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Nio’s stock, as well as Li Auto’s and XPeng’s, plummeted on Tuesday.
Getty Images/AFP/Hector Retamal
Shares of Chinese electric vehicle manufacturers listed on the New York Stock Exchange, such as
NIO,
Tuesday’s drop appears to have little to do with the Chinese electric vehicle sector, which is booming. Instead, the issue could be what’s going on with Didi Global, a Chinese ride-hailing company. NIO (NIO) (ticker: NIO) (ticker: NIO) (ticker: NIO) (ticker: NIO
XPeng
(XPEV) were both down roughly 1% in lunchtime trading on Tuesday.
Auto Li
(LI) shares began the day with a loss, but ended the day with a gain of nearly 2%. The
S&P 500 Index
and
The Dow Jones Industrial Average (DJIA) is a stock market index
are down roughly 0.4 percent and 0.8 percent, respectively, in comparison.
Didi Global is a company based in China.
(DIDI) is doing much worse, with shares down over 20%. Chinese regulators have ordered the Didi app to be deleted from Chinese app stores, citing worries over how the program maintained personal data. Of course, for an app-based service, this is an issue. (Those who have already downloaded the program can continue to use it.) Many Chinese stocks appear to be weighed down by the potential of a bizarre outcome, such as Didi’s recent problems.
Alibaba Group is a multinational corporation based in China
In recent trading, shares of (BABA) have dropped around 3.5 percent. Investing in overseas companies is always risky for US investors. In addition to the usual risks, such as business competition and development, investors must consider issues such as foreign currency and foreign legislation.
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Stock valuations may be lowered as a result of increased risk. Didi, which completed its first public offering about a week ago, was valued conservatively by investors. As an example,
Uber Technologies is a company that provides transportation services.
(UBER) is a ride-hailing service located in the United States that trades for about 8 times sales. Before Tuesday’s dip, Didi, a larger firm with about 500 million active users, was trading for approximately 4 times revenue. Unlike Didi, most Chinese EV manufacturers do not trade at a discount. NIO is currently trading at nearly 15 times its expected 2021 sales. XPeng is worth nearly 16 times its current value.
Tesla
(TSLA), the world’s most valuable automotive and electric vehicle manufacturer, is currently trading at around 13 times expected 2021 sales.
Auto Li
There is one exception: It’s worth nearly 9 times what sales are expected to be in 2021. Because they are growing quickly and the Chinese EV market is hot right now, Chinese EV stocks have high valuations. NIO management told Citigroup analyst Jeff Chung on Monday that they expect sequential growth in deliveries in the third and fourth quarters. In the second quarter of 2021, NIO delivered over 22,000 automobiles, up from about 20,000 in the first quarter. There was considerable fear early in 2021 that a global semiconductor shortage might stymie Chinese EV sales, putting pressure on linked stocks in the first half of the year. However, the scarcity is dissipating, and stocks are shifting. The stock of NIO has increased by 26% in the last three months. The stock prices of XPeng and Li have increased by 18% and 28%, respectively. NIO and XPeng stock have gained about 3% and 2% year to year, respectively, but they are still trailing the S&P 500 and Dow. Li stock has performed slightly better, with a year-to-date gain of nearly 13%. Corrections and enlargements: In the second quarter of 2021, NIO delivered roughly 22,000 automobiles, compared to 20,000 in the first quarter. NIO delivered around 17,600 automobiles in the second quarter and 12,600 in the first quarter of 2021, according to an earlier version of this article. To contact the editors at Barron’s, send an email to editors@barrons.com./n
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