NIO, LI, XPEV Stocks: Why Are Chinese EV Stocks Hitting the Brakes Today

Chinese electric vehicle companies Nio (NYSE:NIO), Li (NASDAQ:LI), and Xpeng (NYSE:XPEV) each closed down roughly 6% today. It seems Chinese EV stocks can’t catch a break as diminished 2022 outlooks combined with mounting omicron variant concerns spell trouble.

Electric vehicle logo painted on a blue street

Source: Shutterstock

Today, Guggenheim offered its take on EV stocks heading into 2022, and it wasn’t particularly optimistic. Analyst Ali Faghri recommends caution in the EV sector. “In the near term, however, we believe EV adoption may fall short of industry forecasts,” he said.

Alternative-energy vehicle sales are expected to reach around 3 million units in 2022, more than double 2020 numbers. However, this comes as overall car sales in the country fell 13% year over year this past November.

2022 also brings a host of new players to the China EV market. In the new year, the country will give foreign automakers (almost) free reign in the country. Current laws mandate that foreign companies must operate as a joint venture with local carmakers, with no more than 50% ownership.

Let’s see what else has the Chinese EV companies bearish today.

Chinese EV Stocks: Competition, Regulation, Supply Shortages

Toyota (NYSE:TM), Volkswagen (OTCMKTS:VWAGY) and Honda (NYSE:HMC) each have elaborate plans for attacking the Chinese EV market as well. This may not bode well for local auto manufacturers. While their market share is at near-historic highs, this may not protect them from the onslaught of new competition.

Toyota has stated that it aims to increase sales of EVs in China by 50% before 2025, with plans to introduce 30 new models by then. Honda has even stated that by 2030, all new models will be electric.

Chinese EV sales have been hit by supply constraints, and specifically, an ongoing chip shortage. With the semiconductor shortages predicted to linger into 2022, this is another sour spot for the high-growth industry.

On the date of publication, Shrey Dua did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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