The Chinese EV market is experiencing a surge in optimism following a $142 billion (one trillion yuan) stimulus package, according to Macquarie Equity Research. Analysts highlight several positive catalysts, including the launch of new models, expanded margins due to operating leverage, and a shift in demand driven by the end of subsidies. The firm also points to reduced discounting pressures and clarity regarding potential European Union (EU) tariffs, which had previously created uncertainty for Chinese automakers.
BYD, the leading player in this market, saw impressive sales in September, with 419,400 units sold, representing a 46% year-over-year increase. The company’s aggressive expansion overseas has surprised the EV market. Its launch of new models, particularly those based on its highly efficient DM-i hybrid technology, is expected to sustain its growth momentum in the coming months. Macquarie remains optimistic about BYD and has raised its price target to $46.35 (HK$ 360), indicating a potential upside of over 20%.
While not on the same scale as BYD, Nio also experienced a successful September, selling 21,200 units, reflecting a 35% year-over-year growth. The company has successfully introduced a battery-as-a-service model, lowering upfront costs for consumers. However, Macquarie sees risks from domestic and foreign competition, believing that the battery-swapping technology may not gain widespread adoption. They have rated Nio as Neutral, with a U.S.-listed share price target of $8.20, representing a modest upside of around 13.5%.
Li Auto faces a more challenging outlook despite its strong sales performance. The company sold 53,700 units in September, a 49% year-over-year increase. However, Macquarie believes a lack of clear catalysts in the second half of the year, particularly the absence of new model launches, could hinder growth. While Li Auto’s extended-range electric vehicles (EREVs) have been popular, the market is shifting towards pure battery electric vehicles (BEVs). The company risks losing momentum without new BEV models or innovations in the near term. Macquarie’s analysts highlight price competition pressuring margins and a potential decline in demand for EREVs as key risks. Nevertheless, they acknowledge the possibility of Li Auto outperforming if its L series continues selling well and if it can successfully launch a BEV SUV in 2025. For now, Macquarie has set the price target at $33, giving it an upside of 10.4% and downgrading the stock from Outperform to Neutral.
