Preview of New Stocks in the US Stock Market | How can Lobe Electric Cars with insufficient competitiveness break through?

China is one of the major producers and consumers of two-wheeled electric vehicles, three-wheeled electric vehicles, and off-road four-wheeled electric minibuses in the world.

According to data from the China Bicycle Association, the number of two-wheeled electric vehicles in China is about 350 million in 2022, which means that there is one two-wheeled electric vehicle for every four people, surpassing the scale of automobiles. Behind these numbers, there are not only huge imagination spaces but also increasing development opportunities for related companies.

Take Lobe Electric Vehicle as an example. It is a manufacturer and distributor of electric vehicles located in Wuxi, Jiangsu Province. Its main business includes the design, development, manufacturing, and sales of electric bicycles, electric lightweight motorcycles, electric three-wheeled vehicles, and electric off-road four-wheeled minibuses, such as golf carts and mobility vehicles for the elderly and disabled. It also provides customers with development and design services for automotive information and entertainment software.

It is worth noting that the company was established in 2021 and started its initial public offering (IPO) on NASDAQ on March 13, 2023. Recently, the company has further accelerated its listing process. On December 21, the China Securities Regulatory Commission issued a notice for the overseas issuance and listing of Lobe Electric Vehicle, with a planned issuance of no more than 2,530,000 common shares and listing on the NASDAQ Stock Exchange in the United States, with the stock code LOBO.

In just two years, Lobe Electric Vehicle has completed the process from establishment to IPO, which can be described as rapid development. However, behind the rapid development of the company, there seem to be some hidden concerns.

"Small but not beautiful," insufficient research and development capabilities

According to Zhitong App, Lobe Electric Vehicle is headquartered in Wuxi, Jiangsu Province, with subsidiaries including Beijing Lobe, Guangzhou Lobe, Tianjin Lobe, Tianjin Bosch, and Wuxi Jinbang.

Among them, Beijing Lobe was established in August 2014 and was acquired by Jiangsu Lobe in 2021. Its main business is the production and sales of electric bicycles and electric three-wheeled vehicles. Wuxi Jinbang was established in 2002 and is one of the earliest companies in China to produce electric bicycles. It was acquired by Beijing Lobe in 2019 and mainly produces electric bicycles and electric assist bikes. Tianjin Lobe was established in October 2021 and produces electric three-wheeled vehicles and off-road four-wheeled electric minibuses. Tianjin Bosch was established in March 2022 and is engaged in the export business of Lobe Electric Vehicle products. Guangzhou Lobe was established in May 2019 and provides software solutions for multimedia interaction systems, multifunctional rearview mirrors, and driving recorders for automotive electronic products through cooperation with leading suppliers in the automotive industry.

It can be seen that it is through these subsidiaries that Lobe Electric Vehicle has established a diversified business portfolio including electric bicycles, electric lightweight motorcycles, electric three-wheeled vehicles, and electric off-road four-wheeled minibuses.

In terms of revenue and net profit performance, Lobe Electric Vehicle has shown a significant growth trend in the past two years. In the first half of 2023, the company achieved a revenue of $8.14 million, a year-on-year increase of approximately 48%, and a net profit of $670,000, a year-on-year increase of approximately 393%. Looking back, in 2021 and 2022, the company achieved revenues of $14.13 million and $18.3 million, and net profits of $1.12 million and $1.66 million, respectively. When looking at the business segments, the revenue growth of Robe Electric Vehicles mainly comes from the steady increase in sales of electric vehicles and accessories. In the first half of 2023, the company's revenue from electric vehicle and accessory sales was $7.4969 million, a year-on-year increase of 50%.

However, it is worth noting that although the revenue and net profit, the two core financial indicators, have steadily increased, Robe Electric Vehicles also has obvious weaknesses in its fundamentals.

Firstly, there is insufficient investment in research and development. According to the prospectus data, in the first half of this year, the company's sales and marketing expenses were $325,800, management expenses were $284,000, and research and development expenses were $132,000. In the same period last year, research and development expenses were only $28,500. The research and development expenses are far less than the sales and marketing expenses and management expenses, indicating that the company does not attach enough importance to research and development investment.

The situation was the same in 2022. Robe Electric Vehicles' sales and marketing expenses in 2022 were $585,800, management expenses were $690,000, and research and development expenses were $227,600. In the same period last year, research and development expenses were only $53,000.

Secondly, the net amount of accounts receivable is high. According to the prospectus data, in the first half of 2023, the company's net amount of accounts receivable was $2.6966 million, which is relatively high. There is a risk of being unable to collect accounts receivable in a timely manner or at all. In addition, if the company's accounts receivable cycle or collection period is extended, its liquidity and business cash flow may be adversely affected. In addition, as of the first half of 2023, the company's cash and cash equivalents were only $370,200, and the total turnover fund was $2.6265 million, indicating that its cash liquidity is not very strong.

Therefore, although Robe Electric Vehicles' revenue and net profit maintain a stable growth trend, the overall operating conditions are not "beautiful" due to the development risks of insufficient research and development investment and high net amount of accounts receivable.

The market "battle" is escalating, and the competitiveness is insufficient.

Considering that China is one of the main producers and consumers of two-wheeled electric vehicles, three-wheeled electric vehicles, and off-road four-wheeled electric buses, and adding the population advantage of China, it is not difficult to imagine that Robe Electric Vehicles is in a promising industry.

Electric two-wheeled vehicles usually refer to various types of electric bicycles, electric motorcycles, and electric scooters. China has adopted a new national standard that promotes the use of lithium-ion battery-powered electric bicycles, which has also driven the accelerated iteration of domestic electric bicycles. According to data from the China Electric Vehicle Association, the export value of China's electric two-wheeler industry reached $5.47 billion in 2019, $6.82 billion in 2020, $7.43 billion in 2021, and $7.35 billion in 2022.

However, it is worth noting that behind these data, there are challenges of slowing penetration rate and increasingly fierce industry competition.

From the perspective of penetration rate, as of the end of 2020, the average number of electric bicycles per hundred urban households was 62, an increase of 23 from 2013. The average number of electric bicycles per hundred rural households was 73.1, an increase of 32.8 from 2013. However, in recent years, the increase in industry penetration rate has slowed down significantly compared to the past, and it is constantly approaching the industry penetration rate ceiling, which can be described as a "red ocean market".

At the same time, after nearly thirty years of development, the two-wheeler electric vehicle industry in China has entered a mature stage. The trend of industry homogenization and low-price competition is gradually becoming prominent. With the implementation of the new national standard in 2019 to promote industry standardization and high-quality development, the "Matthew effect" has further increased market concentration.

According to data from the Forward Industry Research Institute, looking at the current competition pattern in the two-wheeler electric vehicle market in China, based on sales volume in 2022, Yadea and Aima together occupy 43.2% of the market share, and the third in sales is Tailing Electric Vehicle, with a market share of about 14.1%.

From this, it can be seen that the leading effect in China's two-wheeler electric vehicle industry is more obvious, and the market concentration is high, with about 85% of the market share occupied by the top ten companies in the industry. Given the scale of Robor's business, it is difficult for the company to gain a stable competitive advantage in the increasingly intense market.

Taking a closer look, compared with other leading companies such as Yadea, Aima, Xinri, and Tailin, Robor's overall sales volume is still lower than these well-established manufacturers, and even less well-known than mid-tier players such as NIU Electric and Jiuhao Company. From the long-standing market accumulation of traditional brands, the wide sales channels established offline, to the lower pricing, the main leading manufacturers still maintain stable shipments and sales, with obvious market share and distribution channel advantages. The overall competitive environment is not easy.

Therefore, on the one hand, the company is shifting towards the development of intelligent, green, and low-carbon products, entering the smart electric two-wheeler industry; on the other hand, it is expanding its product matrix to gain new growth space in the electric two-wheeler motorcycle and electric three-wheeler markets. However, judging from the performance, it seems that this strategic line of defense has not truly exerted its power.

In summary, Robor Electric Vehicle, which lacks research and development capabilities and competitiveness, may need to further build its core competitive advantages and break free from the stereotype of being "small and unattractive" in the market "battle".