China EV war: investors curb their enthusiasm for NIO, Xpeng, other Tesla rivals as earnings test follows US$124 billion market drubbing

Name: Behind the scenes at BYD Auto: China’s biggest electric vehicle factory
Uploaded: 2021-03-28T23:30:12.000Z
Duration: 1 min 47 s
Description: Behind the scenes at BYD Auto: China’s biggest electric vehicle factory

Market pacesetters NIO, Xpeng, Li Auto face a myriad of challenges with losses still to snowball in 2021 and analysts grow weary of short-term outlook

Automotive chip shortage will add to other lingering market concerns about US-listed Chinese stocks and outlook for central bank policy tightening

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An Xpeng P7 electric car is seen during 2020 Beijing International Automotive Exhibition in September 2020. Photo: Getty Images

Zhang Shidong

Published: 7:30am, 29 Mar 2021Updated: 12:27pm, 29 Mar 2021

Investors who arrived late for China’s electric-car makers’ party have suffered a US$124 billion (HK$963 billion) beating since the industry’s pacesetters slumped from their market highs this year. That may just be the first cut.

A combination of chip shortage, US-China tensions on issues related to audits and sanctions, as well as a US$10.5 billion stock dumping by Goldman Sachs on Friday, are pressuring sentiment just as NIO, Xpeng and Li Auto prepare to release their quarterly corporate health checks after a market slump.

The three carmakers are expected to report another round of steep losses for the March quarter, according to consensus estimates compiled by Bloomberg, testing investors’ faith in their lofty valuations. Unlike their profitable rival Tesla, Chinese EV producers are sustained by the promise of conquering the world’s biggest market at home, just as China set about achieving its carbon-neutrality goals by 2060.

“In the short term, market volatility will continue to add downside risk to valuations,” said Shen Dai, an analyst at SPDB International, the overseas investment banking unit of Shanghai Pudong Development Bank, which has a sell rating on the NEV sector. “We advise investors to remain cautious because of the valuation and the impact of the supply chain.”

A weak 2020 earnings report and a dividend cut from Geely Auto on March 23 sent the stock tumbling by 15 per cent in Hong Kong last week. Net income trailed market consensus by a wide 23 per cent despite an industry rebound. BYD will come up next, with its fourth quarter results on Monday.

Geely fell 2.6 per cent to HK$19.92 in early trading on Monday, while BYD lost 1.9 per cent to HK$173.70.

Tesla currently dominates China’s premium electric-car niche market, delivering nearly 140,000 Shanghai-made Model 3 sedans last year. China’s electric passenger-car market grew 19 per cent to 1.24 million in 2020, according to Statista, more than three times the next biggest market in Germany.

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Behind the scenes at BYD Auto: China’s biggest electric vehicle factory