HK Stock Market Move | Car stocks fell further, while prices of metals and storage chips surged, potentially putting significant cost pressure on car companies in the short term.

The decline in automotive stocks expanded. As of press time, Guangzhou Automobile Group (02238) fell by 3.69% to HKD 3.65; Great Wall Motor (02333) fell by 2.66% to HKD 13.19; LI AUTO-W (02015) fell by 2.58% to HKD 65.95. HSBC released a research report stating that recent sharp increases in upstream raw material prices such as metals and storage chips are expected to bring significant cost pressures to automotive manufacturers in the short term. Due to the higher density of raw materials used in electric vehicles, manufacturers will face greater resistance. The price of lithium has soared by about 127% in the past three months, and the price increase of metal materials may lead to a cost increase of 3,000 to 5,000 RMB per vehicle. The increase in the price of storage chips may bring an additional cost of 1,000 to 3,000 RMB, directly impacting the cost structure of electric vehicles. The bank pointed out that this round of price increases is mainly due to supply constraints. It is believed that in the trend of consumption downgrade and the traditional off-season in the first quarter, it will be difficult for car companies to pass on costs to consumers who are sensitive to prices. Companies will have to absorb additional costs through vertical integration and technological upgrades, and may also rely on operational measures, including negotiating larger annual price reductions with suppliers.