The Coming Catalyst That Could Move Chinese EV Stocks Nio, Xpeng, Li Auto
China’s electric vehicle stocks have seen some weakening in recent sessions. An impending catalyst could lift inventory out of this lackluster phase: January delivery numbers due next week. Finding the sweet spot in the Chinese EV market: China is a hot EV market, both in terms of addressable market opportunities and supply. “China is a green field EV opportunity for many well-positioned automakers, as we believe total EV sales in the region may double over the next few years as EV demand from customers across all price ranges pent up will, “Wedbush analyst Daniel Ives said in a note. Goldman Sachs analyst Fei Feng estimates that the spread of electric vehicles, including battery electric and plug-in hybrids, will increase from 5% in 2020 to 20% in 2025, 53% in 2035 and 80% in 2050 will rise. Xu Haidong, the deputy chief engineer for The Chinese Association of Automobile Manufacturers, said at a summit meeting late last year that China’s EV sales could reach 1.8 million units in 2021 – up 40% year over year – thanks to stable economic growth, continuous stimulus measures for vehicle consumption and sales promotion measures by manufacturers. On the supply side, however, there are plenty of domestic startups, international EV-only company Tesla Inc (NASDAQ: TSLA), and traditional automakers vying for a piece of cake. The standout players in China include Nio Inc – ADR (NYSE: NIO), Xpeng Inc – ADR (NYSE: XPEV), Li Auto Inc. (NASDAQ: LI) and WM Motors, both of which are owned by 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 positioning in the Chinese EV market, has reported record shipments lately. After the COVID-19 pandemic impacted sales in the first two months of 2020, the company was able to hold its ground credibly through a series of innovative measures and technological improvements. The company ended 2020 on a high, delivering a record 43,728 vehicles for the year. Record monthly figures have been achieved since August 2020. In December, Nio delivered a record 7,007 vehicles, including 2,009 ES8s, 2,493 ES6s and 2,505 of the company’s newly launched EC6. Deliveries in January 2020 are not as robust at 1,598. Given Nio’s announcement that it would reduce government subsidies on vehicles purchased through Jan. 10 and have a limited no-deposit option to make up for the pace of sales is likely to have accelerated further. Nio’s Battery-as-a-Service program is already having a positive impact on sales. Related link: Nio Analyst sees significant tailwind for EV Brand sales Xpeng is making the right noise: Xpeng, which listed its ADSs on the NYSE in late August, has also joined the party. “XPeng is well positioned to gain market share in the mid-market and lower premium market and offers a technology-driven ‘smart’ experience by pushing the boundaries of its ADAS and cockpit user interface functions, especially voice recognition” According to Deutsche Bank, Yu said in a note. Xpeng, which sells the G3, an EV SUV, and the P7, an all-electric sedan, is expected to launch a new sedan with lidar technology this year. Earlier this week, the company launched a major wireless upgrade for its P7 sedan customers in China and shipped a new version of the XPeng operating system, Xmart OS 2.5.0. In December, Xpeng delivered a record 5,700 vehicles, an increase of 326% over the previous year and an increase of 35% over the previous month. For the year the company delivered a total of 27,041 vehicles, an increase of 112% compared to the previous year. Robust performance from Li Auto: Li Auto also had an outstanding performance in December with shipments of 6,126 Li ONEs in December and 14,464 units in 2020. The monthly output increased by 31.9% compared to the previous month and by 529.6% compared to the previous year. EV China Share Performance: Nio stock hit a record high of $ 66.99 on Jan 11, responding to the Jan 9 event on Nio Day. Since then, the stock has withdrawn. Xpeng hit a high of $ 74.49 on December 24 before pulling back. After moving roughly sideways thereafter, the stock made a comeback in recent sessions. Li Auto is experiencing a lean patch after also hitting an all-time high of $ 47.70 on December 24th. Next week’s delivery numbers and upcoming fourth quarter results could be key in determining which direction stocks are headed. Photo courtesy of Nio. For More Information On Benzinga, Click Here For Benzinga Option Deals Breaking Down Novavax’s Coronavirus Vaccine Dates: 2 Analyst TakesJohnson & Johnson’s COVID-19 Vaccine Dates: What You Need To Know © 2021 Benzinga.com. Benzinga does not offer investment advice. All rights reserved.