The Upcoming Catalyst That Could Move Chinese EV Stocks Nio, Xpeng, Li Auto

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Chinese electric vehicle stocks have seen some moderation in momentum in recent sessions. One upcoming catalyst could lift the stocks out of this lackluster phase: the January delivery numbers that are due next week.

Finding The Sweet Spot In China’s EV Market: China is a hot EV market, both from the perspective of the addressable market opportunity and supply.

“China is a greenfield EV market opportunity for many well positioned auto players as we believe overall EV sales can potentially double in the region over the next few years given the pent-up demand for EV vehicles from customers across all price points,” Wedbush analyst Daniel Ives said in a note.

Goldman Sachs analyst Fei Feng estimates EV penetration, including battery electric and plug-in hybrid vehicles, will increase from 5% in 2020 to 20% in 2025, 53% in 2035 and 80% in 2050.

Xu Haidong, the deputy chief engineer of China Association of Automobile Manufacturers, said in a summit late last year that China’s EV sales might reach 1.8 million units in 2021 — up 40% from a year earlier — thanks to stable economic growth, continuous stimulus policies on vehicle consumption and sales promotions by manufacturers.

Yet the supply side is crowded with homegrown startups, international pure-play EV company Tesla Inc (NASDAQ: TSLA) and traditional automakers all vying for a piece of cake.

Among the players in China, the standouts include Nio Inc – ADR (NYSE: NIO), Xpeng Inc – ADR (NYSE: XPEV), Li Auto Inc. (NASDAQ: LI) and WM Motors, backed by both Baidu Inc (NASDAQ: BIDU) and technology conglomerate Tencent Holdings ADR (OTC: TCEHY).

Deutsche Bank Securities analyst Edison Yu said the firms are collectively the “Fab Four” of the China EV market.

Nio On Record Streak: Nio, which has a premium positioning in the China EV market, has been reporting record delivery numbers of late.

After the COVID-19 pandemic affected sales in the first two months of 2020, the company acquitted itself credibly through a series of innovative measures and technological enhancements.

The company ended 2020 on a high, having delivered a record 43,728 vehicles for the year. It has been churning out 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 newly launched EC6s.

Deliveries are sitting at a not-so-robust pace of 1,598 in January 2020.

Given that Nio announced it would make good the reduction in government subsidies for vehicles purchased through Jan. 10 and a limited period zero down payment option, the pace of sales will likely have accelerated further.

Nio’s battery-as-a-service scheme has already begun to show a positive impact on sales.

Related Link: Nio Analyst Sees Meaningful Tailwinds For EV Brand’s Sales Volume

Xpeng Makes The Right Noises: Xpeng, which listed its ADSs on the NYSE in late August, has also joined the party.

“XPeng is well positioned to take market share in the mid-tier and lower premium market, delivering a tech-centric ‘smart’ experience through pushing the limits of its ADAS features and cockpit user interface functionality, especially in voice recognition,” Deutsche Bank’s 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 over-the-air upgrade for its P7 sedan customers in China, delivering a new version of XPeng’s operating system, Xmart OS 2.5.0.

In December, Xpeng delivered a record number of 5,700 vehicles, a 326% increase year-over-year and a 35% increase month-over-month.

For the year, the company delivered a total of 27,041 vehicles, a 112% increase year-over-year.

Li Auto’s Robust Performance: Li Auto also turned in a stellar December performance, with deliveries of 6,126 Li ONEs in December and 14,464 units for 2020. The monthly performance represented increases of 31.9% month-over-month and 529.6% year-over-year.

Chinese EV Stock Performance: Nio shares ran up to record highs of $66.99 Jan. 11, reacting to the Nio Day event held Jan. 9. Since then, the stock has pulled back.

Xpeng, meanwhile, peaked at $74.49 Dec. 24 before pulling back. After moving roughly sideways thereafter, the stock has staged a comeback in recent sessions.

Li Auto is witnessing a lean patch after it hit an all-time high of $47.70, also on Dec. 24.

The upcoming week’s delivery numbers and the imminent fourth-quarter results could be the key to determine which way the stocks are headed.

Photo courtesy of Nio.

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