Tesla’s march to US$1 trillion inspires bets on BYD, Xpeng, Ganfeng Lithium as China EV sector caps best run since July

Tesla’s march to US$1 trillion in market value over the past two weeks is underpinning the industry’s prospects, inspiring the best run in four months in shares of Chinese electric vehicle (EV) and battery manufacturers.

The MSCI China All Shares IMI Future Mobility Top 50 Index, which tracks EV makers, lithium-ion battery producers and other new-energy stocks, has risen 14.5 per cent in four straight weeks, the longest winning streak since early July. The index has returned almost 50 per cent this year, while the Hang Seng Index slipped 7.4 per cent.

Xpeng, NIO, Contemporary Amperex and Ganfeng Lithium have risen by 2.6 per cent to 9.4 per cent over the past week, as Elon Musk’s company in California gained more market value after surpassing the trillion-dollar milestone on October 25 during its 11-week surge.

The red-hot industry is a bright spot in an otherwise bleak economy that is fast losing its shine. Chinese EV makers and their parts suppliers ticked the boxes with strong market demand, favourable policies and friendly regulations, in stark contrast to the troubled property and technology sectors.

“We expect the EV penetration rate to exceed 20 per cent in 2025 in China and Europe,” said Yuan Jiancong, an analyst at Citic Securities. “The momentum in the global EV market will continue in 2022 and Tesla will continue to lead the global trend of smart EVs. This trend is irreversible.”

Reports this week underlined that optimism with bullish October sales data. Xpeng delivered more than 10,000 cars for a second month while BYD recorded an 85 per cent surge in sales. Ganfeng Lithium won a three-year supply contract from Tesla.

The market value of Shenzhen-listed Contemporary Amperex, which supplies one-third of the world’s lithium-ion batteries for EVs, reached 1.48 trillion yuan (US$234 billion) this week. That is within 11 per cent of overtaking Industrial and Commercial Bank of China as the second most valuable mainland company, after Kweichow Moutai.

Global sales of new-energy vehicles rose 44 per cent in the first nine months of this year, gaining stronger traction as major global economies switched to green-energy vehicles to reduce carbon emissions, according to Huachuang Securities.

China recorded a 185 per cent surge in the same period, taking its share of the market to 11.6 per cent, according to an industry association.

Tesla added 1.3 per cent to US$1,229.91 in New York on Thursday for a market capitalisation of US$1.24 trillion, making it the world’s sixth-largest company. The stock’s 11-week advance is the longest sequence since a 12-week run that ended in February 2020, according to Bloomberg data.

While Contemporary Amperex fell 2 per cent to 634.09 yuan in Shenzhen on Friday, the stock has risen 81 per cent this year, on top of a 230 per cent jump in 2020. The group’s net income surged 131 per cent from a year ago in the first nine months.

BYD, the Shenzhen-based electric-car maker backed by Warren Buffett, has risen 53 per cent this year while Xpeng gained 12 per cent in Hong Kong trading.