New year brings bad news for Chinese EV makers. Here's why
- Chinese EV sales for the first week of January, a traditional peak period, fell 20% on-month, missing consensus.
The new year hasn’t started on a good note for Chinese electric-vehicle makers as their shares decline on growing fears of slowing demand. The outlook for the sector has taken a beating as exports slow down and price wars intensified in an economic downturn.
Li Auto Inc., the best-performing stock on the Hang Seng Index last year, dropped about 6% this week, while rivals XPeng Inc. and Nio Inc. fell by a bigger measure. Along with BYD Co., the four major EV makers have lost a combined $13 billion in value in 2024.
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While shipments of battery-electric and plug-in hybrid vehicles to dealers are projected to increase 25% this year, according to the China Passenger Car Association this week, the growth is still slower than the 36% seen in 2023.
Citigroup Inc. analysts including Jeff Chung slashed the price target of BYD by more than 20% on Friday, citing competition in China and a lower sales volume forecast due to demand concerns. “The stock may suffer due to uncertainty on valuation and earnings in the first quarter entering the low season with destocking," before more advanced features help ramp up new models from April, they said.
Shares of the world’s biggest EV maker gained 1.9% this week, paring their year-to-date loss.
Chinese EV sales for the first week of January, a traditional peak period, fell 20% on-month, missing consensus, according to Chung. That may be followed by a 50% sequential drop in February, as the market enters a quiet season due to the Lunar New Year holidays.
Concerns over the demand slowdown in China is weighing on upstream EV battery makers across Asia. Samsung SDI Co., which supplies to Volkswagen AG and Ford Motor Co., dropped more than 8% this week amid concerns over its earnings. China’s lithium giant Contemporary Amperex Technology Co. is also trading near a three-year low. “Going into 2024, we expect continued price competition in the form of price cuts on both existing and refreshed models, as well as launching new models at more competitive prices with more advanced features," Goldman Sachs Group Inc. analysts including Tina Hou wrote in a note last week.
