to exceed 10,000 in July, with a guaranteed delivery target of 100,000 vehicles this year and a sprint goal of 120,000 vehicles.
It is worth mentioning that,$XIAOMI-W (01810.HK)$Stock price shows polarization. Since the beginning of this year, the competition in the new energy vehicle market has intensified, resulting in some automakers' sales growth in the first quarter slowing down or even falling, but the overall trend is still growing.
Source: Enterprise Announcement; Chart: Barron's Weekly (Chinese Edition)
Source: Enterprise Announcement; Chart: Barron's Weekly (Chinese Edition)
However, due to many uncertainties such as insufficient investor confidence and the Fed delaying interest rate cuts, the stock prices of new energy vehicle companies have shown a polarization in the first half of the year. The stock prices of companies listed on US and Hong Kong stock markets are generally weak, while the stock prices of the two companies listed on the A-share market have increased.
Apart from market factors, BYD's stock price rise benefits from its leadership position in the electric vehicle industry - diverse product matrix, continuously improving sales and cost advantages of self-produced batteries.
Meanwhile, the delivery volume of BYD's plug-in hybrid electric vehicles (PHEVs) (556,708 units) exceeded that of pure electric vehicles (426,039 units) in the second quarter, becoming one of the best-performing quarters. In the context of consumers pursuing long battery life and low-priced models, hybrid vehicles provide users with more low-priced options.
Even so, BYD's Hong Kong and A-share price-to-earnings ratios are only about 20 times, much lower than Tesla's P/E ratio of about 50 times. In fact, the differing opinions among Wall Street analysts regarding Tesla's valuation reflect the diversity of its positioning - it can be an auto stock, an energy stock, or an artificial intelligence stock.
In the second quarter, Tesla deployed 9.4GWh energy storage products, with YoY growth exceeding 100%, which can provide power for about 10,000 American households for a year. Wedbush analyst Dan Ives believes that the huge storage capacity will drive Tesla's profit growth.
More importantly, Tesla's leading position in the field of artificial intelligence brings it additional value. "Robotaxi released on August 8th will be a historic moment for Tesla and a recent (stock price) catalyst," Ives said, adding that the key to achieving a valuation of over $1 trillion is its autonomous driving vision.
Morgan Stanley analyst Adam Jonas is bullish on Tesla's robotics business potential - trained with artificial intelligence algorithms. Jonas pointed out that his own valuation of Tesla's core automotive business (at $67 per share) accounts for only about 20% of the $310 target price.
In the first half of the year, another electric vehicle company whose stock price rose was Chongqing Sokon Industry Group Stock. With rapidly growing sales and the concept of being a Huawei stock, Sokon's stock price soared by 62% in February. On July 3, Sokon announced that it plans to spend 2.5 billion yuan to acquire Wanjie trademark and related patents. Huawei responded by saying that they will continue to support Sokon in making and selling Wanjie well.
In the U.S. and Hong Kong stock markets, in the first half of the year, the stock price of Xiaopeng Motors dropped by about 50%, the stock price of Zero Run dropped by more than 20%, and the stock price of Jike compared to the issue price fell by 10%. Among them, the stock price of Li Auto had a very "rough" trend - after the first "profitable year" in February, the stock price of Li Auto in Hong Kong surged 25% in a single day, and the February increase reached 67%. However, since March, due to MEGA sales falling short of expectations and the downward revision of sales targets, the company's stock price has continuously declined in the following four months.
Of course, sales performance is only one of the factors affecting stock price changes. As new energy vehicles enter the second half of the intelligent competition, the strength of autonomous driving technology, profitability (currently only BYD, Tesla, and Li Auto have positive net income), or other bonuses that Tesla possesses will all affect the long-term valuation of new energy vehicle stocks.
Editor/Lambor