Shares of Chinese electric vehicle (EV) manufacturers experienced a significant downturn, influenced by Tesla’s recent price reductions in China and a sluggish start to January sales.
NIO, XPeng, and Zhejiang Leapmotor Technology all saw notable declines in their stock values, reports the Wall Street Journal.
On Wednesday, NIO’s shares dropped 9.6% to HK$49.05 (US$6.27), following an 8.65% decrease in its American Depositary Receipts (ADRs) overnight. Since the beginning of the year, NIO’s Hong Kong-listed shares have plummeted by 33%. Similarly, XPeng’s shares fell by 9.9%, and Zhejiang Leapmotor Technology’s shares declined by 5.1%.
Tesla’s recent pricing strategy included a 5.9% cut on its Model 3, bringing the price down to CNY245,900 (US$34,291), and a reduction in the starting price of the Model Y from CNY266,400 to CNY258,900.
These adjustments have negatively impacted the overall sentiment in the auto industry, according to Kelvin Lau, an analyst at Daiwa Capital Markets. He attributed the sell-off in Chinese EV stocks to the combined effect of Tesla’s aggressive pricing and disappointing January sales figures from Chinese EV makers.
Data compiled by Citi revealed a significant drop in month-to-date insurance registrations for NIO, a proxy for retail sales, which fell 27% from the previous month. XPeng’s insurance sales plummeted by 62%, and Leapmotor’s decreased by 30%. Citi analysts, led by Jeff Chung, predict a potential 30% decline in China’s EV sales in January compared to December.
Citi analysts also noted that Tesla’s price cuts in the CNY200,000-CNY300,000 range, where XPeng’s products primarily compete, could pose a significant challenge to the Chinese EV manufacturer.
In response to the heightened competition and pricing pressures, several investment banks, including Citi and HSBC Qianhai, have revised their target prices for NIO’s and XPeng’s ADRs and H shares downward. This adjustment reflects the increasingly competitive landscape in the Chinese EV market, exacerbated by Tesla’s strategic pricing moves.
Tesla yesterday cut Model Y pricing in Europe, while offering some aggressive incentives such as 0% interest on loans and leases in Germany for the compact crossover SUV, which has become the best-selling car in the continent for 2023.
