What’s going on with Chinese electric vehicle (EV) stocks today? This morning, shares of Nio (NYSE:NIO), XPeng (NYSE:XPEV) and Li Auto (NASDAQ:LI) all opened up in the red as Covid-19 cases in China continue to soar. Essentially, the possibility of more widespread lockdowns in China have stirred fears of further supply-chain disruptions and reduced economic activity.
Yesterday, Shanghai reported 51 deaths from cases of Covid-19. That’s the highest count since the city “first reported fatalities in the city’s ongoing outbreak last Monday.”
Here’s what investors should know moving forward.
Why Are Chinese EV Stocks Down Today?
Rising cases in Shanghai have created fears of a mass lockdown in Beijing. In response, Beijing has already initiated a selective lockdown, closing certain neighborhoods.
Yesterday, the capital of China reported 11 cases in a 24-hour period. While that may not seem high, China seems intent on continuing its strict “zero-Covid” policy. According to CNN, a municipal official for Beijing stated the following:
“The city has recently seen several outbreaks involving multiple transmission chains, and the risk of continued and undetected transmission is high. The situation is urgent and grim […] The whole city must act immediately.”
Looking forward, further lockdowns could cause EV companies to halt production. Earlier this month, Nio suspended production due to the impact of Covid-19. The company produces its vehicles in Xinqiao, Hefei, which is about 300 miles from Shanghai. A few days later, Nio then reported it would be “gradually resuming” production. As of now, it’s not known whether the new rising case numbers will cause the company to suspend production again.
In addition to the production delays, Nio also announced a price hike this month on three of its vehicles due to rising raw material costs. These price hikes will be effective as of May 10.
What’s Next for Chinese EV Stocks?
Li Auto has not yet commented on a potential production halt. However, XPeng CEO He Xiaopeng did warn of a potential halt “if suppliers in Shanghai and surrounding areas are not able to resume work.” In a social media post, Xiaopeng stated:
“If supply chain companies could not find a way to resume operation and production, it’s likely all Chinese OEMs may have to suspend production in May […] Good news is some ministries and related departments are going all out to coordinate. Hopefully more government agencies could support joint efforts.”
All told, as the Covid-19 situation in China develops further, Chinese EV stocks will certainly be worth keeping an eye on.
On the date of publication, Eddie Pan did not hold (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 InvestorPlace.com Publishing Guidelines.
