Chinese EV Stocks Plunge as Tesla Disappoints with Q3 Earnings and Guidance

The Chinese electric vehicle (EV) market took a hit on Thursday following Tesla’s underwhelming Q3 results and disappointing guidance, leaving investors and traders concerned about the future of EV stocks in the region.

Shares of BYD and Li Auto, two major players in the Chinese EV industry, plummeted by approximately 4% each on the Hong Kong exchange. XPeng and Nio, which have been popular choices among EV enthusiasts, faced even steeper declines, with XPeng dropping by 9% and Nio down by 8%. Tesla’s Chinese battery supplier, CATL, also experienced a 1% decrease in Shenzhen trade.

Even U.S.-based EV rivals, Lucid Motors and Rivian Automotive, saw their shares drop by about 9% on Wednesday ahead of Tesla’s earnings report. However, they managed to recover slightly in aftermarket trade. This was the second consecutive day of losses for Lucid Motors, which recently reported lower-than-expected deliveries.

For Tesla, this was the first instance of profit and revenue falling short of expectations since Q2 2019. The company faced challenges with tight profit margins, but it maintained its full-year delivery expectations.

In addition to disappointing financial performance, Tesla’s CEO Elon Musk delivered another blow by cautioning that it could take 12-18 months before the battery-powered Cybertruck becomes a significant positive cash flow contributor. This warning led to a 4.2% drop in Tesla’s stock price after the bell on Wednesday.

The EV market is currently experiencing an intense price war, with each player aggressively trying to gain a larger share of the market through price cuts. Over the past several months, Tesla has slashed prices for various models in China in an effort to stay competitive.

As the EV industry continues to face headwinds, investors and traders have become increasingly cautious about the future prospects of Chinese EV stocks, awaiting further developments and indicators of market stability.