Chinese automakers add more market share despite heavy investments by foreign companies

The heated battle for auto market share in China continues to be a major focus as foreign automakers struggle to keep up with domestic giants and upstarts.

Foreign automakers’ market share of auto sales in China slipped to 33% in July from 53% in the same month two years earlier, according to data from the China Passenger Car Association. The trend is even more pronounced in the electric vehicle sector, where support from the Chinese government has helped buoy local automakers. In August, deliveries growth by ZEEKR Intelligent (ZK) (+46% Y/Y), BYD Companies (+36%), Li Auto (NASDAQ:LI) (+36%), NIO (+4.4%), and XPeng (NYSE:XPEV) (+2.5%) stood out. While most of those deliveries were made within China, the continued growth is an indication that Chinese EV makers are standing up to regulatory challenges imposed by the U.S., the European Union, and Canada.

BYD Company (OTCPK:BYDDF) is the clear electric vehicle market share leader in China, with more than 30% of the market on a year-to-date basis. The other major competitors are Tesla (TSLA), GAC Aion, SAIC Motor, Changan, Li Auto (LI), NIO (NYSE:NIO), Geely Automotive (OTCPK:GELYF), XPeng (XPEV), and Great Wall Motor. Through EV partnerships, BMW (OTCPK:BMWYY), Volkswagen (OTCPK:VLKAF), Mercedes-Benz (OTCPK:MBGAF), General Motors (NYSE:GM), Honda Motor (HMC), and Ford Motor (F) are also active in the Chinese market, but have failed, for the most part, to keep up with the growth rates of the domestic players.

On Wall Street, JPMorgan upgraded XPeng (XPEV) on Thursday to an Overweight rating after having it slotted at Neutral. The firm thinks that new models in Q4 will help boost deliveries once again. “That said, we believe the share price of XPeng, as well as its Chinese peers, will be sensitive to volume and new model momentum,” noted analyst Nick Lai.

The intense competition in China for auto market share has led to lower prices and thin margins, although NIO’s (NIO) Q2 earnings report released on Thursday showed a sequential and year-over-year improvement in margins.

Interestingly, the only auto stock that has a consensus Buy rating with Seeking Alpha analysts and Wall Street analysts, as well as a Seeking Alpha Quant Rating of Buy, is General Motors (GM). That is despite GM’s (GM) share price already being up 34% on a year-to-date basis.