China EV stocks jumped Tuesday, shrugging off a report about shift cuts by Chinese EV giant BYD, as demand weakens in the world's biggest and fastest-growing market for electric vehicles. XPEV stock surged while BYD stock edged lower.
BYD, which outsells Tesla in China, asked some workers at its Xian plant to work only four days a week in a factory running two eight-hour shifts per day, sources told Reuters.
The Xian plant makes BYD's top-selling Song and Qin EV sedans. In addition, BYD reduced shifts at its Shenzhen facility, which makes the Han sedans, from three shifts per day to two per day, the sources said. BYD declined to comment to Reuters.
China EV Demand
One of the sources said BYD scaled back production due to weaker industrywide demand in China since the start of the year.
BYD's production averaged 5,749 cars per day in January and February. That is 22% fewer than its average daily output in October and November, according to data from China Association of Automobile Manufacturers.
In March, BYD began offering discounts for its bestselling Yuan Plus and Seal EVs to fuel demand, joining China's EV price war.
BYD Stock, Tesla, Nio, Li Auto, Xpeng
Shares of BYD, which trade over the counter, edged up 0.6% to 25.84 on the stock market today. BYD stock peaked Feb. 1 and has tumbled since, undercutting the 50-day moving average.
Tesla leapt 7.8% to 197.58 Tuesday, continuing to rebound from its rising 50-day average. Tesla insurance registrations in China, a de facto measure of new car sales, grew for the fourth straight week, data showed.
Among other China EV stocks, startup Nio jumped 5.9% to 9.27 on Tuesday. Nio's startup peer XPeng soared 8.3% and Li Auto climbed 3%.
LI stock notched a fourth straight day of gains, meeting resistance at its 50-day line. The stock is in a flat base with a 27.58 buy point, the MarketSmith chart shows.
On Tuesday, Asia-Pacific markets rose broadly after Wall Street's overnight relief rally on optimism the bank crisis may be easing. That follows the $3.2 billion takeover of Swiss bank Credit Suisse by rival UBS.
China EV Stocks Sell-Off
A soft sales start to 2023, together with the price war in China, has hit China EV stocks.
But in a March 19 note, Morgan Stanley analysts called the sell-off an opportunity.
According to CnEVPost.com, the analysts cited a tailwind for China's EV makers in the second half of 2023 and beyond, as the decline in prices of EV batteries and key battery materials accelerates.
In a tougher operating environment, startups could struggle. But the "EV trio (Nio, XPeng, and Li Auto) will still hold fast, backed by healthy balance sheet conditions and better connections to capital markets," Morgan Stanley analyst Tim Hsiao wrote.
While Li Auto leads on execution, the risk-reward balance favors XPeng and Nio stock after this year's sharp declines, he added.
On Tuesday, beaten-up XPEV stock built on a strong two-day rally. That rally came after management said on a March 17 earnings call that new orders doubled in February vs. January.
