Iran War "Safe Harbor": BYD surged in March, and electric vehicle stocks became one of Hengke's best performers

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(Source: Netease Technology)

The surge in oil prices is reshaping the investment logic for electric vehicles, with BYD’s Hong Kong stock posting its best monthly gain in over a year in March, while overseas markets have become the core driving force behind valuation boosts.

The oil price shock triggered by the Iran conflict is unexpectedly catalyzing the Chinese electric vehicle sector. BYD’s Hong Kong shares rose 8% in March, making it one of the best-performing stocks in the Hang Seng Tech Index alongside NIO and Li Auto. In the previous months, the sector had been under pressure due to weak domestic demand and ongoing price war pressures.

The strong momentum in overseas markets is a significant support for this round of rebound. BYD’s overseas sales surged by 50% year-on-year in the first two months of this year, with notable recovery in consumer traffic at dealers in Asian markets such as the Philippines and Indonesia. Meanwhile, orders from Central and South America have also surged.

Investors are focusing on the earnings and full-year guidance set to be released this Friday to assess the sustainability of the recovery driven by exports.

Oil price shock reignites overseas demand

The Iran conflict has driven international oil prices higher, directly stimulating consumer willingness to purchase electric vehicles in emerging Asian markets. According to Bloomberg, consumers in the Philippines and Indonesia have begun queuing to buy electric vehicles.

Leonid Mironov, portfolio manager at Gavekal Capital Ltd., stated, “In the long run, this will help rebuild the market narrative and consumer perception of electric vehicles, especially in developed markets.”

Third Bridge analyst Rosalie Chen pointed out, “Overseas expansion has become an inevitable choice for Chinese automakers.” She believes that BYD’s cost advantages from in-house battery production enable it to achieve strong profitability in its export business and “effectively capture the demand shift driven by rising oil prices.”

BYD delivered 1.05 million units overseas last year, and the company has set a target to sell 1.3 million units in markets outside of China this year. If its self-developed next-generation fast-charging technology can be implemented in overseas markets, it is expected to further alleviate the two major bottlenecks of charging speed and inadequate infrastructure.

Discrepancies between bulls and bears intensify, sustainability of rebound in question

However, market discrepancies regarding BYD are widening. According to S&P Global data, the short position as a percentage of free-floating shares has risen from 0.7% at the beginning of the year to 3.2%, with significant increases in short selling reflecting some investors’ doubts about the sustainability of the rebound.

Nevertheless, the bullish camp is also accumulating. Kevin Net, head of Asian equities at Financiere de L’Echiquier, noted that the strong performance of BYD’s stock is driven by market expectations for sales recovery this year propelled by the launch of new models, the unveiling of new technologies, and most importantly—the continued positive momentum in overseas markets.

Ming Lee, an analyst at Bank of America Securities, believes that BYD’s products have gained recognition overseas, but the company also needs to prove it can maintain its market share domestically. “Recently, foot traffic at stores has increased after technology releases, but we are still waiting for clearer signals of sustained order recovery.”

Currently, BYD’s stock price is still down over 30% from its historical high set last May. The earnings release and full-year guidance this Friday will be a key point in testing whether this rebound can transform into a trending market.

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