China EV Stocks Rise Despite Latest Warning Sign; XPEV Stock Pops
Chinese EV shares rose early Tuesday despite a report of shift cuts from the Chinese EV giant BYD (BYDFF) as demand slows in the world’s largest and fastest growing electric vehicle market.
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BYD, which sells better Tesla (TSLA) in China, ordered some workers at its Xian plant to work just four days a week at a factory that runs two eight-hour shifts a day, sources told Reuters.
The Xian plant manufactures BYD’s best-selling electric sedans Song and Qin. In addition, BYD reduced shifts at its Shenzhen plant, which makes the Han sedans, from three shifts a day to two a day, the sources said. BYD declined to comment to Reuters.
China EV demand
According to one of the sources, BYD has been scaling back production since the beginning of the year due to weaker industry-wide demand in China.
BYD production averaged 5,749 cars per day in January and February. That’s 22% lower than the average daily output in October and November, according to data from the China Association of Automobile Manufacturers.
In March, BYD began offering discounts on its top-selling EVs Yuan Plus and Seal to stimulate demand, joining China’s EV price war.
BYD Stock, Tesla, Nio, Li Auto, Xpeng
Shares of BYD, which trades OTC, fell 0.5% in premarket trading today. BYDDF stock peaked on Feb. 1 and has since fallen, breaking below the 50-day moving average. Tesla was up 2% in the pre-market on Tuesday, remaining at its 50-day rising moving average.
Among other Chinese EV stocks, Startup No (NIO) gained 1.3% in the pre-market on Tuesday. Nios startup peers XPeng (XPEV) and Li car (LI) rose 4.8% and 1.5% respectively.
LI stock is poised for a fourth straight day of gains and a resistance test at its 50-day moving average. The stock is on a flat basis with a buy point of 27.58 as per MarketSmith’s chart.
On Tuesday, Asia Pacific markets broadly rose after Wall Street’s overnight relief rally on optimism that the banking crisis may be easing. This follows the $3.2 billion takeover of Swiss bank Credit Suisse by competitor UBS.
China EV stock sell-off
A weak sales start to 2023, coupled with the price war in China, has hit Chinese EV stocks.
But in a March 19 note, Morgan Stanley analysts described the sell-off as an opportunity.
According to CnEVPost.com, analysts pointed to tailwinds for China’s EV manufacturers in the second half of 2023 and beyond as price declines in EV batteries and key battery materials accelerate.
In a tougher operating environment, startups might struggle. But the “EV trio (Nio, XPeng and Li Auto) will still hold their ground, supported by healthy balance sheet conditions and better connections to capital markets,” wrote Tim Hsiao, an analyst at Morgan Stanley.
While Li Auto is the execution leader, the risk-reward tradeoff favors XPeng and Nio stocks after sharp falls this year, he added.
Battered XPEV stock continues strong two-day rally. That rally came after management said in an earnings call on March 17 that February orders doubled from January.
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