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Short Sellers Gang Up on China’s EV Leader

Short sellers have raised their positions on BYD, China’s—and the world’s—largest manufacturer of electric vehicles amid expectations of weakening sales.

BYD recently dethroned Tesla from the top spot among global EV sellers after it closed the final quarter of 2023 with higher sales than the U.S. major. It sold more than 526,000 cars in the last three months of the year, while Tesla delivered a little over 484,500.

BYD, which is backed by Warren Buffett, can boast a 60% sales increase for 2023, with total sales—hybrids and EVs—at more than 3 million cars, but this year projected sales are only seen rising by a much more modest 23%. The reason for the more modest expectations: intensified competition on the domestic market.

“There are concerns over BYD’s growth momentum this year given 2023’s high base effect and weak consumer demand amid China’s challenging economic environment,” one fund manager told Bloomberg.

Short positions on BYD’s stock have gone up to 5.5% of the company’s total free float in Hong Kong, Bloomberg reports, adding that the ratio between put and call options on the stock has been climbing over the past four weeks, reinforcing the perception of growing pessimism about the company’s performance this year.

This pessimism is mostly driven by expectations of an economic slowdown in China which, if it materializes, would inevitably affect EV sales. Another big reason for the expected weaker performance of BYD and the EV sector as a whole is cut-throat competition.

It has been a mark of the Chinese EV industry for a while and it is only getting worse. This year alone, carmakers in the country plan to introduce as many as 158 new models, of which 80% EVs, per HSBC. The industry is, therefore, looking to conquer foreign markets as the domestic one gets saturated. Expanding abroad, however, could be tough due to things like brand recognition and loyalty, which may have added fuel to traders’ pessimism.

By Charles Kennedy for Oilprice.com

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  • George Doolittle on January 04 2024 said:
    Production is ramping up from USA domestic producers appears to be the "crisis du jour" anyways. I'm still trying to figure out how Volkswagen even remains in business in point of fact and will be following any Ford Explorer news for Calendar Year 2024 this Year. Goodcarbadcar.net reported a truly mind blowing 2023 but this Year presumably will be even bigger with many new models in particular from Toyota only entering full run rate production right now after new introductions this past Year. Many of these are hybrid drive systems now which are a real wild card for US energy production and distribution for Calendar Year 2024 this Year. If I can move 100 gallons of diesel using battery power only for say 100 miles that is a huge cost saving for transportation of said fuel...enormous cost saving in point of fact...fuel I might not even need anymore but presumably to include all vehicle fluids and lubricants as well. Rivian remains a real wild card as that is pure BEV distribution using zero ICE Platform to do that presumably though not exclusively for Amazon. Ford BEV vans have a contract with the US Postal Service which is more great news for Kansas City as well. So far these hybrid drive systems haven't found there way into the US Boating system but clearly that is just a matter of time now as well.

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