Shares of Chinese electric vehicle (EV) stocks Li Auto (NASDAQ: LI) and XPeng (NYSE: XPEV), as well as Vietnamese EV maker VinFast (NASDAQ: VFS), plunged in March, down 34%, 18.6%, and 16.8%, respectively, according to data from S&P Global Market Intelligence.
Expectations may have been high for this cohort heading into the month. After all, Li Auto crushed its fourth-quarter earnings report in February and was riding high heading into March. However, Li’s monthly deliveries suddenly disappointed, especially regarding the launch of its new Li MEGA electric minivan.
Li Auto’s Unexpected Turn
Li’s month didn’t start particularly well. Reporting monthly deliveries as most EV makers do, Li reported February deliveries of 20,251 on March 1. While that figure was up 21.8% year over year, which is certainly not terrible, it may have disappointed investors, given the red-hot 184.6% deliveries growth posted in the fourth quarter. And it was below the run rate needed to achieve the company’s Q1 guidance for 100,000 to 103,000.
Li may have been banking on a big boost for deliveries of the new Li MEGA, an electric minivan-type vehicle boasting a whopping 710 km (440 miles) of range and ultra-fast charging, designed for multigenerational households. However, sales of MEGA disappointed. On March 21, the company pre-announced a downwardly revised delivery guidance range of 76,000 to 78,000, missing initial guidance by a whopping 24%.
Xiang Li, chairman and CEO, offered a mea culpa, describing the Li MEGA marketing strategy as “misplaced,” going for a “1-to-10” mass hypergrowth strategy too early. Instead, Li says the company will now adopt a “0-to-1” strategy of targeting only well-off families in major cities.
Image source: Li Auto.
That note seemed to indicate the Chinese EV consumer is weaker than Li expected, which cast a pall over other Chinese EV stocks and really EV stocks in general. That was obviously not good for either XPeng or VinFast.
Challenges for the EV Market
Li’s about-face also impacted XPeng, which saw a deceleration implied in its first-quarter guidance and compressed gross margins amid the highly competitive price war in China. Alibaba’s disclosure of selling part of its stake in XPeng further fueled investors’ concerns.
VinFast, although less exposed to China, faced challenges from Southeast Asian competitors. One of its major investors, Yorkville Advisors, decided to sell some stake, reflecting the intense competition in the region’s EV market.
The Future of EVs amid Market Turbulence
It’s a tough EV market globally, with production outpacing consumer demand. Factors such as higher interest rates, economic challenges in China, and intense competition among EV vendors are contributing to the downturn.
While EVs remain the future of mobility, industry shakeouts like this may continue before seeing improvement.
