Li Auto and NIO Limited: Driving the EV revolution
By Paul Reid
28 September 2023
With so many stocks to choose from, it’s not easy to keep track of them all and recognize when a market opportunity presents itself. Volatility is the lifeblood of profit and risk, and two volatile stocks are worthy of your attention right now. If you want to enter the EV market, this week’s price dip may have created the perfect entry point. Let’s find out why.
Li Auto Inc. (LI)
In the last 7 days, Li Auto Inc. fell 11% from $39.28 (USD) to $34.96. Li Auto is a Chinese electric vehicle (EV) manufacturer that designs, develops, and sells premium smart SUVs. The Beijing-based company was founded in 2015 and is listed on both the Nasdaq and Hong Kong stock markets. Its flagship product is the Li ONE, a six-seater plug-in hybrid SUV with a range of over 500 miles.
Li Auto's sales have grown rapidly in recent years. In 2022, the company delivered over 130,000 vehicles, up from just over 90,000 in 2021. This growth is expected to continue in 2023, with analysts forecasting over 200,000 vehicles for the year.
For now, Li Auto only sells in China, but it is expanding with new models, such as the L8 and L9 SUVs, expected to drive further growth and make the automaker worthy of international consideration.
The company is well-positioned to capitalize on the growing EV trend, and stocks could significantly recover if the global trend continues.
NIO Limited (NIO)
Since the 2023 high of August, NIO has fallen 45.89% from $15.45 to $8.36 and his holding just above the all-time low of $7.14. NIO is also a Chinese EV manufacturer, founded in 2014 and based in Shanghai, where it’s listed alongside Hong Kong and New York. It also has offices in the US and Germany.
NIO has reported strong sales growth in recent quarters: in the second quarter of 2023, it delivered 25,059 vehicles, up 14.4% year-over-year. NIO is also expanding with new models, such as the ET7 sedan and the ES7 SUV.
In addition to its home market, NIO also sells in Norway, Denmark, Sweden, Germany, the Netherlands, and the United Kingdom. The automaker entered the European market in 2021 with the launch of its ES8 SUV, launching another two models there since then, the ET7 sedan and the ES7 SUV.
It is targeting the US, Canada, and Japan as its next international markets.
Both companies sound strong with proven products, so why the fall? The two stocks fell in value due to recent concerns about a Chinese economic slowdown, causing investor sentiment to weaken as big asset managers question future demand for electric vehicles in China. But is China’s economy really so bad?
China's GDP growth rate last year was 2.99%, according to the National Bureau of Statistics of China, but according to the International Monetary Fund (IMF), China's expected growth rate for 2023 is around 5.2%. Nothing conclusive there to support a negative narrative.
Unemployment in China is rising and expected to reach 6% by the end of the year. This would be the country’s highest unemployment rate since the early 1990s. Moreover, China's population is aging rapidly, significantly reducing the workforce, and gravely affecting an already crumbling property market.
Such projections are cause for concern for the coming generations, and while China is not alone in feeling the brunt of an aging population, such forecasts don’t reflect today’s economy quite so aggressively.
Is the Chinese economy weakening? Compared to what? Just about every nation is having problems such as high interest rates, inflation, questionable employment levels, and growing debt. To suggest that China is weakening faster than the rest of the world is pure speculation. The real question is whether or not China is laying foundations for future growth and recovery. For that, tech industries will play a major part.
If China is going to pull itself out of a downward spiral, one of the best places to start is international trade, and the EV market is prime. The Chinese government is already strongly supportive of the EV industry, awarding subsidies and tax breaks for EV manufacturers and consumers.
Both NIO and Li Auto are attractive companies with a bright future, because the long-term outlook for the EV market is positive. Driven by climate change and rising fuel prices, the global is expected to multiply in the coming years.
Electric vehicles are becoming more popular and affordable, and governments around the world are supporting the transition from gas. Sooner or later, Chinese EVs will find their way out of China. So if you’re looking to trade EV-related stocks after a dip, now might be the perfect time.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.
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