Investing.com – After China’s electric vehicle sector weathered a tough period, investor sentiment is shifting.
As the industry enters its traditional peak season, there is a renewed sense of optimism driven by a combination of macroeconomic factors, emerging industry trends, and strategic moves made by key players.
“Market sentiment showed early signs of improvement in September, with fourth-quarter sales likely to be better than expected,” Morgan Stanley analysts said.
These measures are supported by additional trading subsidies from local governments, ranging from 10,000 to 15,000 yuan, which are expected to stimulate vehicle purchases without the need for mandatory vehicle scrapping.
In addition, the expected launch of upcoming EVs such as the Onvo L60, Zeekr 7x, XPeng (NYSE:) P7+, and Denza Z9 has created a huge buzz.
The sector outlook is also supported by positive market rotation and changing growth/value factors, along with expectations of interest rate cuts. Despite these positive signals, concerns about weak consumer spending in China remain.
The recent success of XPeng’s M03 has set a precedent, prompting investors to closely watch upcoming launches of high-profile models.
The Onvo L60, Zeekr 7x, and XPeng P7+ are seen as catalysts that could impact stock performance. The anticipation surrounding these launches reflects investors’ eagerness to identify stocks poised to benefit from new companies entering the market.
Despite challenges to overseas sales in recent months due to higher tariffs and inventory adjustments, global markets remain a critical area of focus. Conversations with OEMs suggest that international expansion is critical, especially given the risk of market saturation in China.
“It is noteworthy that we believe that global strategic relationships are key to dealing with geopolitical conflicts,” the analysts added.
Price competition continues to shape market dynamics. Although automakers are adopting more rational pricing strategies, the price war is expected to continue. OEMs are likely to engage in competitive pricing for strategically important models, such as BYD’s Han and Xpeng’s M03.
In addition, luxury brands may reconsider price competition after Q3 sales decline. The development of intelligent driving technologies and urban navigation assistance (NOA) remain a focal point.
Tesla’s plan to launch robotaxi, despite the delay in fully autonomous driving, sets an industry benchmark, and Chinese companies are accelerating their progress in L2+ and urban NOA technologies in response to Tesla’s initiatives.
Stocks attracting investor interest include BYD (HK:), NIO, XPeng, Li Auto (NASDAQ:), Zeekr, Geely, and Great Wall Motor.
BYD, often seen as a safe haven amid market volatility, continues to attract attention. Analysts expect BYD to sell 4 million units this year, with growth expected to be 20-25% the following year.
The company is focusing on improving vehicle profitability, with sales expected to reach more than 10,000 yuan per unit in the second half of the year.
Despite its strong position in the mass market, BYD’s performance in the high-end and international markets remains under scrutiny.
NIO has recently seen a surge in investor interest, especially with the expected launch of the L60 model. This event is expected to trigger volatile short selling and potentially huge returns.
However, the recent surge in NIO stock may have already contributed to positive results in the short term. Future performance will depend on effectively ramping up production and successfully converting pre-orders into actual sales.
XPeng shares have also received increased attention as confirmed orders have shown an upward trend. The company’s target of delivering 20,000 units in September, including 8-10,000 units of the M03, is seen as achievable.
The success of the M03 and the upcoming launch of the P7+ are expected to increase investor interest. XPeng’s tech day on October 24 is expected to provide valuable updates on autonomous driving and transmission technologies.
LeAuto’s monthly sales target of 45,000-50,000 vehicles appears achievable, supported by a strong weekly run rate. The company’s strong quality control and cost management are expected to boost profitability in the second half of the year. Investors are looking forward to updates on LeAuto’s BEV lineup and additional PHEV models to drive further sales growth.
Zeekr has also attracted increasing interest from investors, with focus on its valuation compared to its startup peers. The upcoming launch of the Zeekr 7x is expected to be a major catalyst, along with a strong order backlog for the Zeekr 009. September deliveries are expected to reach 20,000 units, supported by a strong order pipeline.
Geely is gaining momentum as a beta company due to its attractive value proposition, strong sales performance and favorable international exposure. The successful launch of the Galaxy E5, which has sold over 2,500 units weekly, has boosted investor confidence.
However, achieving a meaningful reclassification will require more significant upside surprises to earnings expectations.
Great Wall Motor has seen increased interest from southbound funds, driven by strong earnings outlook and export recovery. The performance of the Tank series will be critical to the company’s Q3 results. While the NEV transformation remains a key issue, diversification into new markets and increasing market share in China are essential for a potential reclassification.
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