Chinese electric vehicle stocks have seen some moderation in momentum in recent sessions. A future catalyst could take inventories out of that lackluster phase: the January delivery numbers that expire next week.
Finding the sweet spot in China’s EV market: China is a heated EV market, both from the point of view of supply and addressable market opportunity.
“China is a new EV market opportunity for many well-positioned car manufacturers, as we believe that overall EV sales could potentially double in the region in the coming years, given the pent-up demand for EV vehicles from customers across all ranges. price, “Wedbush analyst Daniel Ives said in a note.
Goldman Sachs analyst Fei Feng estimates that EV penetration, including battery-powered electric vehicles and plug-in hybrids, will increase from 5% in 2020 to 20% in 2025, 53% in 2035 and 80% in 2050.
Xu Haidong, the deputy chief engineer at the Chinese Automobile Manufacturers Association, said at a summit late last year that China’s EV sales could reach 1.8 million units in 2021 – a 40% increase in compared to the previous year – thanks to stable economic growth, policies to continuously stimulate vehicle consumption and sales promotions from manufacturers.
However, the supply side is full of home-based startups, an international pure EV company Tesla Inc (NASDAQ: TSLA) and traditional auto makers, all competing for a piece of cake.
Among Chinese players, highlights include Nio Inc – ADR (NYSE: NIO), Xpeng Inc – ADR (NYSE: XPEV), Li Auto Inc. (NASDAQ: LI) and WM Motors, supported by both Baidu Inc (NASDAQ: BIDU) and technology conglomerate Tencent Holdings ADR (OTC: TCEHY).
Deutsche Bank Securities analyst Edison Yu said the companies are collectively the “Fab Four” of China’s EV market.
Nio On Record Streak: Nio, which has a premium position in China’s EV market, has reported record delivery numbers recently.
After the COVID-19 pandemic affected sales in the first two months of 2020, the company achieved reliable performance through a series of innovative measures and technological improvements.
The company ended 2020 on a high, having delivered a record 43,728 vehicles in the year. It has been producing record monthly numbers since August 2020.
In December, Nio delivered a record 7,007 vehicles, comprising 2,009 ES8s, 2,493 ES6s and 2,505 of the company’s recently launched EC6s.
Deliveries are at a not-so-robust pace of 1,598 in January 2020.
Given that Nio announced that it would offset the reduction in government subsidies for vehicles purchased until January 10 and a limited period of payment option with no down payment, the pace of sales is likely to have accelerated further.
Nio’s battery as a service scheme has already started to show a positive impact on sales.
Related link: Nio analyst sees significant advantages for the sales volume of the EV brand
Xpeng makes the right noises: Xpeng, which listed its ADSs on the NYSE in late August, also joined the party.
“XPeng is well positioned to gain market share in the mid-range and lower premium market, providing a technology-centric ‘smart’ experience by expanding the limits of its ADAS features and cabin user interface functionality, especially in speech recognition” , said Deutsche Bank’s Yu said in a note.
Xpeng – which sells the G3, an EV SUV and the P7, a fully electric sedan – is due to launch a new sedan with technology deal this year.
Earlier this week, the company released a major over-the-air update for its P7 sedan customers in China, delivering a new version of the XPeng operating system, Xmart OS 2.5.0.
In December, Xpeng delivered a record number of 5,700 vehicles, an increase of 326% year on year and 35% month on month.
In the year, the company delivered a total of 27,041 vehicles, an increase of 112% over the previous year.
Rugged performance of Li Auto: Li Auto also had a stellar performance in December, with deliveries of 6,126 Li ONEs in December and 14,464 units in 2020. Monthly performance represented increases of 31.9% month-on-month and 529.6% year-on-year.
Chinese EV stock performance: Nio’s shares rose to a record high of $ 66.99 on Jan. 11, reacting to the Ni Day event, held on Jan. 9. Since then, stocks have declined.
Xpeng, for its part, peaked at $ 74.49 on December 24 before backing down. After moving almost sideways since then, the stock has recovered in recent sessions.
Li Auto is witnessing a skinny patch after reaching a record high of $ 47.70, also on December 24th.
Next week’s delivery numbers and impending fourth quarter results could be the key to determining which stock is headed.
Photo courtesy of Nio.
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