What happened
Several items of news came out of the Chinese electric vehicle (EV) sector today. The result has been a jump in the shares of stocks with a stake there. That has Tesla (TSLA 4.96%) shares up 1.9% as of 11:40 a.m. ET. And the stocks of Nio (NIO -0.48%) and Li Auto (LI -1.68%) were higher by 3.5% and 5.1%, respectively, at that time.
So what
Many recent updates from China's EV sector have been associated with COVID-19-related lockdowns and supply chain issues that have negatively impacted vehicle production. Today, however, there were some signs of a turnaround on that front. Tesla's company-specific news was of battery-material supply deals the company has inked, as reported by Barron's. At the same time, July delivery data out of domestic producers Nio, Li, and XPeng (XPEV) indicate the market is rebounding there. That's also good news for Tesla, as its Shanghai plant is a major factor in its growth plans.
Now what
Nio, Li, and XPeng reported a combined 31,998 for July vehicle deliveries. While it represented a drop from June, that was expected after the companies pushed out vehicles in June that had been delayed in April and May. July deliveries for Nio and Li rose a respective 26.7% and 21.3% year over year, however. And Xpeng notched a 43% year-over-year increase. That's good news for Tesla, too, which lags these domestic names when it comes to monthly delivery data.
Tesla appears to be setting itself up for further increases in production. That's not surprising since the company expects overall annual production growth of about 50% for several more years. But investors weren't sure how it could achieve that in an environment of supply challenges. Tesla seems to have answered some of those concerns from the deals being reported with two Chinese suppliers of battery materials.
This includes a deal with a processor of cobalt and other metals, and another that supplies lithium cathode material to battery makers. Both deals reportedly run through 2025. Tesla recently boosted production capacity at its Shanghai facility, and the company also needs to supply its two new facilities in Germany and Texas once they have ramped production to capacity.
While Nio, Li Auto, and XPeng are all competitors, solid delivery numbers from them bode well for what Tesla will report as well. But Tesla also can't sleep on the competition. Nio plans to open its first overseas plant this fall, according to Reuters. The plant in Hungary will focus on power products such as battery-swapping stations for the European market. Nio has plans to expand sales throughout Europe this year and beyond.
Investors are seeing all of today's news as beneficial to the industry as a whole in the short term. That's helping these names pop today. The overall EV sector is still in very early stages of growth. That should lead to more than just one winner over the long haul.
