$XPeng Inc.(XPEV)$ will be the last of the Chinese EV trio to report fourth-quarter earnings results on 15 March. While $Li Auto(LI)$ had announced overwhelming earnings last week, what cheered the market was its ability to maintain stable gross margin amidst prevailing price war, thanks to its prudent cost management and resilient supply chain. However, $NIO Inc.(NIO)$ 's margin fell short despite an earnings beat when it was its turn to post its earnings this week. Both LI Auto and NIO had seen their stock prices rising post-earnings release, although the former has given up much of its gain after the earlier run-up. XPENG has risen this week ahead of its earnings announcement that is expected to exceed analysts' expectations on the back of positive results from its peers, and I suspect that it may give up its gain following its earnings release despite an expected beat like Li Auto.
Despite growing awareness of global climate change and tightening emission controls, on-going transition from ICE vehicles to EV is irreversible, the EV market is getting increasingly competitive, after being saturated with startups jumping onto the EV bandwagon and the incumbent automotive makers joining the race. With seemingly little product differentiation, pricing has been weaponized to secure market share by the players in the saturated market. As more electric car makers engage in price war to defend their market shares, it erodes the profit margin for every EV maker. Adding to the wound is softening EV demands, as its novelty wears off, adding to the woes of the EV makers, especially the startups which do not have pockets as deep as those of the incumbents. Hence, until the oversupply situation eases, I'm unlikely to increase my exposure to the EV sector.
$Rivian Automotive, Inc.(RIVN)$ stock had sunk after a dismayal fourth-quarter earnings report with no sign of profitability at the end of the tunnel, prompting even Elon Musk of its leading rival Tesla to even post on that he forecasted that Rivian's cash balance would run out within six quarters. Rivian would need to go on a massive fat-cutting or risk turning belly up. Until a feasible turnaround strategy is in place, I would put Rivian on my avoid list.
$Faraday Future Intelligent Electric Inc.(FFIE)$ is another stock that I would avoid at all cost after its steep fall from grace, as Faraday Future continues to struggle under worsening demands and deteriorating balance sheet. Its commitment to achieve profitability and defend shareholder value is seemingly a mission impossible, with its continuity even as a going concern being in doubt by the market. With the stock susceptible to meme-style short-squeeze that has subjected its intraday share price movements to wild fluctuations, it has attracted the attention of day traders, and I'm doubtful that any price recovery will be sustainable under the weight of its poor fundamentals.
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Too many EV maker. Difficult to profit.