Auto stocks plunged again. Amid rising prices and production halts, is the new energy vehicle sector facing its darkest hour?

On April 11, auto stocks collectively plummeted. Rising prices, supply disruptions, production halts, and the pandemic intertwined, continuing to send the auto sector into a 'crash mode,' with some individual stocks experiencing declines beyond a 50% drop.

In Hong Kong-listed auto stocks, Great Wall Motor once fell over 14%, Nio dropped more than 13%, XPeng Motors fell over 10%, Geely dropped 6.5%, BYD fell 6%, and Li Auto dropped 5%.

In A-share markets, BAIC BluePark New Energy Technology fell over 6%, JAC Motors fell 5.7%, and both Seres Group and Changan Automobile fell more than 5%.

The lithium battery sector also declined, with Ganfeng Lithium plummeting 10%, and CATL dropping over 7% during trading.

In terms of individual stocks, Great Wall's decline may be related to the release of sales figures. In March, vehicle sales reached 100,930 units, a year-on-year decrease of 8.86%. Cumulative Q1 sales amounted to 283,500 vehicles, down 16.3% year-on-year. The sales decline is mainly due to the impact of the pandemic on the supply chain. Affected by the pandemic in multiple locations including Shanghai, Jiangsu, and Jilin, many of Great Wall Motor’s parts suppliers were impacted, leading to limited factory capacity.

Insiders pointed out that under the impact of the pandemic in places such as Shanghai, many automakers' factories and R&D bases have nearly come to a standstill, with no output. At the same time, logistics in the supply chain has been affected, creating significant obstacles for shipping and receiving goods and components, “Some parts are even stuck on highways.”

On this basis, upstream and downstream suppliers have suspended operations, and a large number of vehicle manufacturing plants in the Yangtze River Delta region have also halted production.

Among new forces, Nio was the first to announce a production halt. The company stated that its supply chain partners in Jilin, Shanghai, Jiangsu, and other locations have successively suspended production, and operations have not yet resumed. Additionally, each Nio vehicle requires about 1,000 chips, with 10% of the chips facing intermittent supply shortages, exacerbating delivery issues.

Meanwhile, rising raw material costs combined with the pandemic’s impact on automobile production have continued the trend of price increases for new energy vehicles. Nio announced that starting from May 10, 2022, the starting prices for all versions of the ES8, ES6, and EC6 models will increase by 10,000 yuan; the starting prices for the ET7 and ET5 remain unchanged.

Currently, the rise in prices among new energy vehicle brands has covered all price segments. Tesla has adjusted prices three times, while XPeng’s highest increase reached 30,000 yuan. This wave of price hikes has spread from top emerging companies to second- and third-tier automakers, then to traditional carmakers, and even some fuel-powered models have started to raise prices.

At the same time, automakers' production halts and rising raw material costs have impacted the businesses of power battery companies to a certain extent. For example, Nio is one of CATL's most important clients, and the lithium battery industry may be significantly affected. Additionally, the impact on the auto-related industrial chain, including automaker concept stocks and automotive electronic components, is inevitable.

Some industry insiders commented, 'The dark moment for new energy vehicles has arrived.' Affected by supply chain constraints, weakening demand, and the looming risk of long-term overcapacity, the outlook for the sector remains unclear.

From a macro perspective, CITIC Securities stated that the market is in a mid-term bottoming-out phase but faces some challenges: the economy is entering an active destocking phase, and the pandemic continues to disrupt economic activity; the rapid rise in US Treasury yields has yet to stabilize, while the Russia-Ukraine conflict and geopolitical conditions remain uncertain.

Investors should exercise patience at this time and avoid aggressive moves, waiting for opportunities such as a fundamental bottoming out, improvement in the external environment, or strong policy easing. If the market experiences a significant adjustment, investors can gradually position themselves, focusing on early-cycle products. If US Treasury yields stabilize subsequently and domestic monetary easing strengthens, it may be appropriate to gradually increase allocations to growth sectors.

CICC believes that low-valued stable growth areas still hold phased relative allocation value. Manufacturing growth sectors, including new energy vehicles, renewable energy, and technology hardware semiconductors, have seen some risk release, but the turning point depends on whether 'stagflation' risks, global liquidity, and market sentiment factors can marginally improve.

$Tesla (TSLA.US)$$GEELY AUTO (00175.HK)$$BYD COMPANY (01211.HK)$$Contemporary Amperex Technology (300750.SZ)$$XPENG-W (09868.HK)$$LI AUTO-W (02015.HK)$$NIO Inc (NIO.US)$$GWMOTOR (02333.HK)$

196K Views