Several news came out from the Chinese Electric Vehicle (EV) sector today. The result has been a surge in shares of the stock holdings there. that is Tesla (TSLA 2.16%, Shares are up 1.9% as of 11:40 a.m. ET. and shares NIO (NIO 3.10%, And lee auto (LI 3.71%, were higher at that time by 3.5% and 5.1%, respectively.
Several recent updates to China’s EV sector are linked to COVID-19-related lockdowns and supply chain issues, which have negatively impacted vehicle production. However, today there were signs of some change on that front. Tesla’s company-specific news was battery-material supply deals the company has signed, as reported baron’s, At the same time, domestic producers Nio, Li, and . July delivery data XPeng (XPEV -0.62%, Indicates that the market is rebounding there. It’s also good news for Tesla, as its Shanghai plant is a key factor in its growth plans.
Nio, Li, and XPeng combined reported 31,998 for July vehicle deliveries. While this represented a drop from June, which was expected in June after companies pushed vehicles, which were delayed in April and May. However, July deliveries for Nio and Li grew 26.7% and 21.3% year-on-year, respectively. And Xpeng posted 43% year-over-year growth. That’s good news for Tesla, too, which lags behind these household names in terms of monthly delivery data.
Tesla appears to be setting itself up for further increases in production. This is not surprising as the company expects overall annual production growth of around 50% for several more years. But investors weren’t sure how it could achieve that in an environment of supply challenges. Tesla seems to have answered some of those concerns with deals it is making with two Chinese suppliers of battery materials.
This included a deal with processors for cobalt and other metals, and another that supplied lithium cathode materials to battery manufacturers. Both deals reportedly run until 2025. Tesla recently ramped up production capacity at its Shanghai facility, and the company also needs to supply its two new facilities in Germany and Texas when they have increased production capacity.
While Nio, Li Auto, and XPeng are all competitors, solid distribution numbers among them bodes well for Tesla’s report. But even Tesla can’t sleep in the competition. According to Reuters, Nio plans to open its first overseas plant this fall. The plant in Hungary will focus on power products such as battery-swapping stations for the European market. Nio plans to increase sales across Europe this year and beyond.
Investors are viewing all of today’s news as beneficial to the industry as a whole in the short term. It’s helping these names pop today. The overall EV sector is still at a very early stage of development. This can lead to more than just one winner in the long run.
Near Howard Smith Nio Inc. and XPeng Inc. There are positions in Near Motley Fool Nio Inc. And Tesla has positions and is recommended. The Motley Fool has a disclosure policy.