China EV sales set to double as Nio stock, Xpeng rally on subsidy hope

Xpeng (XPEV), no (NIO) and Li car (LI) are preparing to report Chinese electric vehicle sales for July ahead of the US stock market opening on Monday. Chinese EV giant BYD (BYDDF) also reports July sales in early August amid hopes for another big month.




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Nio stock and its startup peer Xpeng reversed higher on Friday’s subsidy news. According to a CnEVPost report late Friday, a State Council meeting confirmed a renewal of the VAT exemption for electric vehicles. The exemption should expire at the end of 2022. Beijing had strongly hinted at such a move in recent months.

Sales of electric vehicles in China are expected to more than double

Retail sales of so-called new energy vehicles (which include all-electric hybrid plug-ins and fuel cell EVs) in China are expected to reach around 450,000 units in July, up 102.5% year-on-year based on preliminary estimates by China Passenger Car Association.

But July sales would be down 15% from June’s record. Reports in early July spoke of a Covid outbreak in Anhui province, where Nio and BYD are conducting major operations. More recent reports suggested that intense heat in July weighed on store visits and test drives.

Strong sales in June capped a volatile second quarter for Chinese electric vehicle makers. Li Auto said in June that parts suppliers have gradually resumed production but have yet to fully recover from a chip shortage and other bottlenecks that hit sales in April.

The latest Chinese media reports suggest that the electric vehicle supply chain is stabilizing.


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China EV shares reverse higher

Nio shares rose 1.2% to 19.73 on Friday, closing at daily highs after falling as low as 18.66. Xpeng also turned higher, closing on session highs and up 0.7%. Highly rated IBD-50 stock Li Auto fell 0.3% on Friday but held above its 50-day moving average. BYDDF shed 2.2%, off session lows but below the 50-day price.

US-listed Chinese EV stocks have fallen below their 50-day moving average and their relative strength lines are lagging behind. Most rallied in May and June, but they tumbled again in July amid renewed fears of being delisted from the US.

In contrast, Tesla stock is well above the 50-day moving average and its RS line is improving. TSLA shares rose 5.8% on Friday to 891.47. Shares rose 9.15% for the week after rising 13.4% the previous week on strong second-quarter earnings.

Nio Stock

The once-hot Chinese EV stock and its peers are facing a high bar for July sales. Check the results again.

In the second quarter, Nio sold 25,059 electric vehicles, up 14% year over year. That included 5,074 EV deliveries in April, 7,024 in May and a record 12,961 in June, up 60% year-on-year. EV deliveries in Q2 were slightly above guidance but slightly below Q1.

Shanghai-based Nio has been hit particularly hard by Covid lockdowns.

Nio will release two new models in the third quarter.

Xpeng stock

In the second quarter, Xpeng sold 34,422 electric vehicles, almost doubling year-on-year. That included 9,002 EV deliveries in April, 10,125 in May and 15,295 in June, the best month since December and more than doubling from a year earlier. EV deliveries in Q2 were slightly above guidance but slightly below Q1.

Xpeng will release a new electric SUV later this year.

Li car stock

In the second quarter, Li Auto sold 28,687 electric vehicles, up 63% year-on-year. That included 4,167 EV deliveries in April, 11,496 in May and 13,024 in June, up 69% year-on-year. EV deliveries in Q2 were well above guidance but well below Q1.

Li Auto will begin deliveries of its premium L9, its second hybrid SUV, in late August.


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BYDDF share

In the second quarter, BYD sold 355,021 NEVs, up 256% year over year and 24% above the 286,329 in the first quarter. That was well above Tesla’s 254,695, although the US EV giant is still the leader in all-electric vehicles.

A resurgence of Covid-19 hit Chinese supply chains and electric vehicle manufacturing earlier this summer. It’s unclear what the current status of the recovery is, although local media reports suggest the situation is stabilizing.

Amid the challenges, the startups continue to grow EV sales at a robust pace. But the most impressive gains continue to come from BYD, which is backed by investment legend Warren Buffett.

On July 29, BYD launched the Seal EV, designed to rival the Tesla (TSLA) Model 3. China is the world’s fastest growing electric car market. The seal is reportedly undercutting the Model 3 in price, starting at RMB209,800 ($31,130) versus RMB279,900 ($41,502) for Tesla’s small sedan.

The rivalry between Tesla and BYD will intensify. Both Chinese auto giants and startups are expanding their EV product range and international presence.

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