China EV stocks are being hammered by a perfect storm that’s triggered a steep plunge in Asia Financial’s China Electric Vehicles index this year.
The index of 14 leading China EV makers has slumped 26.1% so far in 2022 and is down 13% in March.
Supply-chain disruptions, rocketing inputs costs, and the partial removal of government subsidies for China EV manufacturers drove the selloff. Add to that uncertainty over the possible delisting from US exchanges of many of the index’s component stocks and it amounts to a near-perfect storm.
The selloff came despite a 153% surge in EV sales in the first two months of 2022 and a 157% leap last year. The soaring price of lithium, which has almost doubled this year and is up almost 500% over the past year, prompted Great Wall Motors to stop taking orders for its Ora brand EVs this month because one of its models it’s losing 10,000 yuan on each sale, its CEO says. The hit from the rising price of lithium batteries came just as the government slashed subsidies on new EV purchases by 30% in January; remaining subsidies are scheduled to end this year.
“Last year EV makers were riding high and then all of a sudden things began to go south,’’ said Liu Xiaobo, a Shenzhen-based independent financial commentator. “The timing [of lithium price surges] could not be worse, coming just as Beijing starts to cut EV sales subsidies. Manufacturers can either raise retail prices at the cost of sales, or stop selling EVs altogether.’’
Worst-Performing China EV Stocks
The index’s biggest losers so far this month are Great Wall Motor (down 26%), Anhui Jianghuai Auto (-21.1%), and Guangzhou Auto (-15.8%).
Nio, often called “China’s Tesla,” is the best performing constituent with a 3% decline so far in March. Investors are relatively upbeat about Nio’s planned product launches this year. Shanghai-based Nio last week reported a net loss of 2.14 billion yuan ($340 million) in the final quarter of last year even as revenue surged 49% to 9.9 billion yuan.
But the golden era of turbocharged sales growth for China’s EV industry may be over. Credit Suisse analyst Peter Li in Hong Kong sees sales growth slowing to a little over 60% this year, to about 31% in 2023 and 14% in 2024.
- By Frank Chen and Kevin Hamlin
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