There have been talks about slowdown in the Chinese automobile market, which have certainly weighed on the sentiments on some of the automobile stocks. While investors may be right to be cautious given lower automobile sales in China, the sell-off is probably overdone. This opens up opportunities to buy some of these stocks at low valuations.
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BYD (1211.HK) saw first-half profit for the year tripled as China’s new energy vehicle market continues to surge. The Shenzhen-based company, which investors include Warren Buffett, posted a net profit of 1.45 billion yuan, up from 479.10 million yuan a year earlier. Revenue rose 15% to 62.18 billion yuan from 54.15 billion.
BYD sold 145,653 new energy vehicles between January and June, up 95% from a year earlier. It also sold 82,419 gasoline models, down 45%. BYD aims to shift its new-vehicle lineup to only electric-powered vehicles. It said last month it would develop battery electric vehicles with Toyota.
Overall sales of NEVs in China rose 50% in the first six months of this year from a year earlier, but those sales fell 4.7% in July as China cut subsidies on such vehicles from July. BYD said the subsidies cut was likely to pressure companies in the industry in the short term, but would promote its healthy development over the long term.
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Geely Automobile (175.HK)
Since hitting a low in August, Geely’s shares have begun recovering in stock price, but is still some distance away from its high in April. Even with this recovery, it is still about 45% below its all time high in late 2017. At its current P/E ratio of 9.3x, the stock looks like a bargain. If there is a traditional car company that is focused on the future, Geely is probably the one that comes to mind, as the company has recently invested in Volocopter, which develops flying cars.