Hong Kong Stock Observer

The global semiconductor shortage has been much reported on, but few of the major auto companies are able to provide a clear estimate for how much it will affect their manufacturing production in the second half of the year.  First and foremost, the Chinese EV makers, namely Nio, Li Auto, and Xpeng seem to be unaffected by the chip shortage this year. However, these companies have such small scale compared to traditional automakers that it's much easier for them to stockpile chips. In July 2021, Nio delivered 7931 vehicles, up 124% year over year. Li Auto delivered 8589 vehicles, up 251% year over year. Xpeng delivered 8054 vehicles, up 228% year over year. It's likely that these three companies won't face the kind of manufacturing constraints that major automakers are experiencing from the chip shortage, but it will be essential to listen to comments from the respective firm's executives in their upcoming Q2 conference calls.  Larger automakers however are already feel...

Zhongsheng Auto (HK:0881) China's largest dealer of luxury cars with approximately 8.1% market share as of the end of 2020, made three important disclosures in the last week that merit the attention of investors eyeing China's auto sector. The first was Zhongsheng's disclosure about new car sales for the second quarter of 2021 and the first half of 2021, available at this link: https://en.zs-group.com.cn/u/cms/en/202107/05094915aaxg.pdf To summarize, Zhongsheng, a major distributor of Mercedes, Lexus, BMW, Audi, and several other major luxury brands, disclosed aggregate unit sales. At the end of 2020, Zhongsheng operated 373 dealerships, of which 218 were luxury dealerships that are primarily located in tier 1 and tier 2 cities and provincial capitals.  To highlight in the second quarter 2021: Total new car sales volume was 143K, up 15% from the same period last year.  Total luxury car sales volume was 84K, up 21% from the same period last year. For the 1st half, Zhongsheng...

Tesla's China (and to a smaller extent US operations) have faced a surfeit of bad news recently. Multiple global and domestic media publications over the last few days have reported that Tesla will recall 285K Model 3s, most of which were domestically produced, over a fault that could cause the vehicle to unexpectedly activate its cruise control system. Tesla users won't even have to visit a dealer to fix the problem; all they need to do is download a software update. (An article about Tesla's recall from the Wall Street Journal is reposted at the bottom of this post) A few months ago, the firm faced quality complaints as well as allegations that the cameras and sensors embedded in the vehicles could be used for malicious surveillance. While these headlines certainly look bad, cumulatively these incidents are unlikely to hurt the firm's prospects in the Chinese market over the long term, unless the stream of bad news continues and damages public opinion. However, it...

This website focuses on publishing insights related to Chinese equities listed in Hong Kong, Shanghai, Shenzhen, as well as ADRs. Presently the author researches China's auto market, specifically the market for luxury cars and the dealership companies that distribute them. Please refer to the Research Reports section to download the author's latest report on the Chinese auto market.