Nio, Xpeng, Li Auto: Have Chinese EV Stocks Bottomed After A Tough April?

NIO: Nio logo
NIO
Nio

U.S.-listed Chinese electric vehicle players Nio, Xpeng, and Li Auto saw deliveries for the month of April tumble, amid Covid-19 related outbreaks in multiple regions in China since late March, which have resulted in the supply chain, manufacturing, and transportation disruptions. For instance, Nio (NYSE: NIO) saw deliveries for April fall to 5,074 units, down from about 10,000 in March and about 7,100 units in April 2021, as the company temporarily suspended production at its Hefei plant. Li Auto saw the sharpest sequential decline, with deliveries falling to 4,167 vehicles in April, down from about 11,000 in March, and about 5,500 in April 2021. Xpeng saw the smallest impact of the three, with deliveries falling to 9,002 units in April, from about 15,000 vehicles in March, although they were up from around 5,000 units in April 2021.

All three stocks were roughly flat in pre-market trading on Monday, likely indicating that the tough delivery numbers are already priced in. However, the stocks have taken a beating thus far in 2022 amid regulatory concerns relating to the listing of Chinese stocks in U.S. markets and rising interest rates, which have reduced the premium that investors are willing to pay for growth stocks. For instance, both Nio and Xpeng stocks are down by close to 50% year-to-date, while Li Auto stock is down 30%.

Following the sell-off, the three companies now trade at below 3x consensus 2022 revenue, which we believe is an attractive valuation considering their growth rates and above-average gross margins. Even with the temporary dip in April, year-to-date delivery growth has held up for the three companies. For instance, Nio’s deliveries for the first four months of 2022 rose 13% versus last year, Li grew deliveries by 96%, and Xpeng expanded deliveries by around 135%. There are signs that Covid-19 cases are flattening in China, meaning that production should pick up in the coming quarters. Moreover, the regulatory overhang over U.S.-listed Chinese stocks could be easing with reports that the Chinese Securities Regulatory Commission was working to loosen auditing rules while making auditing reports for Chinese ADRs available to U.S. regulators.

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Check out our analysis on Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for more details on how NIO stock stacks up versus its peers.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns May 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 NIO Return 0% -47% 162%
 S&P 500 Return 0% -13% 85%
 Trefis Multi-Strategy Portfolio 0% -17% 227%

[1] Month-to-date and year-to-date as of 5/2/2022
[2] Cumulative total returns since the end of 2016

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