Investors in Chinese electric vehicle (EV) stocks, who had been hoping for a strong earnings season to provide fresh tailwinds, instead face disappointing results that have stoked anxiety about what lies ahead.
The sector was riding high – with Xpeng’s year-to-date gain exceeding 130 per cent earlier this month – buoyed by a surge in global risk appetite and an improved outlook for Chinese assets. But signs of pressure at even established firms like BYD have raised new questions over the industry’s profitability after its rapid expansion.
Attention is now shifting to how Chinese EV makers will fare next year, with domestic demand expected to soften as government policy support wanes. Earnings may suffer further with costs seen rising and discounts for consumers likely to continue.
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“We expect the demand environment in 1Q 2026 to be challenging, particularly after nearly two years of national trade-in and scrappage policies” that boosted EV purchases, said Bing Yuan, a fund manager at Edmond de Rothschild Asset Management. Competition could intensify, hurting margins into next year, she added.
Traders quickly turned against the best‑performing stocks as results fell short. Xpeng shares dropped 10 per cent in Hong Kong the day after it reported continued losses and issued weak guidance. Zhejiang Leapmotor Technology touched its lowest level since April after its profit came in at less than 65 per cent of the analyst estimate even as sales nearly doubled.
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Li Auto and Nio were among others issuing fourth-quarter revenue and vehicle delivery forecasts that missed market expectations. The outlooks suggest sluggish consumer demand in what is a critical period for carmakers striving to hit annual sales targets.
Analysts had projected a bump in deliveries towards the end of this year, given that taxes on EV purchases will be phasing back in from 2026 following years of exemptions. Things are only likely to worsen next year, with Bloomberg Intelligence estimating China’s EV growth will slow to 13 per cent from 27 per cent this year.