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Why Nio and Other Chinese EV Stocks Got Crushed Today

By Howard Smith – Dec 3, 2021 at 2:47PM

Key Points

  • Sometimes high-level news takes control of the market, and the underlying businesses go on sale.
  • Nio just reported a new record for monthly deliveries in November, but XPeng and Li Auto both outpaced Nio for the month.
  • Demand for EVs in China continues to grow, and these companies are navigating supply chain issues well.

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A combination of factors have these EV maker stocks getting hit extra hard today.

What happened

On a day when the Nasdaq index is down more than 2%, it shouldn't be surprising that aggressive growth names in the EV sector are leading the way. But Chinese EV makers Nio (NIO 5.94%), XPeng (XPEV 8.31%), and Li Auto (LI 3.02%) are getting a double whammy today, which explains why the declines are as high as they are. As of 2 p.m. ET, shares of those three names were down 12.6%, 10.8%, and 17.7%, respectively. 

So what

In addition to market sentiment going against high-growth, speculative companies such as these, Chinese stocks in general are in the crosshairs today. That comes after ride-hailing company Didi Global announced it was delisting from the New York Stock Exchange under pressure from the Chinese government. But investors who look past the broader headlines will also see these three companies have recently reported good progress in their growth stories. 

Investor looking at laptop in center of city as stocks decline.

Image source: Getty Images.

Now what

Despite the recent macro factors impacting the share prices of Nio, XPeng, and Li Auto, each company reported strong growth in its latest delivery update. Nio shipped a record 10,878 vehicles in November, bringing its year-to-date total to almost 81,000. That represents an increase of 120.4% over the prior-year period. But that pales in comparison to XPeng's 285% increase year over year so far in 2021. And like Nio, Li also reported record November deliveries of almost 13,500. 

While these EV makers are navigating global supply chain constraints well so far, they are not immune to investors' fears related to the pandemic and Chinese regulators. Uncertainties over the omicron variant and what impacts it might have on the global economic recovery have investors taking a risk-off approach in general. And DiDi's announcement adds fuel to the fire for shares of Chinese companies traded in the U.S. 

But investors looking at the company level might find the share declines to be an opportunity. XPeng launched its new P5 smart sedan in September. It delivered 2,154 P5 vehicles in November and said it maintains a "solid order backlog" of the new offering. XPeng also launched a new smart SUV in July 2021, and the company delivered more than 5,500 of the G3i last month. Li aims for a different niche than both Nio and XPeng. It sells the Li One SUV that contains a small gasoline engine that helps provide added range with the ability to recharge its batteries. 

Demand in China continues to grow, and Nio has already launched in Europe with shipments to Norway beginning last summer. The company plans to continue expanding in the large European EV market next year, too. While the macro environment is going against these specific names right now, long-term investors might find it a good time to buy as the businesses continue to perform.

Howard Smith owns shares of NIO Inc. The Motley Fool owns shares of and recommends NIO Inc. The Motley Fool has a disclosure policy.

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