Why Some Chinese EVs Will Accelerate While Others Get Left in the Dust

The shares of Chinese electric vehicle makers are bouncing today, based on the latest weekly sales. The numbers, coupled with the news flow on the latest on tariffs and in battery development, make for volatile trading in the sector.

I think Chinese EVs make for one of the most exciting sectors in Asia, a combination of cutting-edge technology, consumer confidence, and low-cost production. China has stolen a massive lead in EV advancements, and as the home market to the world’s largest battery producers; it’s hard to imagine China surrendering that position.

But there will be winners and losers among the Chinese EV makers. An Asia-focused fund manager friend here warns that some stocks may falter or even fall to zero as companies fail to compete. A fierce price war within China raises the stakes, suggests some producers may ultimately go bankrupt, and also emphasizes the importance of successful expansion into higher-margin export markets.

New registrations drive stocks

We just got the numbers on new insurance registrations for the week ending April 27. That’s dominating the market moves early this week.

Consider that Xpeng XPEV (HK:9868) is the worst performer in Hong Kong’s Hang Seng China Enterprises index today, down 4.5% for Tuesday. Its registrations were up 8.4%, after delivering 33,205 cars in March.

The China Enterprises Index, tracking mainland businesses listed in Hong Kong, fell 0.2% on Tuesday, even though the broad-market Hang Seng (with a greater influence of multinationals and Hong Kong companies) rose 0.2%. The Hang Seng Tech index rose 0.6% for Tuesday.

Second-worst in the China Enterprises benchmark today is BYD BYDDY (HK:1211), continuing a two-day selloff with a 2.6% drop for Tuesday. Combined with Monday’s decline, that’s a 6.4% fall since the Friday close.

BYD’s pace slowing

BYD is the market leader, but its 10.9% increase for the April 27 week lags its pace 4-6 months ago. We can see that its pace of escalation is slowing, with the 377,420 new-energy vehicles (batter and hybrid) up 24.8% for March year-on-year but only 16.9% month-on-month. It was regularly delivering close to 100,000 vehicles six months back.

Xiaomi XIACY (HK:1810) has had great success after branching out from smartphones into EVs. But its 7,000 new insurance registrations last week were down 2.2% week-on-week. Its shares fell 0.1% in Hong Kong today.

Xiaomi hurt by fire

The company has been buffeted by negative publicity after an SU7 accident killed three college students at the start of this month. The car was in autonomous mode, detected roadwork ahead, issued a warning and transferred control to the driver, Xiaomi says. But questions are being asked about why the car caught fire, and whether the passengers were unable to open the car doors. The working theory is that they died from the fire rather than the crash.

Zeekr Intelligent Technology Holding ZK shares bounced on Wall Street for Monday, up 4.9%. The EV brand is owned by Geely Automobile Holdings, propelling Geely Auto GELYY (HK:0175) shares up 4.2% in Hong Kong today. That makes them the top performer on the China Enterprises index.

Zeekr listed in May 2024, and has lost 22.1% since debut. So it is worth watching whether the brand can continue its current momentum, suggesting a share-price rebound would be on the cards. It’s not a stock I’ve considered before but I’ll be following it closely to see if this momentum continues.

Nio back in favor?

Nio NIO shares leapt 7.1% on Wall Street for Monday. It’s another company that’s been out of favor, seeing a massive 2021 runup leading into a crash that leaves the shares down 56.5% since debut. That’s a share-price drift that encouraged me to sell out of it almost entirely, cutting my losses.

Nio, selling cars under both the Nio and Onvo brands, saw 7,970 new registrations last week in China. That’s up a whopping 29.2%. The company has launched a third band, Firefly, designed to appeal to “premium small-car” shoppers, like the Mini or Smart cars.

I would worry that it is spreading itself too thin. So the weekly data don’t encourage me to buy back into the stock. But active traders could make quick profits trading into and out of the Chinese EV brands, based on how these weekly numbers drive the volatile stocks.

At the time of publication, Alex Frew McMillan had long positions in BYDDY, Li Auto LI and Xpeng XPEV, as well as KTEC, the tracker ETF for the Hang Seng Tech Index.