China’s EV stocks start 2024 in reverse gear as price wars pressure profitability.

China’s electric car makers’ shares have started the new year in reverse gear as intense competition and price wars continue to pressure profits, while the overall market remains sluggish.

Nio and Xpeng have lost over 18% and 16%, respectively, while Li Auto has lost 12% so far this year. Almost 2% and 12%, respectively, have been shed by BYD and Zhejiang Leapmotor in 2024.

The domestic market will remain competitive, which could put pressure on profitability and pricing, Bernstein analysts said earlier this month in a report on the Chinese EV industry.

As well as competition concerns, Morgan Stanley highlighted macroeconomic uncertainty in its note on Wednesday: “Investors remain cautious following China’s automotive market’s volatile start to the year.”

According to Fitch Ratings, mainland Chinese passenger EV sales grew only 28% in the third quarter of 2023, compared to 108% in the same period in 2018.

A slowdown in growth is expected to deepen in 2024, according to Fitch Ratings. Despite economic uncertainty, Fitch Ratings expects China’s domestic passenger car demand to rise modestly to nearly 22 million units in 2024.

Carmakers have been trying to boost deliveries at a time when a slowdown warning is being issued. A record 20,115 EVs were delivered by Xpeng in December, 78% more than a year earlier, while its fourth-quarter deliveries reached 60,000 for the first time. In the fourth quarter, Li Auto delivered 131,805, an increase of 184.6% over the previous quarter.

As a result of its sales of battery-powered vehicles, BYD surpassed Tesla as the world’s top-selling EV brand in the fourth quarter.

Xpeng and Nio have fallen short of their sales targets for 2023, while BYD, Li Auto, and Geely are meeting theirs.