Chinese EV Stocks: Why NIO, XPEV and LI Stocks Are Stalling Out Today

Chinese EV stocks are, let’s just say, not having a good day today. Indeed, sector-specific concerns are wreaking havoc on the sector, as investors take a risk-off approach to EV stocks today.

An electric vehicle is hooked up to a charging cable.

Source: Shutterstock

Specifically, it appears once again a global chip shortage is driving most of the discussion today. Accordingly, Chinese EV maker Nio (NYSE:NIO) announced its Q2 production targets were at risk due to this shortage. Shares of NIO stock have dropped 7% at the time of writing.

Similarly, competitors Xpeng (NYSE:XPEV) and Li Auto (NASDAQ:LI) were both down big today, 7% and 13%, respectively.

It appears the aforementioned chip issues, coupled with deteriorating U.S.-China relations and associated delisting threats are playing into a broad-based decline in most Chinese stocks today.

That said, LI stock has headwinds of its own that shareholders are dealing with today. Let’s dive into those.

LI Stock Leading Decline in Chinese EV Stocks

Yesterday, Li Auto announced a rather large $750 million bond issuance. Indeed, this issuance seemingly has taken the market by surprise. The senior convertible notes are due in 2028, and the company expects to use the proceeds for R&D related to new vehicle models and technological enhancements. The company notes its interest rate and conversion rate have not yet been finalized for these bonds.

Given the state of sentiment around EV stocks, the timing perhaps wasn’t great.

That said, I’m a bit surprised as to the reaction of the market today on this news. Chinese EV players have tapped equity and debt markets continuously to fund growth. Whether or not the recent selloff with Chinese EV stocks is warranted will ultimately be determined by the market over time. However, there is an intriguing case to be made that these stocks are seeing more pain than perhaps they should right now.

Of course, valuations are still elevated for this group of Chinese EV stocks. Thus, I expect more price discovery (volatility) on the horizon.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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