Tesla's Chinese Rivals Surge as Trump Revokes Biden's EV Targets

As President Donald Trump revokes former President Joe Biden's executive order targeting 50% electric vehicle (EV) sales by 2030, the U.S.-listed shares of Chinese EV startups Li Auto Inc. (LI), Nio Inc. (NIO), and Xpeng Inc. (XPEV) surged in pre-market trading on Tuesday. Meanwhile, California-based EV startup Rivian Automotive Inc. (RIVN) fell, highlighting the contrasting fortunes of these companies in the face of Trump's policies.

The Chinese EV manufacturers rose as Trump did not target China in his inauguration speech or impose tariffs on Beijing. Instead, he threatened 25% tariffs on Canada and Mexico on Feb. 1. The rally was further boosted by Nio's strong brand vehicle registrations in China, with a 2800% increase in the week of January 13-19 compared to the previous week. Li Auto and Xpeng also saw significant increases in insurance registrations, up 25% and 27% respectively.

Tesla (TSLA) stock rose 1.85% in pre-market trading on Tuesday, despite Trump's announcements about EVs. Investors likely expect Tesla CEO Elon Musk's close affinity to Trump to aid the company and enable a favorable regulatory environment for its vision of deploying autonomous vehicles on public roads this year. Musk has previously dismissed the impact of a drop in EV tax credit for Tesla, stating that the elimination of subsidies would only be slight for Tesla but devastating for its competitors.



The contrasting performances of these companies highlight the importance of understanding the strategic differences between them and how these differences impact their growth prospects and market positions. Nio, Xpeng, and Li Auto vary in their approaches and development, with Nio focusing on a luxurious customer experience, Xpeng emphasizing self-driving technology, and Li Auto offering extended-range electric vehicles (EREVs) to address range anxiety. These strategic differences have allowed them to target different market segments and maintain strong market positions in the Chinese EV market.

As Trump's policies continue to evolve, these companies may need to adjust their strategies to remain competitive. If Trump imposes tariffs on Chinese goods, these companies might face increased production costs, leading to higher prices for consumers. To mitigate this, they might need to optimize their supply chains or find alternative sources for components. If Trump ends the $7,500 federal tax credit for EVs, these companies might need to adjust their pricing strategies to remain competitive. They could offer more attractive financing options, discounts, or other incentives to make their products more affordable.

In conclusion, the surge in Chinese EV stocks following Trump's revocation of Biden's EV targets highlights the importance of understanding the strategic differences between these companies and how these differences impact their growth prospects and market positions. As Trump's policies continue to evolve, these companies may need to adjust their strategies to remain competitive in the face of potential challenges.