Following a price cut and a slew of new models, Nio's sales efficiency has improved materially and should maintain this level of demand for at least the rest of the third quarter, said Edison Yu's team.

China's major electric vehicle (EV) makers reported July deliveries yesterday, and as usual, Deutsche Bank analyst Edison Yu's team shared their thoughts.

July sales for leading EV automakers generally surprised to the upside as new product cycles ramped up quickly, the team wrote in a research note sent to investors yesterday.

Nio (NYSE: NIO) delivered a record 20,462 vehicles in July, with more than 10,000 new ES6s, according to the company.

Xpeng (NYSE: XPEV) delivered 11,008 vehicles in July, up 27.70 percent from 8,620 in June, its sixth sequential increase in monthly deliveries. The G6 delivered more than 3,900 units in July.

Li Auto (NASDAQ: LI) delivered a record 34,134 vehicles in July, its second consecutive month over the 30,000 mark.

Yu's team believes that Nio's sales efficiency has improved materially following a price cut and the introduction of a range of new models, and that it should be able to maintain this level of demand for at least the rest of the third quarter.

The team said Xpeng deliveries in July exceeded their expectations and expects the company to deliver 15,000 units in August or September.

For Li Auto, the team believes that competition from other car companies will intensify further and could limit the company's incremental growth.

Below is the full text of the team's report:

July shows strength of new product cycles

July sales for leading EV automakers generally surprised to the upside as new product cycles ramped up quickly.

Nio set a monthly record and broke 20,000 deliveries for the first time, driven by robust demand for new ES6 (>10,000). Li Auto maintained momentum with another solid month selling >34,000. And Xpeng delivered ~11,000 as G6 production looks very much on track (>3,900 deliveries).

Looking ahead, we continue to expect big improvement in 2H volume from Nio/ XPEV while Li Auto could be in a more defensive position as competition intensifies.

July OEM recap

Li Auto delivered 34,134 vehicles (+5% MoM; +228% YoY), ahead of our forecast. Management previously commented it is targeting L8 and L9 to be +10,000 each and L7 at 15,000 in monthly sales for 3Q and then 40,000 total in 4Q.

Looking ahead, we expect competition to further intensify from other OEMs, potentially limiting incremental growth. The company exited the month with 337 retail stores and 323 servicing centers.

Nio delivered 20,462 units (+91% MoM; +104% YoY), beating our forecast and setting a monthly record. The new ES6 sold >10,000+ units in July and ET5 series sold about 6,400 units vs. ~3,800 in June.

Following the price cut and slew of new models, we think Nio's sales efficiency has improved materially and should at least maintain this level of demand for rest of 3Q. Nio exited the month with ~1,600 battery swap stations.

Xpeng delivered 11,008 units (+28% MoM; -4% YoY), ahead of our expectations. G6 appears to be ramping up well reaching 3,900+ deliveries.

Looking ahead, we expect Aug or Sep can reach 15,000 units. See here for our initial thoughts on the VW partnership.

Zeekr delivered sales of 12,039 vehicles (+13% MoM; +140% YoY). The company exited the month with over 300 retail stores.

Nio delivers record 20,462 vehicles in Jul, new ES6 exceeds 10,000 units