Chinese electric car companies extend their control

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Shares of US-listed Chinese electric car manufacturers rose amid broader gains in the sector, and outperformed global industry leader Tesla, buoyed by consumption incentives in Beijing and heavy buying from investors.

It is said that China’s industrial regulator is considering policies to stabilize manufacturing growth. The Ministry of Industry and Information Technology held a seminar, where policy recommendations were discussed.

Meanwhile, the Ministry of Investment and Technology is studying exceptional policies to address the difference in profits for manufacturers caused by the Corona pandemic and the high prices of raw materials. The policies aim to support the investment momentum in the sector.

The US depository receipts of Nio, XPeng and Li Auto are up at least 64% each over the past month to be among the biggest gainers in US-traded Chinese stocks.

A US Depository Receipt is a certificate issued by a US bank that represents shares in a foreign company for trading on US stock exchanges.

The sharp rise reflects improved sentiment after months of stagnation due to concerns about high valuations and supply bottlenecks.

Their gains easily beat Tesla’s 17% lead, with divergent prospects for Chinese and US policy and investors nervous about how Elon Musk will finance a potential Twitter deal affecting the electric car giant’s share price.

China’s electric car industry hit its lowest level during the Shanghai lockdown. Not a single car was sold in the city in April, and factories were forced to close or operate under severe restrictions.

The authorities have since revealed a series of stimulus measures to revive the sector. Including subsidies, increased auto ownership quotas in Shanghai and Guangdong, and the possibility of extending purchase tax exemption for new energy vehicles.

Meanwhile, Tesla’s stock has seen massive volatility and is down about 36% from its April high. Although the company has made a noticeable comeback with regard to its production in China.

A pressure factor on the company’s stock is the imminent looming job cuts by the US automaker. In addition to the uncertainty about Musk’s deal to acquire Twitter. Besides his recent comments about new factories in Germany and Texas losing money.

Shares of Chinese electric car companies beat Tesla

The market performance is also emblematic of the diverging outlook for growth and politics in China and the United States. Year-to-date, the NASDAQ Golden Dragon China Index has outperformed the broader NASDAQ measure by 18 percentage points.

Chinese companies are expected to benefit from the policy stimulus. While US counterparts are suffering under strong monetary tightening and fears of a recession.

However, investors are looking for more catalysts to maintain the momentum after gains in Chinese electric car shares.

The improvement in delivery numbers provides some relief as the Chinese economy gradually recovers from the damage done by the coronavirus shutdowns.

Li Auto, the largest by market value of the Chinese trio, delivered 11,496 units in May. This is a 176% increase from April and more than double last year’s level.

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