Technology stocks in the U.S. stock market generally fell on March 2, with the mainland’s three largest new energy vehicle Chinese stocks leading the decline, with market capitalization evaporating by a total of nearly 100 billion yuan. The overall share prices of mainland new energy vehicle companies have continued to fall since the end of last year.
The three major mainland new energy vehicle companies listed in the U.S. stock market – Azera, Xiaopeng and Ideal – saw their share prices plunge 13%, 11% and 8% respectively on March 2, with market capitalization evaporating $10.1 billion, $3.16 billion and $1.918 billion respectively, for a total of $15.178 billion, or about RMB 98.2 billion.
This is another share price plunge for the three companies in less than a month. And previously at the end of last year, they also had a collective plunge due to another new energy vehicle Chinese stock being questioned for fraud.
Three major new energy vehicle Chinese stocks fell for a week in February this year
Starting on February 9 this year, shares of Azera, Xiaopeng and Ideal once fell for a week in a row, accumulating 13.4%, 16% and 6.7% respectively, with market values evaporating $13 billion, $6 billion and $2 billion respectively.
On Feb. 13, Gao Overhead Capital, a leading mainland investment firm with a longstanding interest in the automotive sector, said via the SEC website that it had liquidated its positions in Azera, Xiaopeng and Ruiyuan in the fourth quarter of 2020 because their share prices had risen sharply in the past year and their market capitalizations were clearly too high.
During the worst of the 2020 Epidemic, these three companies nevertheless saw dozens of times increase in market capitalization. For example, Azera’s stock price skyrocketed from $3 per share at the beginning of 2020 to more than $50 per share by the end of the same year. But at the end of the year, the three companies saw their share prices plummet.
Fraudulent news triggered a plunge in the share prices of three major car companies
The U.S.-listed mainland new energy vehicle company “Kandi Auto” was exposed to fraud on Nov. 30, 2020. On the same day, Kandi Auto closed down more than 28%; Ideal Auto and Xiaopeng Auto fell more than 8%; and Azera Auto fell more than 6%.
Short-selling agency Hindenburg Research issued a report saying that Conti Auto made false sales to undisclosed affiliates to falsify revenue, with nearly 64% of sales in the previous 12 months coming from undisclosed affiliates.
The report mentions that Conti Automotive orchestrated a false revenue scheme to inflate revenues to U.S. investors in order to obtain funds from the U.S. capital markets.
The bubble bursts, and in 2021, mainland new energy car companies fear more difficulties
On March 2, the day the three major Chinese stocks plummeted, news of a huge loss and planned layoffs at Beijing New Energy Vehicle Company (BAECO), a $100 billion state-owned enterprise, was confirmed.
Mainland media quoted BAIC New Energy employees as saying that they did hear internally about layoffs, and that each department was more or less assigned some layoff tasks in varying proportions, but the company suspended this action after the media focused on the matter; the news of layoffs was related to the company’s huge losses in 2020, and that BAIC New Energy did have redundancies in its personnel.
BAIC New Energy is the first mainland new energy vehicle company to be listed on the A-share market, and at one point ranked first in pure electric vehicle sales on the mainland for seven consecutive years since its establishment in 2009.
According to the performance forecast of BAIC Blue Valley, the parent company of BAIC New Energy, on January 29, it is expected that BAIC New Energy will have a net profit loss of RMB 6 billion to RMB 6.5 billion in 2020 attributable to shareholders of the listed company, and a net loss of RMB 6.2 billion to RMB 6.7 billion attributable to shareholders of the listed company for deductible net profit.
Publicly available information shows that over the past decade or so, the Chinese Communist Party has strongly subsidized the new energy vehicle industry, leading to a bubble in the industry. 2020 saw the Communist Party announce a reduction in subsidies for the next three years, “in principle, the subsidy standards for 2020-2022 will retreat by 10%, 20% and 30% respectively from the previous year. “
Other new energy vehicle manufacturers on the mainland also appear to be in a similar situation to the three major Chinese stocks mentioned above. For example, Changan Automobile, Great Wall Motor, Geely Automobile, GAC Group and SAIC Group all saw their share prices soar or even rise several times in 2020 at one point, but all fell from the end of 2020.
As of Feb. 19, the share prices of these companies have cumulatively dropped by 33%, 21%, 20%, 29% and 23%, respectively.
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