Chinese electric vehicle (EV) manufacturers are facing a challenging start to the new year, with their shares experiencing declines fueled by growing apprehensions about a slowdown in demand. The EV sector’s outlook has been dampened by a combination of slowing exports and intensified price wars, exacerbated by an economic downturn.
Li Auto Inc., the top-performing stock on the Hang Seng Index in the previous year, saw a 6% drop this week. Rivals XPeng Inc. and Nio Inc. experienced more significant declines. Alongside BYD Co., the four major EV manufacturers collectively lost a total of $13 billion in value in 2024.
While the China Passenger Car Association projects a 25% increase in shipments of battery-electric and plug-in hybrid vehicles to dealers this year, it represents a slower growth rate compared to the 36% observed in 2023.
Citigroup Inc. analysts, led by Jeff Chung, reduced BYD’s price target by over 20% on Friday, citing heightened competition in China and a lower sales volume forecast due to demand uncertainties. They expressed concerns about potential stock volatility due to valuation uncertainties and earnings uncertainties entering the first quarter, a traditionally low season with destocking. They anticipate an uptick in new model production from April, driven by more advanced features.
The world’s largest EV maker saw a 1.9% gain in shares this week, offsetting its year-to-date loss to some extent.
In addition to the impact on EV manufacturers, concerns about the demand slowdown in China are also affecting upstream EV battery makers across Asia. Samsung SDI Co., a supplier to Volkswagen AG and Ford Motor Co., witnessed a more than 8% drop in share value this week amid earnings concerns. China’s lithium giant, Contemporary Amperex Technology Co., is trading near a three-year low.
Goldman Sachs Group Inc. analysts, including Tina Hou, anticipate continued price competition in 2024, manifesting as price cuts on existing and refreshed models, as well as the launch of new models at more competitive prices with advanced features.
