Shares of Li Auto were down more than 5% early Monday morning.
Courtesy Li Auto
Supply-chain woes won’t subside for the auto industry. But that isn’t the biggest reason shares of Chinese electric-vehicle makers were down early Monday.
Chinese EV Li Auto (ticker: LI) cut guidance for third-quarter deliveries Monday, saying it can’t get enough microchips. Li now expects to deliver about 24,500 vehicles in the third quarter, fewer than the roughly 25,500 vehicles it previously expected.
Shares were down more than 5% in premarket trading. Still, guidance isn’t the biggest issue for the stock. Li, and other stocks, are falling because of highly indebted property developer China Evergrande (ticker: 3333.Hong Kong).
Evergrande is having trouble paying its bills. That’s bad news for lenders holding tens of billions of dollars of its debt. Fears that a default could impact banks and credit markets are what has investors worried.
Evergrande stock is at a new 52-week low Monday. Shares are off almost 90% from their October 2020 52-week high of more than $20 a share.
European stocks were down about 2% in overseas trading Monday. Hong Kong’s Hang Seng Index was down 3.3%. S&P 500 and Dow Jones Industrial Average futures were down about 1.3% and 1.6%, respectively.
The chip shortage hasn’t hit auto stocks all that much this year, even though it has constrained global auto production. Roughly 10% to 15% of the cars companies planned to build in 2021 won’t get built. Ford Motor (F) stock, for instance, is up 54% year to date. There have been fewer cars to sell, but pricing has been exceptionally strong, boosting profitability for auto makers.
For Li and its peers, EV demand has been strong. Citigroup analyst Jeff Chung recently wrote that Chinese EV sales grew 202% year over year in August. Chinese EV sales are at about 1.6 million units through the first eight months of 2021, up about 221% over the comparable span in 2020.
The mix of chip and Evergrande news has shares of Li peers NIO (NIO) and XPeng (XPEV) taking a hit as well. NIO shares were down about 4% in premarket trading. XPeng stock is off about 4.5%.
Year to date, NIO and XPeng shares are off about 23% and 9%, respectively, while Li stock has gained about 1%. That performance has been disappointing as EV sales have boomed in China. A host of other issues, including rising interest rates, the Chinese crackdown on U.S.-listed firms such as Didi Global (DIDI), and Evergrande, have all weighed on shares.
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