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The Zacks Analyst Blog Highlights BYD, NIO, Li Auto and XPeng

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For Immediate Release

Chicago, IL – January 17, 2023 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: BYD Co (BYDDY - Free Report) , NIO Inc. (NIO - Free Report) , Li Auto (LI - Free Report) and XPeng Inc. (XPEV - Free Report) .

Here are highlights from Monday’s Analyst Blog:

China 2022 Auto Sales Rise on EV Boom, Despite Odds

Vehicle sales in China, the world's largest car market, witnessed the second straight year of growth in 2022 after snapping a three-year slump in 2021. Auto sales managed to maintain momentum last year even in the face of COVID resurgences, commodity inflation, chip crunch and supply chain snarls.

According to the China Association of Automobile Manufacturers (CAAM), a total of 26.86 million vehicles were sold in the country last year, marking a 2.1% increase from 2021 levels. Importantly, sales of electric vehicles (EVs) almost doubled last year, hitting a record high.

EV Sales Fend Off Challenges in a Sluggish December

In December 2022, auto sales in China were down 8.4% year over year to 2.56 million units. This marked the second consecutive month of year-over-year decline since May. Surging COVID infections weakened demand and kept buyers away from showrooms. While the overall car market stalled and automakers suffered production disruptions, sales of new energy vehicles (NEVs) continued their run on the fast lane. NEV sales rose 51.8% to 814,000 units last month.

For the full year, NEV sales rocketed 93.4% year over year to 6.89 million units. China further cemented its position as the biggest EV market in 2022, aided by favorable government policies and subsidies along with high oil prices. Led by the electrification boom, the market share of NEVs in China's auto sales hit 25.6% last year, up from 13.5% in 2021. BEVs comprised 73% of total NEV sales and jumped 81.7% in 2022.

Take a look at the December, fourth-quarter and full-year 2022 sales numbers of prominent China-based EV makers like BYD Co, NIO Inc., Li Auto and XPeng Inc.. While LI currently carries a Zacks Rank #4 (Sell), BYDDY, NIO and XPEV have a Zacks Rank #3 (Hold).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

BYD hit a new record by selling 235,197 plugin vehicles in December. This was the fourth straight month when the plugin vehicle sales volumes of the company crossed 200,000 units. It sold 683,440 vehicles in the fourth quarter of 2022, up 157%. For the full year, the company sold 1,863,494 NEVs, up a whopping 209% year over year. Of the total sales, battery-powered EVs accounted for around 49%. BYD delivered 911,140 pure EVs last year, rocketing 184% year over year.

NIO delivered a record-setting 40,052 vehicles in fourth-quarter 2022, representing a year-over-year uptick of 60%. December's delivery count was 15,815 vehicles (comprising 6,842 SUVs and 8,973 sedans), up 50.8% year over year. NIO's yearly deliveries were up 34% to 122,486 vehicles for 2022. The cumulative deliveries totaled 289,556 vehicles as of Dec 31, 2022.

Li Auto delivered 46,319 units in the fourth quarter of 2022, up 74.6% sequentially and 31.5% year over year. In December, the company's deliveries totaled 21,233 units, representing a 50.7% surge year over year. Last month, deliveries hit a fresh record, with Li Auto claiming to emerge as the fastest EV maker in China to cross the 20,000-delivery mark on a monthly basis. Total deliveries in 2022 jumped 47.2% year over year to 133,246 units and cumulative deliveries reached 257,334 as of 2022-end. 

XPeng delivered 22,204 units in the three months ended Dec 31. 2022. This marked a significant decline from 41,751 units sold in the corresponding period of 2021. The company delivered 11,292 EVs in December 2022, down 29.4% year over year and rocketing 94% from November 2022 levels. Deliveries of the flagship G9 SUVs jumped a whopping 160% sequentially to 4,020 units in December. For the full year of 2022, total deliveries climbed 23% from a year ago to 120,757 vehicles. Cumulative deliveries as of 2022-end totaled 258,710 units.

Can EV Sales Blossom Without Subsidies in 2023?

Demand for EVs has been rising amid climate change concerns and favorable government policies. The government began granting EV subsidies in 2010 to support commercialization. The subsidies were originally supposed to expire by 2020 end. But in April 2020, the government of China announced plans to extend subsidies for EVs for another two years to spur sales. Buoyed by favorable government policies, China recorded bumper EV sales last year. Since Jan 1, 2023, the government has withdrawn subsidies to EV buyers. Will that put brakes on the EV momentum in China?

Well, industry watchers do not expect EV sales in the country to be much impacted by the slashing of subsidies, given that the demand for green vehicles is strong enough to grow without government aid. China's NEV market is evolving from being policies/subsidies driven to demand driven. Over the past couple of years, companies have allocated large sums of money toward electrification and consumers' interest in EVs has also increased noticeably. And while China has discontinued EV subsidies, other incentives like tax breaks remain.

EV buyers are entitled to a 10% purchase tax exemption 2023-end. Also, the government is sharpening focus on the EV credit system. Per the policy, a certain percentage of the total sales mix of an auto manufacturer should be battery-powered. Those who fail to comply with the target are liable to pay a fine. Companies that surpass the EV sales mix target can sell any surplus credits.

While China's decision to end EV subsidies shouldn't greatly derail the country's auto market in 2023, economic challenges, COVID-19 disruptions and shortage of semiconductors do pose headwinds. Cui Dongshu—Secretary-General of China Passenger Car Association (CPCA) said, "This year might remain challenging for auto makers as a result of a sluggish global economy, higher interest rates in the U.S., and a large inventory held by China's manufacturers and dealers. China might expect to see around 1% in annual growth in its car market, with fewer sales in the earlier months before they pick up speed toward the end of the year."

As far as the NEV market is concerned, he said, " The sale of new-energy cars this year might also see a pullback from explosive growth seen in the past. Growth could slow to around 30% this year from 2022." That marks a sharp decline from more than 90% growth last year.

It's to be seen if automakers resort to better incentives, sweeter financing deals and deeper discounts to bolster demand if customers get unwilling to shell out more for these discretionary items.

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