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China electric vehicle deliveries fall as COVID-19 lockdowns hit production

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Yahoo Finance's Pras Submaranian joins the Live show to discuss the decline of China's electric vehicle deliveries as COVID-19 lockdowns continue to hit production.

Video Transcript

- All right. We are coming up on the opening bell here this morning. But first, we got to talk about Chinese automakers and their implications for the market and the reflection of what's going on in China.

We had Xpeng, Li Auto, and NIO all out with their delivery numbers over the weekend. Our Pras Submaranian is covering that for us. So Pras, what have we learned from these automakers and the effect of those COVID related shutdowns in China?

PRAS SUBMARANIAN: Hey, Julie. So really not a big surprise here that you'd see these April delivery numbers come down based on the wave of COVID infections that are hitting Shanghai and the resulting areas in that time period. Both Li and NIO reporting that their deliveries are down around 25% versus a year ago, compared to last year. But NIO said that quote, "Vehicle production has been recovering gradually."

I think it's the big picture, is the recovery. Right? So according to Chinese officials, Tesla actually has resumed production at its Chinese factory at 80% production because Tesla's part of this first white list of companies that they're doing a staggered production ramp up in these companies in that affected area. So they're starting to open those up.

And Musk even tweeted about it, a week and a half ago, that Giga, Shanghai, was coming back with a vengeance. So I think it's a slow return to normalcy and recovery for these Chinese automakers after a weak April, comparatively speaking, compared to last year.

- The word disappointment could be on the docket here with automakers. It's not this week, Pras. It's not just the EV makers. We'll get some auto sales from Ford and General Motors, I believe this week. And all sides continue to point a lot of these automakers still have difficulty getting the supply of chips they need to produce enough cars.

PRAS SUBMARANIAN: Yes, as we heard them both talk about that in earnings calls last week. But we also heard them both say, both Ford and GM at least, that they are seeing things get better and they have assumed that production will get better in the second half of the year.

So there's hope that could actually affect their production in the back half. But like you said, Soz, you never know. Right? Because just like a year ago they said the same thing. Oh, the first half of 2022 will be fine. But then more Chinese infections led to chip makers sort of decreased production that eventually rolled off into US automakers not being able to make the cars they need to.

[BELL RINGING]

- All right. There's the opening bell on this Monday morning. So we'll see if we get any kind of improvement in sentiment in the markets after the selling that we saw last month, particularly in large cap technology. We've been talking with Pras about what's going on in Chinese automakers and what the implications are for the rest of the market.

Because I think, Pras, it's not just about Tesla and other automakers that manufacture in China. It's also about everybody else that makes stuff in China. Right? We can sort of try to read the tea leaves and see if other things are improving as well.

We keep looking for turning points. Right? We're looking for turning points in inflation. We're looking for turning points in supply chain. We're looking for turning points in the shutdowns there and what they mean. So I guess we're trying to find any kind of little glimmer of hope on that front.

PRAS SUBMARANIAN: Yeah. And I'm sort of connecting with this piece, the 80% production resumption at the Tesla Shanghai factory plant. That is good news. And it shows that the COVID infection rate is coming down. They're starting to open that closed loop where they had been staying in the factories. Now, they're able to actually go home. And we're seeing a resumption of normalcy there.

So I think, Julie, we can kind of cling on to that as a positive sign for the component and chip shortages alleviating themselves. Hopefully, we'll see a better situation this summer. But like you said, it's so hard to say. We thought we were over this pandemic, many, many times. Right? And then a different wave happens. And then it sort of spreads across the globe.

So in China right now, things appear to be getting better. So hopefully, that's good for the automakers as well.

- Hopefully so. We shall see. All right. Thanks so much, Pras. Appreciate it.