SINGAPORE – Chinese electric vehicle companies like Nio, Xpeng and Li Auto are strong companies but their stocks are likely to be corrected, the executive director of an auto consultancy told CNBC this week.
That’s because their stocks have skyrocketed in recent months, said Michael Dunne, CEO of ZoZo Go, which advises automakers on doing business in Asia. He said the stock movement “looks like a bubble” but companies have the potential to become the “Tesla of China”.
There has to be a correction, these are young companies.
“There are merits. There are strong companies built by tech billionaires, much like [Tesla CEO] Elon Musk, “he told CNBC’s Squawk Box Asia on Wednesday.
“There are good reasons to invest in these stocks, but be careful,” he warned. “The stock launches have been sensational over the past three months.”
On Wednesday, Nio shares, listed on the New York Stock Exchange, closed at $ 62.15, up more than 1,500% year over year. The stock rose roughly 187% over the past three months, while the NYSE-listed Xpeng rose 163% and the Nasdaq-listed Li Auto rose 83%.
“There has to be a fix. These are young companies,” said Dunne.
Li Auto and Xpeng went public in July and August, respectively, while Nio went public in 2018. And the companies lag far behind the market leader Tesla in terms of market capitalization and vehicle deliveries.
Dunne said Chinese automakers need to focus on the domestic market.
“To be truly successful, these companies – Xpeng, Nio, Li Auto, and others – need to be successful at home first,” he said.
They are not welcomed in the US for political reasons, and Europeans will “be very tough on the Chinese as they were on the Japanese and Koreans before them,” he added.
“So look for the Chinese to focus their efforts on their home market, which is the largest in the world after all, with all possible potential at the top and bottom,” he said.