The Chinese EV Industry: Stock Trends for Investors

The Chinese electric vehicle (EV) industry is currently experiencing significant growth, consolidating its position as a global leader. In 2024, China achieved a remarkable milestone by surpassing 1 million EV sales in August, marking a substantial increase in the electrification of its vehicle market. This figure represents 30.6% of all vehicle sales for that month, highlighting a continued upward trend in EV adoption.  

New-energy vehicle (NEV) sales surpassed those of internal combustion engine vehicles for the first time. This shift indicates a significant milestone in China's transition to electrification from traditional Chinese cars, driven by increased consumer acceptance and aggressive marketing strategies by manufacturers. S&P Global Mobility forecasts that NEVs will comprise 46% of the passenger vehicle market in 2024, up from 36% in 2023.

BYD alone has sold over 1 million new energy vehicles (NEVs) this year, reinforcing its dominant market position. Other brands, like Xpeng, Zeekr, and GAC Aion, are also gaining traction, contributing to a vibrant competitive landscape.

Chinese EV Stocks with the biggest YoY growth

In the rapidly evolving Chinese electric vehicles market, several companies have shown impressive year-on-year growth, making them standout stocks for investors. Here are some of the Chinese stocks with notable growth, according to Insider Monkey and Morningstar:

Li Auto Inc. (NASDAQ: LI): Li Auto has reported a substantial 48.9% year-on-year increase in vehicle deliveries, with 53,709 units delivered in September. For the third quarter, they delivered 152,831 vehicles, marking a 45.4% rise compared to the same period last year. The company has an estimated 17% market share among NEVs priced at RMB 200,000 and above, positioning it as a leader in this category among domestic brands.

NIO Inc. (NYSE: NIO): NIO has also demonstrated growth, delivering 61,855 vehicles in Q3 2023, which reflects an 11.6% increase from the previous year. In September, NIO achieved a 35.4% year-on-year growth with 21,181 vehicles delivered. As of 2024, NIO Inc. holds a market share of approximately 2.1% within China's EV sector. The company has a strong position in the premium electric vehicle space, where it competes alongside domestic leaders like BYD and Xpeng.

BYD Company Ltd. (OTC: BYDDY): BYD has solidified its position as a leader in the Chinese EV market, selling over 1.8 million passenger cars in 2022. This accounted for about 28% of the Chinese passenger new energy vehicle (NEV) market. The company's focus on mass-market EVs and significant production capabilities have contributed to its remarkable growth. BYD currently leads the Chinese EV market, commanding a significant market share across both battery electric vehicles (BEVs) and plug-in hybrids (PHEVs).

To learn more about the EV stocks and to keep up with industry news, check out the moomoo app.

BYD Growth

BYD has been experiencing significant growth in the electric vehicle (EV) market. In the first half of 2024, the company reported a total of approximately 1.9 million sales of passenger plug-in electric cars, which marks a 29% increase compared to the same period last year. This includes over 850,000 battery electric vehicles (BEVs), up 14%, and over 1.1 million plug-in hybrid electric vehicles (PHEVs), which saw a remarkable 44% increase.

BYD is on track to meet its ambitious goal of selling around 4 million vehicles in 2024, having sold 1.27 million cars in the first five months of the year alone,. The company achieved a record sales month in May 2024, with 331,817 new energy vehicles sold, representing a 38.2% year-over-year growth. This robust performance comes despite a competitive landscape and price cuts in the market.

Overall, BYD's strategic focus on affordable EVs and international expansion has positioned it as a leading player in the global automotive market.

Nio Growth

Nio has demonstrated significant growth in 2024, solidifying its position as a key player in the electric vehicle (EV) market. In the second quarter of 2024, Nio achieved a record-breaking delivery of 57,373 vehicles, marking an impressive increase of 143.9% year-over-year. This upward trend continued into the third quarter, where Nio reported 61,023 vehicle deliveries, further enhancing its market share in the battery electric vehicle segment in China.

By September 2024, Nio had delivered 21,181 vehicles, a 35.4% increase compared to the same month in the previous year, bringing its total deliveries for the year to 149,281 vehicles.

The company also launched a new budget brand, ONVO, which debuted with the ONVO L60 SUV, quickly gaining traction with 832 deliveries within just three days.

Overall, Nio's continuous innovation in EV technology, such as advancements in battery swapping, and its expansion into new markets, including Europe and the Middle East, underscore its robust growth trajectory.

Zeekr

Zeekr, Geely's premium EV brand, has shown substantial growth recently, primarily due to strong year-over-year increases in vehicle deliveries and expansion efforts. As of September 2024, Zeekr's total vehicle deliveries reached 142,873 units for the year, marking an 81% increase compared to the same period in 2023. Notably, Zeekr delivered 54,811 vehicles in Q2 2024 alone, achieving a 100% year-over-year growth in that quarter, which helped boost its revenue significantly to $2.76 billion—up 58% from the previous year. The company’s gross margins also improved to 17.2%, compared to 12.3% in the prior year, indicating stronger profitability per vehicle sold.

The company has expanded beyond China, entering new markets in Europe, Japan, and Mexico, and has introduced new technologies, such as rapid charging and autonomous driving features. Zeekr’s recent product launches, including the ZEEKR 7X SUV, aim to appeal to a broad global consumer base with luxury and functionality tailored for both urban and off-road conditions. Moving forward, Zeekr plans continued global expansion and investments in R&D to strengthen its market position in the competitive EV sector.

Potential risks of investing in Chinese EV stocks

Investing in Chinese electric vehicle (EV) stocks presents unique opportunities but also comes with specific risks, given the regulatory environment, competitive landscape, and market volatility.

Here are some of the main risks:

• Regulatory and policy risks: The Chinese government has been instrumental in supporting EV growth with subsidies, tax breaks, and incentives. However, policy shifts, such as reducing or removing subsidies, can have a direct impact on sales and profitability for EV companies. For instance, China is gradually reducing subsidies as the EV market matures, which could strain the margins of companies that rely heavily on government support.

• Geopolitical tensions between China and other countries, especially the United States, could also impact EV manufacturers with significant overseas markets. Export restrictions or tariffs could affect revenue for Chinese EV makers expanding internationally.

• Market saturation and intense competition: The Chinese EV market is highly competitive, with both domestic players (like BYD, Nio, and Xpeng) and international brands (such as Tesla) vying for market share. Over 100 EV brands are currently in operation in China, which could lead to price wars, squeezing profit margins for all players. This competition could hinder companies from achieving sustainable long-term growth.

• Rapid innovation in EV technology requires consistent investment in research and development, creating pressure on companies to keep up technologically. For smaller or newer companies, this need for constant innovation may be unsustainable.

• Supply chain and cost challenges: While China has a strong EV supply chain, recent battery material shortages and global supply chain disruptions have impacted production costs. Key battery materials, such as lithium, have seen price volatility, which could lead to higher manufacturing costs and reduced profitability for EV companies that cannot pass these costs onto consumers.

• The need to source sustainable battery materials and develop in-house battery production capabilities is an additional challenge. Companies that cannot secure stable supply chains may face production slowdowns or higher costs.

• Financial risk and valuation concerns: Many Chinese EV companies, including Nio and Xpeng, operate at a loss as they prioritize growth over profitability. Investors may be exposed to high-risk profiles due to substantial cash burn and dependence on capital markets for funding. If these companies fail to achieve profitability, they could face difficulties securing future funding.

• High valuations in the EV sector could lead to price corrections. If future earnings or market share growth does not meet high investor expectations, stock prices could decline sharply.

• Potential delisting and audit issues: Some Chinese EV companies listed on U.S. stock exchanges, such as Nio and Xpeng, face delisting risks due to regulatory changes like the Holding Foreign Companies Accountable Act (HFCAA). This legislation requires foreign companies to comply with U.S. audit standards, and non-compliance could lead to delisting, reducing access to U.S. capital markets and affecting investor confidence.

Potential benefits of investing in Chinese EV stocks

Investing in Chinese EV stocks offers several benefits, given China’s rapid growth in the EV market and supportive government policies. Here are some of the main potential advantages:

• High growth potential: China is the largest EV market globally, with electric vehicle sales accounting for nearly 30% of all vehicle sales in 2023. The country’s EV market is projected to grow steadily as domestic demand rises, presenting a substantial growth opportunity for investors in companies like BYD, Nio, and Xpeng..

• Government support and subsidies: The Chinese government has shown strong support for the EV sector through various incentives, including subsidies, tax breaks, and infrastructure investments. Policies promoting sustainable transportation benefit domestic EV companies by making EV ownership more accessible and encouraging widespread adoption.

• Technological advancements and innovation: Chinese EV manufacturers are recognized for their fast-paced innovation, with many companies leading in areas like battery technology, autonomous driving, and energy efficiency. For example, companies like BYD and Nio are developing proprietary battery technologies and autonomous driving features that are increasingly competitive globally.

• Global expansion opportunities: Chinese EV companies are expanding internationally, with many aiming to penetrate the European, Japanese, and Latin American markets. Brands like BYD and Zeekr have launched operations in Europe and Latin America, with further expansion plans. This international growth creates new revenue streams beyond China, diversifying their market reach and reducing dependence on a single regional market.

• Environmental and ESG investment appeal: The EV industry aligns with the global push for environmentally friendly alternatives to traditional internal combustion engines. As sustainability becomes a priority for investors, Chinese EV stocks offer a way to support green technology. Investing in these companies appeals to ESG (Environmental, Social, and Governance) investors, which could lead to increased demand for these stocks and potentially higher valuations.

• Overall, Chinese EV stocks offer high-growth potential in a booming sector backed by strong government support, advanced technology, and expanding international reach. These factors make them attractive for investors seeking exposure to the future of transportation and clean energy solutions.

Comparing American & Chinese EV industry trends

The U.S. and Chinese electric vehicle (EV) industries are both leading global growth but differ significantly in market trends, regulatory support, technology focus, and consumer preferences.

Here’s a comparison of key trends between the two:

• Market size and growth: China is the world’s largest EV market, with EV sales accounting for nearly 30% of total vehicle sales in 2023 while the U.S. is the second-largest EV market with EV sales accounting for only about 7% of total vehicle sales in 2023. China aims for EVs to make up 40% of new car sales by 2030 while the U.S. is catching up quickly, as the Biden administration set ambitious targets for 50% of new car sales to be electric by 2030.

• Government support and policies: The Chinese government has provided extensive subsidies, tax breaks, and incentives for both EV manufacturers and consumers. China also offers substantial support for building charging infrastructure and battery-swapping stations. The U.S. offers tax credits and incentives but has fewer direct subsidies for EV manufacturers. The Inflation Reduction Act (IRA) introduced tax incentives for EV buyers and support for domestic battery production.

• Consumer preferences and market segmentation: The Chinese EV market is segmented with a strong demand for affordable, smaller EVs due to urbanization and dense city populations. Many Chinese companies, like BYD and Wuling, focus on budget-friendly EV models, catering to a wide range of income levels.  The U.S. market initially focused on premium models, with Tesla dominating in the luxury and performance segments. However, as competition increases, more affordable options from brands like Chevrolet and Ford are emerging.

• Technology and innovation focus: Chinese EV makers have pioneered battery-swapping technology, which allows EVs to quickly swap depleted batteries for fully charged ones, reducing wait times. Companies like Nio are expanding battery-swapping stations across China and recently in Europe. U.S. automakers focus heavily on advanced battery technologies, such as solid-state batteries and high-energy-density options, aiming for longer range and faster charging.

• International expansion and global influence: Chinese EV manufacturers are expanding aggressively into international markets, particularly in Europe, Southeast Asia, and Latin America. Brands like BYD and Nio aim to establish a global footprint by focusing on affordable EV options and premium services, with mixed success in penetrating Western markets.American brands are also expanding internationally, with Tesla having a significant presence in Europe and Asia. Legacy automakers like Ford and GM are increasingly focusing on EV exports, particularly to Europe.

Chinese Government's EV industry policies

The Chinese government has implemented a comprehensive suite of policies to support the EV industry, aiming to position China as a global leader in EV adoption, production, and innovation. Key policy areas include subsidies, mandates, infrastructure support, R&D investment, and international expansion incentives.

Here’s an overview:

Consumer and manufacturer subsidies: China has long offered direct subsidies to EV buyers to make EVs more affordable, though these have gradually decreased as the market matures. EVs meeting certain range, efficiency, and safety criteria are eligible, making it attractive for consumers to purchase electric over internal combustion engine (ICE) vehicles. For manufacturers, tax exemptions and production subsidies reduce operating costs and support market entry.

The government has also introduced tax breaks on EV purchases, which currently last through 2025, and are particularly beneficial for lower-cost and mid-range EV models popular in urban areas.

Regulatory mandates and NEV credit system: China’s NEV mandate system requires automakers to meet specific NEV production quotas, with NEV credits pegged to production volumes. Automakers failing to meet these quotas must buy credits from companies exceeding them, creating an incentive structure for all companies to increase EV output.

Long-term, China is phasing out ICE vehicles, with a target for 40% of new vehicle sales to be NEVs by 2030 and full electrification by 2035. This aggressive timeline is shaping the strategies of both Chinese and foreign automakers operating in China.

Charging network expansion: China leads in EV infrastructure, having established the largest public EV charging network globally, supported by government-backed initiatives to install fast-charging stations and battery-swapping facilities. The Chinese government partners with local governments and companies like Nio to increase battery-swapping stations, improving convenience and reducing EV downtime.

Rural electrification: Recognizing the need for broad adoption, China is expanding EV infrastructure in rural areas, aiming to make EVs viable outside major cities and encourage sustainable transportation across all regions.

Research and development (R&D) and innovation: Under the "Made in China 2025" initiative, the government funds R&D in battery technology, autonomous driving, and EV manufacturing to build self-reliance in high-tech EV components and reduce dependence on foreign suppliers. Emphasis is placed on advancing battery performance, reducing production costs, and creating export-competitive models.

Global expansion support and trade protections: The Chinese government encourages EV makers to explore international markets, providing financial support to firms exporting to Europe, Japan, and Latin America. Chinese EV brands like BYD and Nio are capitalizing on these policies to establish a strong global presence, with ambitions for further expansion.

Domestically, import restrictions and tariffs on foreign EVs help protect Chinese companies, allowing them to dominate the local market without facing significant international competition. This protective stance is intended to foster domestic brands and strengthen China’s position as an EV powerhouse globally.

Environmental and ESG goals: EV adoption plays a significant role in China's environmental strategy, which includes peak carbon emissions by 2030 and achieving carbon neutrality by 2060. By promoting EVs as part of its environmental, social, and governance (ESG) framework, China aims to reduce urban pollution and decrease the country’s reliance on fossil fuels, aligning with its sustainability objectives.

American Government's EV industry policies

The U.S. government has taken significant steps to support the EV industry, with a focus on increasing EV adoption, developing domestic manufacturing, and building essential infrastructure. Here are the key policy areas:

Consumer incentives andt tax credits: The IRA of 2022 introduced significant tax credits for EV buyers, offering up to $7,500 for new EV purchases and $4,000 for qualifying used EVs. To qualify, the vehicle and its battery components must meet specific domestic sourcing requirements. The goal is to encourage both EV adoption and support the development of a domestic EV supply chain

Several states, including California, Colorado, and New York, offer additional tax credits, rebates, and other financial incentives to make EV ownership more affordable. California, for example, provides rebates for EV purchases and incentives for low-income residents, further supporting widespread adoption

Manufacturing and supply chain development: The IRA includes provisions for incentives that encourage companies to manufacture EVs, batteries, and components domestically, which aims to reduce dependence on foreign suppliers. Companies that produce EV components or conduct final assembly in North America receive significant benefits, aligning with the Biden administration’s goal to create jobs and establish a robust EV supply chain within the U.S.

Department of Energy (DOE) grants and loans: The DOE has awarded billions in grants and low-interest loans to support battery production and raw material processing for EVs. For instance, the DOE has allocated funds to help U.S. companies produce lithium, nickel, and cobalt for EV batteries, which are critical components for battery productio

National Electric Vehicle Infrastructure (NEVI) program: As part of the bipartisan Infrastructure Investment and Jobs Act of 2021, the NEVI program allocated $5 billion over five years to states to create a national network of EV fast-charging stations, with a goal of placing charging stations every 50 miles along major highways. This initiative is crucial for supporting long-distance travel and widespread EV adoption across the U.S.

Grants for local infrastructure: Additional funding is available for local and community EV infrastructure projects. This includes grants aimed at deploying chargers in urban areas, low-income neighborhoods, and rural areas, addressing disparities in EV access across different regions.

The Environmental Protection Agency (EPA) has proposed stricter emissions standards for passenger vehicles and light-duty trucks, targeting reductions in greenhouse gas emissions. These new rules are expected to encourage automakers to increase EV production to comply with regulatory standards, especially as the U.S. aims to meet its Paris Agreement commitments on climate change.

California’s Zero-Emission Vehicle (ZEV) mandate: California, along with several other states, has set ambitious zero-emission vehicle mandates requiring a certain percentage of new vehicle sales to be ZEVs. California aims to ban sales of new gas-powered vehicles by 2035, setting a precedent that other states are likely to follow.

Support for research and development (R&D): The U.S. government supports EV-related R&D through grants from the Advanced Research Projects Agency-Energy (ARPA-E) and other federal initiatives that fund projects in battery technology, charging technology, and energy efficiency improvements. The DOE also funds university and private sector research on next-generation battery technologies like solid-state batteries and recycling processes for critical EV materials, aiming to reduce costs and increase the performance of future EV.

Job creation and workforce development: Programs under the IRA and DOE initiatives are designed to create jobs within the EV sector. Workforce development initiatives are in place to train workers in battery manufacturing, EV assembly, and infrastructure maintenance, promoting job growth and addressing skills gaps within the green economy.

Conclusion

The Chinese EV industry is currently experiencing significant growth, consolidating its position as a global leader. This is driven by a combination of large-scale production, advanced technology, and competitive pricing. Chinese manufacturers like BYD, SAIC, and XPeng leverage strong government support, favorable policies, and innovations in battery technology, positioning them to capture over half of the global EV market by volume. However, it does face new pressures in the form of international regulatory challenges.