China's EV stocks surged above a key level as the big overhang starts to lift

Electric vehicle sales in China surge in seasonally strong November, with Nio (NIO) poised for a sharp rebound as supply headwinds ease and new models ramp up. XPeng (XPEV) shares rose sharply on Wednesday, leading to a broad jump for EV shares in China, following a better-than-expected Q4 supply outlook. On Wednesday, there were more signs of change in China’s ultra-strict Covid policy, which is weighing on carmakers.



x



On December 1, Nio, XPeng and their Chinese partner in the EV launch Li Auto (LI) are set to report sales in November. Chinese EV giant BYD (BYDDF) should follow in a few days.

All of these EV manufacturers are increasingly competing with Tesla (TSLA) in the world’s largest EV market.

NEV retail sales are expected to reach 600,000 in November, the China Automobile Association estimates. That would be an increase of 58.5% from the previous year and also an increase of about 8% from October. Unlike BYD, all startups saw sales decline in October versus September amid lockdowns.

“New Energy Vehicles” or NEVs include all-electric, hybrid-electric and fuel cell vehicles.

“Historically, auto sales in China have risen strongly in the year-end months,” Deutsche Bank analyst Edison Yu wrote in a Nov. 25 note. He expects new models, including the Nio ET5 and Li L8 and L9, to boost sales in November.

EV subsidies in the country expire at the end of the year, which could lead to some demand.

Chinese EV shares rose on Tuesday and jumped again on Wednesday. Local authorities continued to easing some ‘zero Covid’ rules. Wednesday, after protests against the policy erupted in several cities over the weekend. China’s top leadership is also pushing for a more “targeted and precise” approach to fighting the coronavirus, local media said.

Nio sales

Check back Thursday for November’s results. Nio delivered 10,059 electric vehicles in October, down 7.5% from September but up 174% from a year earlier.

Investors will pay particular attention to November’s ET5 numbers. The shutdown and supply issues held back October volumes for the new Tesla Model 3 rival sedan.

Deutsche Bank’s Yu predicts Nio will ship a record 13,500 EVs in November, up 34% from October, and 19,500 EVs in December.

Nio itself led record shipments in Q4 on Nov. 10, while reporting a worse-than-expected Q3 loss.

It is expected to deliver 43,000-48,000 EVs in Q4, up 72%-92% from a year earlier. It will also be up 36%-52% from Q3’s 31,607 EV deliveries.

These deliveries will include a small but growing number of European sales. Nio has expanded deliveries from Norway to several European countries.

Nio shares rose 17.3% to 12.31 the stock market today, jumping above its 50-day line intraday. Shares of Nio and its China EV partners remain below the 200-day line after falling over the past year.

XPeng Sales

Check back later for the November results. XPeng sold 5,101 EVs in October, down nearly 40% from September, continuing a rapid month-on-month sales decline.

Early Wednesday, XPeng reported a bigger-than-expected Q3 loss of 39 cents per ADR share. Revenue rose 19.3% to RMB 6.82 billion, or $959.2 million.

In Q4, shipments of 20,000-21,000 EVs are expected, down roughly 50%-52% from a year earlier and significantly less than the 29,570 in Q3. With October shipments and November sales likely similar, this means XPeng shipments will recover to around 10,000 in December.

Deutsche Bank’s Yu predicts that XPeng will ship 19,500 EVs in Q4. New models, such as the G9 SUV, are gaining popularity slowly, while some older models are being phased out, he said.

Shares of XPeng jumped more than 36% by 10:01 a.m. Wednesday, moving above its 50-day line. Shares jumped 6.5% to 7.34 on Tuesday.

On Wednesday, the southern Chinese city of Guangzhou, where XPeng is based, eased Covid-19 restrictions in various areas. Other major Chinese cities, including Shanghai and Zhengzhou, home to the world’s largest iPhone factory, also said Wednesday they were lifting Covid lockdowns.

Li Auto Sales

Check back later for the November results. Li Auto sold 10,052 vehicles in October, down 13% from September and up 31% from a year earlier.

Li Auto is experiencing slight delivery delays for some new L8 and L9 models due to parts shortages in November, based on local media reports. But the weekly log shows that Li Auto will easily exceed 10,000 deliveries.

Li began deliveries of the L9 SUV on August 30 and began deliveries of the L8 on November 10. It phased out its original One model.

On Dec. 9, Li Auto will report third-quarter earnings before the market opens. It is also expected to give a Q4 delivery forecast at that time.

Shares of Li Auto jumped 16% to 21.53 on Wednesday, moving back above the long-sliding 50-day line. Shares jumped 8.7% to 18.53 on Tuesday.

BYD Sales

Check back later for the November results. In October, BYD sold a milestone of 103,157 all-electric EVs, which is an increase of 150% compared to the previous year. A total of 217,816 fully electric and hybrid-electric vehicles were sold in October.

BYD is on track to sell nearly a million fully electric vehicles in 2022.

Exports remain a small share of total sales, but are growing rapidly. The Warren Buffett-backed electric car maker has a massive international expansion underway. On Tuesday, BYD said it will enter the personal electric car market in Mexico next year.

On December 9, BYD is preparing to launch the Frigate, a hybrid SUV. This will contribute to numerous new EV launches. BYD Seal, a competitor to the Tesla Model 3, launched in late August.

Shares of BYDDF jumped 7.7% to 50.21, back above its 50-day line for the first time since early August. Shares jumped 5.2% on Tuesday. BYD sells over the counter in the US

Tesla stock

Tesla didn’t post sales in China alone, but weekly registration data suggests a strong month for domestic sales in China. Price cuts in late October and various other incentives, along with Tesla’s big production increase and soon-to-expire Chinese EV subsidies, are likely contributing factors.

Tesla shares rose 1.1% on the day. Shares fell 1.1% on Tuesday, trading below major key averages.

Electric vehicle sales in China

China’s electric car market remained red-hot in the first 10 months of 2022 despite headwinds.

During that period, NEV sales jumped 110 percent, while the broader passenger car market grew just 14 percent, according to data from the China Association of Automobile Manufacturers. In October alone, all-electric sales in China jumped 70% to 508,000.

“Over the past 10 months, the (NEV) segment has recorded seven monthly triple-digit growth on a year-on-year basis, supported by strong underlying demand and tax incentives offered by the government,” Deutsche Bank analysts said in their Nov. 25 note.

YOU MIGHT ALSO LIKE:

Tesla Stock Vs. BYD Stock

These are the 5 best stocks to buy and watch now

Stocks to watch: Top rated IPOs, large caps and growth stocks

Find the latest stocks reaching buy zones with MarketSmith

Why this IBD tool simplifies the search for the best stocks

Futures: Market Rally Awaits Powell’s Speech; What to do

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *