Mohit Oberoi
Chinese EV (electric vehicle) stocks are trading higher in early US price action today. Tesla (NYSE: TSLA) Q4 2022 earnings beat and Elon Musk’s praise for Chinese EV companies seem to be lifting the pack higher today.
Tesla managed to beat both topline and bottomline estimates in the fourth quarter of 2022. Musk also sounded upbeat on the demand for TSLA cars and said that so far in January the order rate is twice that of the production run rate.
The Elon Musk-run company said that it expects to produce 1.8 million cars in 2023. While it would imply a growth of only about 31%, Musk said that the company could produce as many as 2 million cars in 2023.
He pointed out that despite growth being less than 50%, the company’s CAGR growth since 2021 is still above 50%. Tesla’s delivery growth lagged 50% in 2022 as well and it could deliver only about 1.31 million cars in the year, a YoY rise of around 40%.
Tesla is nonetheless the market leader when it comes to battery electric cars. BYD leads the market when we account for plug-in hybrid vehicles as well. However, TSLA only sells all-electric vehicles. There is a guide on how to buy Tesla stock.
BYD is the market leader in China and is also reportedly looking to buy Ford’s plant in Germany. China is the world’s largest automotive market and its EV adoption rates are also way above those in most developed markets.
Musk Praised Chinese EV Companies During Tesla Q4 2022 Earnings Call
In the past, Musk has praised Chinese workers for what he called “burning the 3 a.m. oil.” He simultaneously criticized American workers for “trying to avoid going to work at all.” Notably, Tesla’s China Gigafactory is now its most productive plant with a capacity to produce 750,000 Model 3/Y cars annually.
During Tesla’s Q4 earnings call, Canaccord Genuity analyst George Gianarikas asked which companies Tesla sees as its key competitors in five years timeframe.
Musk said that at least when it comes to self-driving no other automaker comes anywhere near it. Incidentally, many companies are reconsidering their investments in self-driving ventures.
Lars Moravy, TSLA’s Vice President of Vehicle Engineering said that “whoever keeps up with the trend of EVs is going to be our competitor.” He added, “The Chinese are scary, we always say that.”
Musk was also all praise for Chinese EV companies. He said, “we have a lot of respect for the car companies in China. They are the most competitive in the world. That is our experience.”
He added that the Chinese market is “most competitive.” He also said, “if I would have guessed, there are probably some company out of China as the most likely to be second to Tesla.”
Chinese EV Stocks Rise After Tesla Earnings & Musk’s Praise
Chinese EV stocks are trading higher today. Tesla’s earnings beat and Musk’s praise seem to be adding to the buying spree. The sector has anyways seen buying interest amid optimism over reopening in China.
Recently, Baillie Gifford also increased his stake in NIO. Many analysts see NIO as a worthy competitor to Tesla. There is a guide on buying NIO stock.
Notably, earlier this month, we saw a sell-off in Chinese EV stocks after Tesla lowered car prices in the country. The move raised fears of a price war in the world’s largest and as Musk said most competitive car market.
The fears came true when Xpeng Motors also announced price cuts. Following Tesla’s footsteps, it reduced the prices for multiple models including the best-selling P7 sedan whose starting price it cut by around 12.5%. Xpeng also lowered prices for G3i and P5 models. However, the company has not revised the prices for the newly launched G9 model.
Chinese EV Companies Would Release Their January Deliveries Next Week
Next week, Chinese EV companies like NIO, BYD, Li Auto, and Xpeng Motors would release their January earnings. They had impressed with their December deliveries and markets would watch their January deliveries for more insights into the EV demand environment in the country.
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This article was written for Business 2 Community by Mohit Oberoi.
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