Shares of Three Chinese Electric Vehicle Manufacturers Widely Followed – NIO (NYSE: NIO), XPeng (NYSE: XPEV), and Li Auto (NASDAQ: LI) – they were all down on Tuesday morning. The companies ’shares were caught in a wave of partially stimulated sales with signs that U.S. interest rates could rise.
Here’s where things stood at 10:30 am EST, compared to Monday’s closing prices:
- Li Auto was down about 6.9%.
- NIO was down about 7.1%.
- XPeng was down about 7.6%.
When stocks across a segment (or across the market) are suddenly down, it is sometimes difficult to identify one factor that drives the sale. I think a number of things contribute to this.
First, the $ 1.9 trillion COVID-19 relief package that is moving through U.S. Congress is concerned about inflation, simply because it is throwing a lot of money into the economy. That certainly makes an impact.
Second, and possibly related, the rate on the 10-year U.S. Treasury benchmark bond has risen to 1.37%. That is still very low by historical standards, but it has not been as high since early 2020.
In general, investors tend to reduce risk when interest rates rise. The fact that all three of these stocks (and most other EV stocks) have been in high demand in recent months by avid investors hoping to post the benefits with Tesla (NASDAQ: TSLA) making them prime sales candidates for investors who now aim to reduce portfolio volatility.
Third, and also related to it, Tesla has fallen sharply over the past few days. He’s the department leader, so it’s no surprise to see other electric vehicle stocks fall as well.
That said, nothing about these outside events changes the long-term fundamentals of any of these companies. If you believed in them a month ago, and plan to keep them in the long run, there is no compelling reason to sell them. (Of course, some investors will take advantage of the lowest prices to enhance their positions.)
All three of these companies will be giving updates to automated investors soon, when they report on fourth-quarter and full-year 2020 earnings. Li Auto will report this Thursday, February 25, before open US markets; The NIO will report next Monday, March 1, after the U.S. markets close; and XPeng will report the following Monday, March 8, in the morning.