2024: China’s EV Stocks Start in Reverse Gear

Paresh Jadhav

12 months ago

China’s EV stocks started 2024 on an unfavorable note as price wars threatened profits. BYD remains dominant on mass markets; however, Tesla’s price cuts have reduced barriers for emerging companies like XPeng to gain entry.

Survival-of-the-fittest competition has broken out on the world’s largest stock exchange. While some EV stock winners could endure, others could succumb to its pressures and fold.

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Nio

Nio operates a fleet of battery swapping stations that enable customers to gain new power within three minutes, offering convenience to its customers while increasing sales over time. Nio’s plans to expand this network next year may eat into near-term margins but ultimately boost long-term sales growth.

Nio is one of the fastest-growing EV manufacturers. From 2018-2022, their vehicle deliveries increased at an astounding 170% annually, surpassing smaller American rivals Lucid and Rivian by far.

However, Tesla faces numerous obstacles. They must compete with established Chinese EV companies such as BYD (OTCMKTS:BYDDF), which has won early support from Berkshire Hathaway and dominates China’s midmarket. BYD also competes against foreign firms like Tesla; while trying to find ways to make money in the US market.

Xpeng

Xpeng Electric Vehicle Company of China has become another casualty of price wars and stagnating growth, yet maintains that they remain on track to achieve their 2025 sales target, and plan to expand into Europe.

Xpeng has struggled to compete with traditional carmakers despite receiving backing from large investors. Recently, this startup announced an unexpectedly large loss and stated its intention to reduce spending and focus on core business operations.

US-traded shares of Xpeng fell as much as 8.6% on Friday after Alibaba unveiled plans to reduce its stake. As part of a wider effort to optimize its investment liquidity, Alibaba said selling 85 million American depositary receipts will raise about $1.5 billion before fees.

Li Auto

Li Auto stands out as one of the EV industry’s fastest-growing companies as pure electric vehicles (EVs) become mainstream. Their second quarter financial results showed double-digit gross margin and 128% quarter-on-quarter delivery growth; their focus lies on high-end premium EVs with gasoline engines to extend range; their latest model, Li MEGA has already garnered 10,000 pre-orders!

Next year, BYD plans to introduce four new models – an EREV and three battery electric vehicles (BEVs), as well as investing in charging infrastructure – and reach annual sales of 1.6 million cars by 2025; by then they intend to focus on overseas markets with direct sales models in place – according to their announcement on Weibo.

Rivian

Rivian shares have taken a dramatic tumble since last year when its electric vehicle startup missed production targets and reduced sales expectations this year. Rivian also didn’t cut prices like some competitors had done and its significant cash burn makes breaking even extremely challenging.

Rivian continues to make headway with its R1T and R1S electric trucks and SUVs. Rivian recently won a court ruling against opponents of its second plant plan in Georgia and is on track to produce 50,000 vehicles this year. Rivian also believes its R2 platform will be less costly to produce than current models; these positive indicators could give Rivian a chance to reverse its recent decline; currently trading at 2.5 times estimated sales revenue (a bargain compared to Tesla).

Lordstown Motors RIDE

Lordstown Motors designs, produces and markets light-duty electric vehicles under its flagship product: the Endurance full-size pickup truck. Lordstown Motors produces its vehicles at its Foxconn plant located in Lordstown, Ohio.

The company recently announced a reverse stock split to improve share liquidity, making its shares more appealing to both institutional investors and individual investors.

Steven Burns, Foxconn (OTCMKTS:HNHPF)’s founder and former CEO, has sold off all his stakes in the company following its warning of imminent bankruptcy if Foxconn backs out of its investment agreement. This sale comes shortly after Foxconn has advised investors it may withdraw its support in return for financial investment agreements from shareholders like them.

Hindenburg Research released a report about Lordstown Motor Company in March that alleged production delays and that many orders were mere non-binding expressions of interest rather than firm financial commitments. Lordstown is just one of several EV startups struggling to ramp up production.

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