Several news were released about the Chinese electric car sector today. The result was a jump in shares of stocks that have a stake there. which has Tesla (TSLA 0.04%) Shares are up 1.9% as of 11:40 a.m. ET. and stock New (New 2.28%) And the Lee Otto (LI 3.84%) They were 3.5% and 5.1% higher, respectively, at that time.
Several recent updates from the electric vehicle sector in China have been linked to COVID-19-related shutdowns and supply chain issues that have negatively impacted vehicle production. Today, however, there were some indications of a shift on that front. Tesla’s own news was the battery material supply deals that the company signed, as reported Baron. At the same time, delivery data for July were released from domestic producers Nio, Li and XPeng (XPEV 0.16%) Indicate that the market is rebounding there. This is also good news for Tesla, as its Shanghai factory is a major factor in its growth plans.
Nio, Li and XPeng reported 31,998 vehicle deliveries in July. While it is down from June, that was expected after companies pushed vehicles in June that were delayed in April and May. However, July deliveries for Nio and Li were up 26.7% and 21.3% year over year. Xpeng achieved a 43% increase year-over-year. That’s good news for Tesla, too, which lags behind these local names when it comes to monthly delivery data.
Tesla appears to be preparing for further increases in production. This is not surprising because the company expects total annual production growth of around 50% for several more years. But investors were not sure how to achieve this in a challenging supply environment. Tesla appears to have answered some of those concerns with deals reported with two Chinese suppliers of battery materials.
That includes a deal with a processor for cobalt and other metals, and one that supplies battery makers with a lithium cathode material. Both deals are said to be valid until 2025. Tesla recently ramped up production capacity at its Shanghai facility, and the company also needs to supply its new facilities in Germany and Texas once production is scaled up to capacity.
While Nio, Li Auto and XPeng are all contenders, their solid delivery numbers bode well for what Tesla will report as well. But Tesla also can’t sleep in competition. Nio plans to open its first overseas plant this fall, according to Reuters. The plant in Hungary will focus on energy products such as battery replacement stations for the European market. Nio has plans to expand sales across Europe this year and beyond.
Investors see all of today’s news as beneficial for the industry as a whole in the short term. This helps these names appear today. The electric vehicle sector in general is still in very early stages of growth. This should result in more than one long-term winner.
Howard Smith holds positions at two companies, Nio Inc. and XPeng Inc.. Motley Fool holds positions at Nio Inc. And Tesla recommends them. Motley Fool has a disclosure policy.