Chinese electric vehicle stocks are in a freefall as investors react to the growing inventories in the country. Nio stock price has crashed to $4.57, much lower than its all-time high of $67. It is hovering at its lowest level since 2020.

It is not alone. Xpeng stock has plunged to $7.72, also lower than its all-time high of $74. Its market cap has plummeted from a peak of $54 billion to below $10 billion. 

Even Li Auto, often seen as the safest Chinese EV company is in trouble as its stock moved below $30 this week. At its peak in 2023, the stock was trading at $45. In Hong Kong, BYD, the biggest Chinese EV company, was trading at H$200, down from its all-time high of H$333.

EV stocks chart

EV stocks chart

And more EVs are coming online. Xiaomi launched its EV this week and analysts expect that it will manufacture between 30k and 50k vehicles in the first year.

Chinese EV companies, together with their American peers like Tesla, Lucid, and Mullen Automotive are dealing with a major saturation in the industry. This saturation is then leading to lower margins as they are forced to cut prices.

Most big Chinese EV companies are pumping thousands of vehicles per month. On Wednesday, Nio announced that it will produce over 30,000 in the first quarter, lower than the guided 33k. It hopes to manufacture over 200k vehicles this year after making over 160k in 2023.

Xpeng, on the other hand, delivered more than 141k vehicles in 2023, a big increase from 90k in the previous year. Li Auto, on the other hand, made over 376k vehicles in 2023, a 182% increase from the previous year. BYD sold over 3 million vehicles in 2023.

All these companies are expected to boost their vehicle sales and production in 2024. The question is whether there are enough buyers for these vehicles. I believe that there are not enough buyers for EVs in China to justify the supercharged production.

This explains why most of these companies are boosting their investments abroad. BYD is said to be considering a plant in Mexico to target American buyers. The challenge for doing this is that the American market is also saturated, with companies like Tesla, Rivian, and Lucid having a major market share.

Therefore, there is a likelihood that most Chinese EV stocks will likely continue falling as sales slow and margins thin. As I wrote before, there are increasing signs that the EV bubble has burst.

By Crispus Kanyaru

With a keen eye for market trends and a knack for translating complex financial concepts into engaging narratives, Crispus has established himself as a trusted voice in the world of finance. His work has graced the pages of esteemed publications like Benzinga, Forbes, Invezz, and Banklesstimes, reaching a diverse audience eager to navigate the ever-evolving financial landscape. Crispus's journey began with a deep curiosity about the forces shaping the global economy. This natural inquisitiveness led them to pursue a degree in finance and CPIA, equipping them with a solid foundation in financial theory and analysis. But Crispus knew that knowledge alone wasn't enough. He craved to bridge the gap between dry data and real-world experiences, to make finance accessible and relatable to everyone.

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