Chinese electric car shares are rising, making it difficult for Tesla

(Bloomberg) – Shares in Chinese electric vehicle makers are making it difficult for global industry leader Tesla Inc., supported by Beijing’s pro-consumption policies and volume buy deeply from investors.

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US depository receipts of Nio Inc., XPeng Inc. and Li Auto Inc., which have each gained at least 64% over the past month to be among the top gainers in US-traded Chinese stocks. The strong bounce reflects improved sentiment following a month-long slump on concerns about valuations and supply bottlenecks.

Their profits easily beat Tesla’s 17% gain, with a divergence in China and the US policy outlook and investors worried about how Elon Musk will finance a potential deal. Twitter Inc. equalize the share price of the EV giant.

China’s electric-vehicle industry bottomed out during Shanghai’s shutdown – when not even a single car was sold in the city in April and factories were forced to either close or operate under conditions. serious limitations. Authorities have since announced a series of stimulus measures to revive the sector, including subsidies, higher quotas for auto ownership in Shanghai and Guangdong, and possible expansion exemption from purchase tax for new energy vehicles.

READ: Tesla Cut, Chinese Rivals Added by Oldest EV Fund in Korea

Andy Wong, fund manager at LW Asset Management Advisors Ltd. “There are cash flows that are buying the decline and capturing the industry recovery,” said Andy Wong, fund manager at LW Asset Management Advisors Ltd. However, the short-term upside potential has shrunk after the recent rally, he noted.

Meanwhile, Tesla’s stock has seen big swings and is down about 36% from this quarter’s peak in April, although the company has made a significant comeback in terms of manufacturing in China. . The US automaker’s impending job cuts, uncertainty about the deal on Musk’s Twitter, and his latest comments about losses at new plants in Germany and Texas are causing inventories to fall. controlled warehouse.

Pricing in

Market performance is also emblematic of different growth prospects and policies in China and the US. As of now, the Nasdaq China Golden Dragon index has outperformed the broader Nasdaq index by nearly 18 percentage points, as Chinese companies are expected to deliver on policy stimulus while companies The same US industry is tired of aggressive monetary tightening and recession fears.

READ: JPMorgan China Fund raises bets on tech as bullish calls rise

However, after China’s EV shares surged like that, investors were looking for more catalysts that could sustain the rally. Li Auto’s 14-day relative strength index is at 84, well above 70, which is signaling to some investors that the stock is being overbought. The readings for XPeng and Nio are also around 70.

The improvement in delivery figures provides some comfort as China’s economy gradually recovers from the damage caused by the Covid-19 lockdown. Li Auto, the largest by market capitalization of the Chinese trio, delivered 11,496 units in May, up 176% from April and more than double last year’s level.

“Going forward, we think the catalyst will need to come from earnings and an improving economy” as most of the good news for the sector, wrote Eason Cui, analyst at Sunwah Kingsway Capital Holdings Ltd. Chinese cars have been priced. in the first day of this month.

READ: Li Auto launches new luxury SUV to compete with Mercedes, BMW

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