Challenges in Q1 for Electric-Vehicle Industry

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The electric-vehicle industry is off to a rough start this year, with price reductions and investor destocking expected to impact first-quarter results. This is concerning news for all auto manufacturers, including Tesla.

Delivery results for January reveal that the situation is as bleak as anticipated. Leading Chinese EV makers Li Auto, NIO, and XPeng reported a combined delivery of 49,470 units, representing a 44% decline from December 2023.

While January tends to be a slower month for car sales, the 44% drop is greater than the 40% sequential dip observed last year during the same period.

Reports from Citi analyst Jeff Chung highlight that Chinese EV makers experienced a decrease in order intake in January due to high inventories at dealerships. To offload their excess stock, companies have been reducing EV prices.

Of the three manufacturers, Li Auto is the largest. It delivered 31,165 vehicles in January, marking a 38% month-over-month decrease. However, this figure showcases a remarkable 106% increase compared to the previous year. Despite the positive growth in deliveries, Li Auto’s shares have plunged by 28% since the start of this year.

The challenges faced by the electric-vehicle industry in the first quarter should be closely monitored, as they may have lasting implications for the market.

Electric Vehicle Stocks Experience Mixed Results

Li U.S.-listed American depositary receipts (ADRs) started the day with a 3.1% increase in premarket trading. Meanwhile, S&P 500 and Nasdaq Composite futures saw a 0.4% and 0.6% rise, respectively.

NIO reported delivering 10,055 units, which represents a 44% decline from the previous month but an 18% increase compared to the previous year. Overseas trading pushed NIO stock up by 0.3%, although the overall shares have seen a 40% decrease in 2024. In the U.S., NIO’s ADRs experienced a 3.6% surge.

XPeng, on the other hand, delivered 8,250 vehicles, reflecting a 59% decline compared to the previous month. However, when compared to the previous year, there has been a significant 58% increase. In overseas trading, XPeng stock rose by 1.4%, while year-to-date shares have dropped by about 42%. XPeng’s U.S.-listed ADRs saw an increase of approximately 2.5%.

Following the release of delivery numbers from Chinese EV makers, Tesla experienced a 2% surge. Prior to this development, Tesla shares had witnessed a 25% drop in 2024.

Chinese car manufacturers, including Tesla’s production facility in Shanghai, sold approximately 6 million all-battery electric vehicles in 2023, marking a 20% increase from the previous year. Citi analyst Chung remains optimistic about growth in 2024 and predicts a further 16% increase.

If Chung’s projection holds true, battery electric vehicles (BEVs) will account for approximately 27% of total car sales in China this year, up from approximately 24% in 2023.

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