Chinese auto stocks lifted alongside Li Auto's earnings beat

Shares of Li Auto (LI) are moving up after the company posted fourth-quarter earnings, with other Chinese automaker stocks getting a lift off of their strong results. While there has been a decrease in EV demand across the US, will China see the same weakness in its auto market?

Kraneshare Senior Investment Strategist Anthony Sassine joins Yahoo Finance to discuss the Chinese auto market as well as the broader auto sector, highlighting EVs and how their potential success going forward.

When asked how EV-focused auto stocks may perform this year, Sassine says: "Over the long-term, I think EVs are going to be fine. Because we're trying to replace 1.3 billion ICE [Internal Combustion Engine] cars with EVs... So, there's still a long way to go. But, in down cycles like this year where we're going through a transitional period between two growth waves. The high-quality cars will float to the top. We're seeing that with Li Auto. Li Auto was only $28 or $26 like two weeks ago. Right now, after that bump you're seeing it at $40 [per share]."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

JOSH LIPTON: Shares of Li Auto are surging after delivering a better-than-expected earnings report. The strong results given other Chinese automakers, NIO and XPENG lift too for more. We're talking to Kraneshare Senior Investment Strategist Anthony Sassine.

Anthony, it is good to see you. So let's start there. Li Auto reports. Investors clearly like what. They heard, Anthony.

But you've had time to look over the report. What did you make of those results?

ANTHONY SASSINE: Yeah, it's definitely better than expected. Li has been one of the leaders in that space for the past couple of years really making a big mark in the Chinese EV market. They were one of the very few companies that were able to become profitable within a three-year period without even any backing from major companies like x banks backed by Alibaba.

And NIO is backed by Tencent. Really Li Auto doesn't have a major backing. So the company continues to deliver.

And it's kind of a little bit of a reminder, too, that the slump we're seeing in EV, it's not as bad as people think. But definitely, there are few companies that are doing better than others.

And that's one of them is Li Auto. The other one potentially, we're going to expect a good performance is BYD. And Tesla is right around the corner as well.

JULIE HYMAN: I mean, if you look, Anthony-- it's Julie here. If you look at the Chinese EV makers in their US shares year to date, I think Li's the only one that's actually higher on the year. And, of course, Tesla hasn't been doing so hot either. So as you look into this year amidst the price war that has been ongoing in China among these companies, is Li the one that you would be a buyer of or do you think that there's potential for these other stocks to do well also?

ANTHONY SASSINE: Yeah, look, Julie over the long-term, I think EVs are going to be fine, right? Because we're trying to replace 1.3 billion ice cars with EVs. We're still at 4045 billion this year.

So there's still a long way to go. But in down cycles like this year, where we're going through a transitional period between two growth waves, the high-quality cars are going to fly. They're going to float to the top, right?

And we're seeing that with Li Auto. Li Auto was only 28 or $26 like two weeks ago, right? Now, after that bump, you're seeing it at 40. You're seeing it do well this year.

So, basically, the negative sentiments took down most EV car's quality and non-quality this year. And, you know, I think we're really overshot to the downside. And Li Auto is here to remind us.

But Li is definitely one of the top choices BYD. And, you know, Teslas as well. NIO, XPENG, they have something to prove still yet because their sales are not really passing the 15,000, $20,000 a month. They still have some work to do.

Plus these are more expensive cars. So in a year like this, you would expect consumers not to buy as much the more expensive cars. But the EV sector, in general, for the long-term, as I mentioned, is going to be good.

The way we advise investors to invest it through ETFs, through cars ETFs, Kraneshare because it has all the different companies. Taking bets on separate companies can be risky. Why not get exposure to the whole pi over the long-term?

JOSH LIPTON: And, Anthony, we were just talking to our colleague too about that new BYD supercar. Anthony, I'm interested to get your take on that. Some are comparing it as if the rival, the comparison here would be Ferrari. I'm not sure I really see that, Anthony. But maybe I'm wrong.

ANTHONY SASSINE: Yeah, no, I like the three-wheels drive option thing. I think that makes a lot of difference. And I don't think Ferrari can say that.

But look, Chinese companies are coming in every different sector and every different industry, right? A few years ago, we didn't trust solar companies in China. Now, they are the best.

Last year, Tesla was the leading. Today, it's BYD. So Chinese companies are really moving into that upper value chain. And they're really starting to compete with brands like Ferrari and Lamborghini.

And I'm not surprised. Are we there yet with regards to that? I don't know. That still has to be seen.

Definitely, the price point is going to be at a level where it kind of compensate for that difference in brand. But they're moving up there with great technology and great manufacturing ability that allows them to do this for less. And in the next few two, three, four years, you're going to see these companies stand out. You know, like they're on the way.

JULIE HYMAN: Do you think that the US market is going to have to open to them in order for them to really see that next leg of success?

ANTHONY SASSINE: Yeah, that's a little bit tough to see. Especially like today, I saw an article talking about like an extermination event. If the Chinese cars are able to come into the US market for the US auto companies. That's bad. That's bad politics.

I don't think it's going to happen anytime soon. But look, the real story here, especially for the electric vehicles is in China, right? China is the biggest EV market by far.

You're talking about eight 9 million sales a year versus 2. And the US, even in Europe. Europe is at 3.

You know, I think China can survive on its own domestic consumption for a little while. And then Europe is not too close to them. There's a little bit of friction there.

But I think they may be able to get over it by setting up factories in Europe. The US is a totally different story because the Biden administration Inflation Reduction Act is trying to close these loops where Chinese companies will be able to participate. We'll see how long that lasts because that means EV products are getting more expensive in the US than the rest of the world if you don't allow Chinese companies to participate. But for the short to medium term, I think Chinese companies will be fine just focusing on domestic market

JOSH LIPTON: Anthony, thanks so much for joining us today. Really helpful insight as always. We appreciate it.

ANTHONY SASSINE: Thank you. Appreciate it.