Even though China is leading the electric vehicle (EV) race, most Chinese EV stocks declined in price recently because Chinese authorities hinted at industry consolidation. Against this backdrop, Chinese EV stocks BYD Company (OTC:BYDDY), XPeng (XPEV), and Kandi Technologies (KNDI) look significantly overvalued at their current price levels. So, we think it could be wise to avoid these three stocks now. Let’s discuss.The global electric vehicle (EV) industry has achieved significant growth thanks to favorable government policies to address increasing climate change concerns. According to a Fortune Business Insights report, the global EV market is expected to grow at a 24.3% CAGR over the next seven years. In addition, China’s central government would like 20% of new cars sold to be electric energy vehicles by 2025.
However, most Chinese EV stocks declined in price recently after Chinese Industry and Information Technology Minister Xiao Yaqing said consolidation in the sector is needed because there are “too many” EV makers in China. Furthermore, the EV industry is being negatively affected by the current, global, semiconductor shortage, which is expected to persist for some time.
Against this backdrop, we think it could be wise to avoid Chinese EV stocks BYD Company Limited (BYDDY), XPeng Inc. (XPEV), and Kandi Technologies Group, Inc. (KNDI). Their current valuations are not in sync with their growth prospects.