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Chinese EV stocks: Who will challenge Tesla’s share price in 2021?

Electric vehicle stocks had a meteoric rise in 2020. Chief among these was Tesla’s [TSLA] share price, which gained 696.47% last year to hit $844.99 — making it the most valuable automobile manufacturer on the planet. Some analysts think the stock can go higher, with Bank of America’s John Murphy suggesting the stock could hit $900 a share.

One region in which Tesla has been spending heavily is China. The country is the largest EV market in the world with 1.3 million vehicles sold last year according to evvolumes.com, well ahead of Germany in second place with 0.4 million. 

Not only has Tesla continued to roll out supercharging stations in the country, but last week the company delivered its first Chinese-built Model Y cars. The implications for building in the country mean lower production costs and increasing profit margins. Yet Tesla’s share price is expensive, costing $841.47 and trading at a 1,650.73 P/E ratio as of 21 January’s close. 

It could pay for investors to look beyond Tesla and consider Chinese EV stocks. A report by S&P Global Platts quotes Xu Haidong, the deputy chief engineer of the China Association of Automobile Manufacturers, as saying that Chinese EV sales could reach 1.8 million units in 2021. By 2025, that number could rise to 6 million, accounting for 20% of total new cars, according to S&P Platts’ own calculations.

Chinese EV stocks to watch in 2021

Nio’s share price

Nio’s [NIO] share price accelerated at the start of January when it unveiled its first battery-powered sedan. The ET7 will put Nio in direct competition with Tesla’s Model 3, which has been a huge success in China. Those gains come on top of a strong 2020, with Nio’s share price up 1172.6% over the year.

 

1172.6%

Nio's share price gains in 2020

 

However, while Nio has been steadily ramping up deliveries — and even managed to double sales in the fourth quarter — it lags behind Tesla in terms of production and has yet to turn a profit. 

Among the analysts tracking the stock on Yahoo Finance, the stock carries an average $58.28 price target, which would see a 0.10% upside on the current price (as of 21 January’s close).  

 

Xpeng’s share price

Xpeng’s [XPEV] share price has climbed over 145% since listing on the New York stock exchange in August 2020. That listing saw the Chinese electric vehicle manufacturer’s share price soar 40% in a single day, raising $1.5bn in the process. According to CNBC, Xpeng’s focus is on cars priced between CNY150,000 and CNY300,000 — a large market in China, which will give the company plenty of room for growth. 

 

$1.5billion

Raised by Xpeng's IPO

 

Yet in early December, UBS’s Paul Gong downgraded Xpeng from buy to neutral, saying the share price had become too high to justify buying. Gong is still bullish on Xpeng with a $59 price target according to Market Watch, expecting it to lead in the development of autonomous driving technology. 

 

Li Auto’s share price

Like other EV manufacturers, Li Auto’s [LI] share price had a stellar 2020, having gained circa 98% over the past 12 months. However, since hitting an all-time high on 24 November, the stock has dropped circa 20%. For investors, now could be the time to buy the dip. Li Auto had a strong fourth quarter with deliveries hitting 14,464 units, a 67% increase on the same quarter last year, and the firm is forecasting strong sales in 2021. 

Wall Street seems to think Li Auto has a lot of miles left ahead. Jefferies initiated coverage of Li Auto on 19 January with a buy rating and $44.50 price target, saying it should become profitable earlier than its rivals, while Credit Suisse upped its rating on the stock to outperform on 6 January, also upping its target from $33 to $40.

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