The Shanghai Composite Index has dropped 0.74% to 2180.89, the biggest day since February 6th of this year., and Chinese auto stocks are taking a big hit as well..
China’s auto stocks dropped as troubles pile up. The “china electric car company” is a company that has been struggling since the beginning of the year.
Sluggish sales and supply-chain interruptions have made investors increasingly gloomy about the world’s biggest vehicle industry, and Chinese auto stocks have fallen this year.
The industry has been pulled down by a larger selloff that has affected Chinese markets. Meanwhile, the conflict in Ukraine has pushed up metal and oil prices, raising worries that manufacturers’ costs would rise and demand for gas-guzzling bigger cars may suffer.
Global auto stocks have also declined in 2022, indicating that the worldwide vehicle sector is facing similar issues. However, the decline in Chinese stocks has been more severe. An MSCI Inc. index tracking Chinese auto and component manufacturers has lost 46 percent this year as of Tuesday, compared to a 23 percent decrease in the global index.
The Hong Kong-listed shares of Great Wall Motor Co., which is collaborating with Germany’s Bayerische Motoren Werke AG, or BMW, to make electric Mini cars in China, has dropped by more than half this year through Wednesday. Geely Automobile Holdings Ltd., whose parent firm also controls Volvo Car Corporation, has seen its stock plummet by 45 percent.
BYD Co., the sector’s largest business by market capitalization, sold more electric cars in China last month than Tesla Inc. The Warren Buffett-backed company’s stock had dropped 26% this year as of Wednesday’s closing.
Investors were concerned about low consumer mood and decreasing demand at the start of the year, before the Covid-19 outbreaks and lockdowns placed further strain on supply chains, according to Eunice Lee, an analyst at Sanford C. Bernstein.
The Chinese government’s zero-tolerance stance to the epidemic has produced difficulties. Last month, a Covid-19 outbreak in Suzhou prompted the closure of a manufacturing that provides semiconductors to carmakers like as Geely and Great Wall, affecting both production and sales.
In February, Geely sold approximately 78,500 automobiles, down 46 percent from January. It attributed the drop on a chip shortage and the Lunar New Year holiday, which occurs on different dates each year. On the same basis, Great Wall’s unit sales dropped 37%.
According to an official summary released on the website of the state-owned Securities Times, China’s scarcity of auto chips is reducing and the country’s automobile supply is increasing, according to a representative for the country’s statistics office who spoke at a news conference Tuesday.
In general, China’s economic growth has slowed, and the housing market has tanked. In China, this tends to dampen automobile, furniture, and home appliance purchases, since house purchasers often acquire a new car as well.
“If you look at property sales and passenger car sales growth over the last 20 years, they’re generally associated,” said Angus Chan, an analyst with Bocom International. Investors are also concerned about whether firms will be able to pass on greater expenses without losing some customers, according to him.
Mr. Chan cautioned that economic instability and property restrictions might lead to China’s auto sector entering a “zero-growth period,” with 0 percent to 1% annual increase in new passenger vehicle sales from 2022 to 2026. After three years of decreases, new automobile sales increased by 4.4 percent to 20.1 million cars last year.
EV companies such as XPeng Inc., Li Auto Inc., and NIO Inc., as well as established automakers, have been affected by the selldown.
Last year at the Shanghai auto show, a BYD electric car was on exhibit.
Bloomberg News photo
According to Ken Wong, Asia stock portfolio expert at Eastspring Investments, manufacturers of new-energy cars began the year with unusually high valuations and remain quite richly priced despite large reductions in their share prices.
According to FactSet, Li Auto’s enterprise value as of Wednesday was 88 times its expected profits before interest, taxes, depreciation, and amortization for the following 12 months. Geely’s corresponding ratio was 5.3 times.
In China, electric vehicles are quickly gaining market share. According to the China Passenger Car Association, sales of electric and plug-in hybrid cars more than quadrupled to 272,000 vehicles in February from a year earlier.
Clarence Leong can be reached at [email protected]
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