China’s economic landscape is getting more and more complicated for electric vehicle (EV) producers. Most recently, government officials confirmed that the nation will not be issuing an additional round of stimulus for the second half of 2024. As a result, many companies are struggling in the market today, including prominent Chinese EV stocks.
Many Chinese automakers are still recovering from a highly volatile July and so far, August isn’t off to a good start. Indeed, the outlook appears questionable at best as automakers face rising competition and China’s government grapples with slowing gross domestic product (GDP) growth.
What’s Happening With Chinese EV Stocks?
So far today, Nio (NYSE:NIO) stock is having a worse day than most of its peers. As of this writing, shares of NIO are down more than 9% for the day. But plenty of other Chinese EV stocks are in the red as well. Sector leader BYD (OTCMKTS:BYDDY) is down about 4% so far while Xpeng (NYSE:XPEV) stock is down 5%. Finally, Li Auto (NASDAQ:LI) is doing better than its competitors but still falling almost 2%.
While Chinese EV stocks are struggling, other industries stand to be impacted as well due to China’s broad economic problems. CNBC notes that the nation may not be able to achieve its 5% full-year growth target, according to some experts. The outlet reports:
“The economy faces challenges not only from the external environment but also from structural transformation — ‘pain that must be experienced in the process of pushing for high-quality development,’ Zhao Chenxin, deputy director of the National Development and Reform Commission, told reporters Thursday.”
Anticipation of further stimulus funding helped boost some Chinese EV stocks recently, including Nio. As InvestorPlace’s Eddie Pan notes, such a measure could have potentially helped generate demand for Nio’s vehicles. But now that China’s economic planning agency and finance ministry officials have confirmed that stimulus won’t be coming, NIO stock is back to falling — and Nio is back to facing a questionable future.
Why It Matters
With many Chinese EV stocks caught on the wrong side of this public policy matter, it may be hard for most investors to be optimistic about their chances of recovery. Strong companies like BYD, which has been working overtime to expand into new markets, may bounce back soon. But for stocks like NIO, which have failed to generate sustainable momentum even after reporting good news, it may not be so easy. Even a positive update regarding Nio’s use of autonomous driving technology hasn’t been enough to keep shares in the green.
In times like these, investors should examine China’s EV sector from a macro perspective. Automakers that have already proven themselves to be winners will stay on the road to success, even if their progress is gradual. But companies that were already struggling will have a much tougher time.
On the date of publication, Samuel O’Brient 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 InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
