Over the last week, we have seen some truly remarkable moves in China-based companies that produce and manufacture electric vehicles. With flurries of analyst upgrades, solid delivery numbers, and lots of bullish sentiment about the potential of the Chinese EV industry, these supercharged stocks are showing investors that they are gaining traction. There’s a lot to like about these businesses, as China-based manufacturers currently account for over 50% of overall EV deliveries worldwide.
While Tesla (NASDAQ:TSLA) is the current leader in China’s rapidly growing EV market, 3 additional companies could also benefit in the coming years. We know that electric vehicles feature advantages like environmental tax credits, lower costs, less maintenance, and eco-friendliness, which is a big reason why investors are so excited about the growth prospects of companies in the sector. The rising demand for electric vehicles in one of the world’s largest economies could be the perfect recipe for investing success. Keep reading below to learn more about 3 supercharged Chinese EV stocks to watch next week.
1. NIO
The first stock on our list is the up-and-coming premium electric vehicle company Nio (NYSE:NIO). The stock has been on an absolute tear and is up over 1000% year-to-date. While it’s fair to consider the monumental rise in share price as the product of speculation, the company has a lot of positives working in its favor. In October, the company delivered more than 5,000 EVs and marked the third consecutive month of record deliveries for the company. NIO has delivered 31,340 vehicles in 2020 thus far, which is a year-over-year increase of 111.4%.
These delivery numbers are important for two reasons – they confirm that NIO is executing at a high level from a production standpoint and that the demand for its electric vehicles remains strong even as the pandemic rages on. With that said, the stock is up over 22% over the past week and is likely due for a sharp pullback soon. If such a pullback occurs, investors that are intrigued by the growth prospects of NIO might find an attractive entry point.
2. Xpeng
Another Chinese EV stock that investors should watch going forward is Xpeng (NYSE:XPEV). The stock has recently gone parabolic and is up over 58% over the last week thanks to strong delivery numbers and several prominent analyst upgrades. The company went public back in August and produces smart electric vehicles. Its primary products are an electric sport utility vehicle called the G3 along with a sports sedan called the P7.
What’s interesting about Xpeng is that it has emphasized using technology to separate its electric vehicles from the competition. The company reportedly had 40% of its employees focused on R&D as of June 30th, 2020. With innovative technology like autonomous driving and other unique proprietary software, Xpeng’s vehicles appeal to the large and growing base of tech-savvy middle class-consumer in China. Xpeng is launching Xpilot 3.0, an assisted driving software that features things like autonomous parking, in 2021. The company reported deliveries of 3,040 vehicles in October, which was an increase of 229% year-over-year. Xpeng has delivered over 17,117 units in 2020 to-date, which represents a 64% year-over-year increase.
4. BYD Company
The final Chinese EV stock on our list that investors should keep an eye on next week is BYD Company (OTC:BYDDY). BYD, which stands for “Build Your Dreams”, is a company that is one of China’s major electric vehicle battery manufacturers in addition to producing electric vehicles. The company has seen strong demand for its newly launched premium electric sedan. In the two months following the announcement of BYD’s “Han” line of electric cars, the company has received over 40,000 orders.
BYD Company is the only Chinese EV company that is backed by Warren Buffett’s Berkshire Hathaway (NYSE:BRKa), which owns a 25% stake in the business. Q3 sales for the company increased by 41% year-over-year to $6.67 billion. This company is an interesting option for investors that are looking for a more diversified business that offers additional products besides electric vehicles. The stock is up over 25% in November and could carry its positive momentum into next week’s trading sessions.
Final Thoughts
The Chinese EV market has never been hotter, and the share prices of these three companies reflect that. While there are positive qualities about each one of these companies and the future of electric vehicles in China, investors need to recognize that these companies are operating in a very competitive market environment and that there are always added risks in buying stocks in emerging markets. After such strong moves for these stocks, the best approach for long-term investors is likely waiting for them to cool off before considering adding shares.