China's best-known electric car companies are set to release quarterly earnings over the next few weeks, beginning with BYD on Thursday. Here's what analysts are watching: For the third quarter, UBS analysts are watching the extent to which electric car start-ups Li Auto , Xpeng and Nio continue a trend of slowing growth in delivery volume and widening losses in the last few months. The quarter saw a slump in Chinese passenger car sales overall. New energy vehicles — a category that includes both hybrids and battery-only cars — held on to sales growth. However, China's electric vehicle penetration is near the government's goal of 20% . "Further upside potential is quickly shrinking, which might counterintuitively lead to valuation de-rating of pure EV makers," UBS analyst Paul Gong and a team wrote in an Oct. 20 note. "We are overall cautious on the China auto sector." The analysts noted that in contrast with electric car start-ups, BYD, Wuling Mini and Tesla China have "pushed up their volume significantly with much less loss or even decent profit in Tesla's case." Those three companies beat out start-ups like Nio in the China Passenger Car Association's rankings of best-selling new energy vehicles in China for the first three quarters of the year. Hybrid models Among the bestsellers was BYD's hybrid model Qin Plus DM-i, one of three hybrids the company launched in January. On the back of the hybrid line's success, Bank of America Securities analysts raised their forecast for BYD's hybrid passenger car sales by 3% for this year to 235,653 vehicles, and 13% for next year, according to an Oct. 19 report. The BofA analysts also raised their expectations for BYD's battery-powered passenger car sales by nearly 16% for this year, to 238,893 vehicles. They now expect earnings per share will decline less than previously expected — shrinking by 18.7% this year from a year ago — and for earnings to surge next year by 44.2%. One of the priorities for Chinese consumers who spoke with CNBC earlier this year was driving range. They were also concerned about whether cold temperatures might drain batteries faster. That's helped Li Auto, whose Li One model comes with a fuel tank for charging the battery. That's also UBS analysts' top pick among the three start-ups, Li Auto, Xpeng and Nio. Chip shortage Although it's not yet clear when the company will release earnings, Li Auto said it will hold an extraordinary general meeting with investors on Nov. 16. The start-up said deliveries in September were affected by the global chip shortage. "We expect Li to ramp up delivery with the chip-shortage situation improving," BofA analysts said in an Oct. 19 report. Based on September deliveries, the analysts raised their sales volume forecast by 1% for this year and 3% for next year. They predict the company's net loss will narrow by 5% this year, and expect the start-up will reach breakeven in 2023. Xpeng delivered the most cars of the three Chinese start-ups in the third quarter, despite the chip shortage. Deutsche Bank analysts expect third-quarter sales to come in above market expectations, and management to give fourth-quarter guidance in the range of 35,000 to 40,000 vehicle deliveries. The analysts raised their price target to $57 a share, according to an Oct. 21 report. The start-up has yet to officially announce when it will release its quarterly results. Xpeng held its annual tech day over the weekend, at which it launched a semi-autonomous driving system update that adds support for driving in cities, in addition to highways. With its Xpilot software, "Xpeng has become the only [original equipment manufacturer] in China that has the proprietary manufacturing capacity for full stack development of NEVs," Citi analysts said in an Oct. 24 report. They have a buy rating on the stock. Norway expansion Nio's shares are down 15% so far this year, after soaring more than 1,000% last year. The company has struggled in the last few months with a chip shortage, but announced deliveries of 24,439 vehicles in the third quarter. That exceeded lowered guidance, and was on the high end of the original forecast. Nio has yet to announce when it will release earnings, although it's set Dec. 18 as "Nio Day" to announce details about business plans and car models. Looking ahead, Goldman Sachs analysts expect gains for the electric car stock and earlier this month upgraded the stock to buy. They predict Nio will benefit in the next six months from the launch of its luxury electric sedan, the et7, which they note is "China's priciest car model launched by a domestic brand." The Goldman analysts are also watching how overseas, Nio has built up its Norway expansion in the last few months with the opening of a flagship store in the capital city of Oslo. The start-up has launched the es8 to local customers and plans to launch the et7 sedan to customers in Norway next year. Comparable electric car models from Audi and Tesla sold fewer than 1,000 vehicles per month in Norway last year, the Goldman analysts noted. BYD and Xpeng have also shipped cars to Norway this year. The country is a leader in battery-powered electric car penetration — the category accounted for more than half of new cars sold domestically last year, according to the Norwegian Road Federation. — CNBC's Michael Bloom contributed to this report.
