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Chinese electric vehicle (EV) stocks have been quite volatile in 2024. While the EV industry turmoil is playing its part, broader concerns over the Chinese economy, coupled with pessimism toward Chinese stocks among a section of the market, is not helping matters either.
Over the last few weeks, we have seen a divergence in the performance of Chinese EV stocks. NIO (NIO) has been the best of the group, and has gained over 40% during the last month.
On the other end of the spectrum is Li Auto (LI), which previously outperformed its peers by a wide margin in 2023 – but has lost 10% in the last month, and missed out on the rally.
Somewhere in between is Xpeng Motors (XPEV), up over 10%. Amid the recent rally, another Chinese EV company - Zeekr Intelligent Technology Holding Limited (ZK) - also went public in the U.S. via an upsized IPO, and the stock soared on its listing day.
What’s driving the recent divergence in these Chinese EV stocks, and which one of them do analysts like best? We’ll discuss in this article.
What's Driving the Divergence in Chinese EV Stocks?
Last year, NIO underperformed its Chinese EV peers, and ended in the red for the third consecutive year; meanwhile, Li Auto continued its good run and closed in the green. Baked into the price action were their deliveries and financial performance. While Li Auto impressed markets with its deliveries and posted profits and positive free cash flows, NIO and Xpeng continued to post losses.
Xpeng announced key partnerships with Volkswagen (VWAGY) and Chinese ride-hailing giant Didi last year, which helped fuel a rally in July. However, XPEV could not hold onto the gains, and came off its highs even as it closed the year in the green.
Cut to 2024, and Xpeng's deliveries have been stuck below 10,000 in all four months reported so far. Even Li Auto - which set several delivery records in 2023, including becoming the first emerging Chinese EV company to deliver over 300,000 cars in a year - has generally disappointed, and its April deliveries were just over half of the December peak.
NIO has fared relatively better in 2024, and its April deliveries more than doubled YoY to 15,620. The stock had been really beaten down over the last three years, which paved the way for a relief rally amid better-than-expected deliveries in April.
NIO, LI, and XPEV Bring Different Dynamics to the Table
NIO, LI, and XPEV all bring different dynamics to the table. Li Auto, for instance, has the rare distinction of being profitable in an industry known for its burgeoning losses. It has also carved out a niche with its hybrid cars.
As for NIO, it has positioned itself as a luxury brand, and its vehicles offer quite a high range. Its ET7 sedan, for instance, has a range of 1050 kilometers (km), and is the only battery-electric sedan to deliver a range of over 1,000 km on road.
As for Xpeng Motors, it's largely a play on partnerships with Didi and Volkswagen. The company is developing new models as part of these partnerships, which could turbocharge its deliveries. Its autonomous driving capabilities are also quite advanced. Incidentally, Tesla (TSLA) CEO Elon Musk believes that his own company’s valuation is linked to its progress on autonomy, and if Xpeng can progress towards full autonomy, it could trigger a major valuation rerating.
Which Chinese EV Stock Do Analysts Like the Most?
When it comes to Wall Street analysts, Li Auto is the clear winner, with a consensus rating of “Strong Buy.” LI has a “Strong Buy” rating from 8 analysts, while one each rates it as a “Moderate Buy” and “Hold.”
XPEV has a consensus rating of “Hold,” and only 45% of analysts rate it as a “Strong Buy” or “Moderate Buy,” compared to 36% who rate the stock as a “Hold,” with the remaining analysts in the “Strong Sell” camp.
NIO also has a consensus rating of “Hold” from the 14 analysts in coverage. It's the lowest-rated among the three stocks, with only 28% of analysts rating it as a “Strong Buy” or “Moderate Buy.” Over 57% of analysts covering NIO rate it as a “Hold” which gives an impression that Wall Street is generally on the fence about the stock.
Xpeng Motors Has the Most Upside Potential
When it comes to upside potential based on the mean target price, Xpeng Motors looks like a favorite. Its mean target price of $15.48 is 87% higher than yesterday’s closing prices. Li Auto’s mean target price of $45.17 is 71% higher than yesterday’s closing prices, while NIO's mean target price of $7.51 is just about 30% higher.
All things considered, I believe that all three stocks are good investment opportunities in their own right. While the Chinese EV industry is still not out of the woods, with overcapacity, slowing growth, and possible tariffs in Europe continuing to present potent challenges, the worst looks to be over for the group.
On the date of publication, Mohit Oberoi had a position in: LI , XPEV , NIO , TSLA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
