China’s electric automakers have potential, but consultant warns ‘there’s bound to be a correction’

SINGAPORE — Chinese electric automobile corporations comparable to Nio, Xpeng and Li Auto are robust corporations, but their shares are doubtless to see a correction, the chief government of an auto consulting agency informed CNBC this week.

That’s as a result of their shares have shot up in latest months, mentioned Michael Dunne, CEO at ZoZo Go, which advises automakers on doing enterprise in Asia. He mentioned the inventory motion “does resemble a bubble,” but the businesses have the potential to develop into the “Tesla of China.”

There’s bound to be a correction, these are younger corporations.

“There’s merit. They’re strong companies built by tech billionaires not unlike [Tesla CEO] Elon Musk,” he informed CNBC’s “Squawk Box Asia” on Wednesday.

“There’s good reason to be investing in these stocks, but be careful,” he warned. “The stock run-ups have been sensational in the last three months.”

On Wednesday, Nio shares listed on the New York Stock Exchange closed at $62.15, hovering greater than 1,500% from a 12 months in the past. The inventory is up about 187% over the previous three months, whereas NYSE-listed Xpeng surged 163% and Nasdaq-listed Li Auto gained 83% in the identical interval.

“There’s bound to be a correction. These are young companies,” Dunne mentioned.

Li Auto and Xpeng went public in July and August, respectively, whereas Nio’s preliminary public providing was in 2018. And the businesses nonetheless fall far in need of market chief Tesla when it comes to market capitalization and automobile deliveries.

Dunne mentioned the Chinese automakers have to concentrate on the home market.

“To really thrive, these companies — Xpeng, Nio, Li Auto and others — have to succeed at home first,” he mentioned.

They will not be welcomed within the U.S. due to political causes, and the Europeans will be “very tough on the Chinese, just as they’ve been on the Japanese and Koreans before them,” he added.

“So look for the Chinese to concentrate their efforts on their home market which is, after all, the largest in the world, and has all kinds of potential on the high end and the low end,” he mentioned.

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