Tesla cuts prices in China could impact NIO, Li, and XPeng

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recently released the price of the Model Y made in China. It’s a bit more affordable than some of the competition. This is good news for Tesla Bulls, but it could be bad news for the competition.

Tesla (symbol: TSLA) sells the Shanghai-made Model Y for a base price of 339,000 yuan, or about $ 52,000. Cheaper

NIO

(NIO) EC6 crossovers start at 368,000 yuan.

the

XPeng

(XPEV) G3 starts for less, but it’s a less efficient vehicle. The G3 shows its time to accelerate from 0 miles per hour to 60 miles per hour in about nine seconds. A comparable Model Y achieves this speed in about five seconds.

the

Li Auto

(LI) Li ONE SUV starts at around 328,000 yuan. “With the Li ONE, we want to … become the best-selling model in its price segment which is [the 300,000 to 350,000 Yuan] price segment, ”Li Auto Chairman Kevin Shen said on the company’s recent earnings conference call.

Tesla, for its part, is able to cut costs by increasing local production in China. “We are also seeing benefits from the continued upward trend in locally built and delivered cars, which has gone from less than 50% at the start of last year to over 70% more recently,” said CFO of Tesla, Zachary Kirkhorn all third quarter earnings conference.

The Chinese-built Model Y was approved for sale in China in late November. Tesla also manufactures Model 3 sedans in China.

CEO Elon Musk recently said it was important to keep lowering vehicle prices. “I don’t think we lack desire for our product, but we lack affordability,” Musk said on the recent conference call.

Lower prices and competition have not hurt EV stocks. Shares of XPeng, NIO and Li Auto, as well as Tesla, produced incredible returns in 2020. Shares of NIO, for example, rose about 1110%, beating Tesla’s huge 743% gain.

Despite the competition and changing stock prices, VE’s Chinese stocks are still popular with analysts. More than 60% of analysts covering the three companies rate the stocks long. The average purchase ratio of the Dow Jones is around 57%.

Barron’s is more cautious, writing recently that the valuations of Chinese EV producers are too high, while suggesting that investors are taking profits. This article appeared in mid-December.

XPeng is trading about 15 times estimated sales in 2021. NIO and Li Auto are trading about 15 times and 8 times estimated sales in 2021, respectively. Tesla, for comparison, is selling about 14.5 times 2021 sales.

The three Chinese EV producers are expected to report delivery figures in early 2021.

Write to Al Root at [email protected]