Reviewing the auto stocks of the week reveals the diverse trends shaping the automotive market.

Recently, despite the Federal Reserve's interest rate cut announcement, the A-share market has exhibited an unexpected independent trend, contrasting with the general decline seen in other markets. All three major A-share indices turned red, with over 4,000 stocks rising across the market.

In particular, apart from the Shanghai Composite Index, which fell slightly by 0.36%, the Shenzhen Component Index, ChiNext Index, and CSI 300 Index all recorded slight gains. In terms of trading volume, the combined volume of the Shanghai and Shenzhen stock exchanges reached over 1.44 trillion yuan, an increase of 80 billion yuan compared to the previous trading day's 1.36 trillion yuan, ending a three-day losing streak. This marks the 57th consecutive trading day that the combined trading volume of the Shanghai and Shenzhen stock exchanges has exceeded 1 trillion yuan.

Sector-wise, the AI glasses concept demonstrated strength, with Tianjian Co., Ltd., HC SemiTek, and CloudWalk Technology experiencing 20% gains, hitting the daily limit. The semiconductor sector was also active, with Kaiweite Technology achieving a 20% gain and reaching the daily limit. However, the auto sector saw weak volatility, with China National Heavy Duty Truck leading the decline.

In the Hong Kong stock market, the new energy vehicle sector surged in the short term, with NIO jumping over 5%, Leap Motor rising nearly 4%, and Li Auto and XPeng following suit.

NIO's share price rose due to the imminent official launch of its new brand, Firefly, after more than two years of preparation. Firefly's first product is set to debut, targeting the high-end compact car market, aiming to compete with brands like BMW MINI and Mercedes-Benz Smart, priced around 150,000 yuan. Combined with NIO's Battery as a Service (BaaS) model, prices are expected to drop further.

'High-end compact cars may not sell 10,000 to 20,000 units per month, but selling a few thousand units is definitely not a problem,' said Jin Ge, President of Firefly, in an interview. 'The cost boundary for compact cars is not high, making it difficult to make decisions. Finding the right balance is crucial.'

Reportedly, Firefly has considered the needs of different global markets since the beginning of its research and development. The launch timeline for Firefly in China and Europe will not differ significantly, with the Chinese market expected to launch in the first half of next year, and the European market possibly a quarter later.

Leap Motor also received a boost from the capital market, though not due to a significant event like NIO's 'new brand launch.' Instead, Leap Motor's share price rise was attributed to 'completing the annual sales target ahead of schedule.'

Leap Motor announced sales of 40,169 units in November, representing a year-on-year increase of 117.0% and a month-on-month increase of 5.2%, setting a new record for multiple consecutive months. For the year, Leap Motor sold a cumulative total of 251,000 units from January to November, representing a year-on-year increase of 100.1%, thereby completing its 2024 sales target of 250,000 units ahead of schedule.

Cao Li, Senior Vice President of Leap Motor, revealed that Leap Motor currently has no plans to enter the market for vehicles priced above 300,000 yuan, but will instead focus on more widespread mass-market models to solidify its position in the largest market segment. 'Currently, many automakers are blindly pursuing high-end products, but Leap Motor has chosen not to follow this trend. In the current market environment, stability is key.'

Changjiang Securities noted that Leap Motor's domestic new vehicle cycle will drive continuous sales growth, and its overseas collaboration with Stellantis will enable asset-light overseas expansion, opening up global sales opportunities. This is what the capital market views as Leap Motor's advantage.

As a result, Leap Motor has set a doubling target. In 2025, Leap Motor will challenge the annual sales target of 500,000 units. Recently, Zhu Jiangming, Founder, Chairman, and CEO of Leap Motor, said, 'Faced with competition, as long as we continuously innovate and revolutionize ourselves, we have nothing to fear from competition.'

Several other new energy vehicle brands also recorded impressive sales figures. According to data from the China Association of Automobile Manufacturers, domestic sales of new energy vehicles exceeded 10 million units from January to November. BYD and Xiaomi both performed well in November and completed their 2024 annual targets ahead of schedule.

Lei Jun, Chairman of Xiaomi Group, posted on Weibo that this was the second consecutive month Xiaomi Automobile had delivered over 20,000 units, and the company had raised its annual delivery target for 2024 to 130,000 units, up from the previously set target of 120,000 units.

Based on November sales data, Leap Motor joined the ranks of companies delivering over 40,000 units, while Arcfox and XPeng entered the group delivering over 30,000 units for the first time in a single month, contributing to XPeng's stock price rise.

While the A-share market has shown an independent trend, on the other side of the ocean, following the 'hawkish rate cut' announcement, the US stock market is about to face a 'triple witching day.'

The Federal Reserve concluded its two-day monetary policy meeting on December 18, announcing a 25-basis-point cut in the target range for the federal funds rate to between 4.25% and 4.50%. Multiple foreign media outlets stated that this rate cut was in line with market expectations, marking the third consecutive rate cut, totaling 100 basis points, but expecting the rate cut to narrow to 50 basis points in 2025.

However, Singapore's Lianhe Zaobao reported that Donald Trump's fiscal and trade policies have added more uncertainty to next year's interest rate policy, which is widely believed to hinder the rate cut process.

Affected by this, US stock markets fell sharply, with major indices recording their largest one-day declines in months. The Dow Jones Industrial Average fell for the 10th consecutive trading day, marking the longest such streak since September 20 to October 4, 1974, according to CNN.

'Trump's return to the White House has put the Federal Reserve on a potentially bumpy path,' argued The Guardian. Trump has repeatedly criticized the Fed's decisions, and his allies have even suggested the possibility of undermining the Fed's independence.

According to the Associated Press, Powell said that some, but not all, Fed officials were already trying to factor in the uncertainty brought about by the new administration's entry into the White House. 'When the road conditions are unclear, you slow down,' Powell said. Reuters reported that Powell clearly and repeatedly mentioned the need for caution from now on, shocking Wall Street.

The arrival of the 'triple witching day' was not unexpected. Data from Asym 500 shows that $6.6 trillion worth of stock, ETF, and index-related options are set to expire, potentially making this the largest 'triple witching day' on record.

The so-called 'triple witching day' occurs every quarter when options contracts linked to individual stocks, ETFs, and indices like the S&P 500 expire alongside futures contracts tied to major stock indices. Derivatives market experts refer to this day as the 'triple witching day' because the expiration of a large number of derivative contracts is usually accompanied by higher trading volumes and volatility.

Traders have always closely watched the 'triple witching day' event. However, this time's 'triple witching day' carries particularly high risks, as the Fed's 'hawkish rate cut' this week has just triggered a round of selling in the US stock market.

According to SpotGamma's model analysis, this 'triple witching day' is also accompanied by the expiration of a large number of call options, which will significantly reduce the market's Gamma value, leading to a few days of market fragility early next week, with potential for continued volatility.

Fearing that the Fed may soon end its rate cut cycle, the Dow Jones Industrial Average fell more than 1,100 points on Wednesday and barely managed a small gain on Thursday, ending a ten-day losing streak. The gains in the US stock market also narrowed to around 1% by the end of Friday.

Matt Thompson, Co-Portfolio Manager at Little Harbor Advisors, said, 'The 'triple witching day' may inject more volatility into the market, but we just don't know which direction it will take.'

However, Musk should know the direction, as Tesla fell.

On December 19, Beijing time, Tesla's share price experienced its largest decline since Trump's election victory last month, falling over 8%, erasing $131.5 billion in market value overnight. On December 20, Tesla's pre-market share price fell nearly 5%.

Recently, global stock markets have generally shown a downward trend, severely shaking investor confidence. The decline in technology stocks like Tesla is understandable. However, the magnitude of Tesla's market value erosion has exceeded market expectations.

The main reason is that as the year-end approaches, Tesla is showing signs of fatigue. With less than a month to go, Tesla will announce its 2024 fourth-quarter and year-end vehicle delivery figures. Since the delivery of the Cybertruck in November 2023, Tesla's lineup has not added a single large new vehicle.

In the Chinese market, under sales pressure, Tesla recently introduced a policy of 'limited-time delivery with immediate tail payment discount' for the Model Y, reducing its price to an all-time low, both domestically and globally. At the same time, Musk has set a target for Tesla to 'increase sales by 20-30% in 2025.'

Currently, Tesla is not yet ready to launch a brand-new model. To achieve this goal, the only option is to introduce a low-end model like the Model Q to quickly expand sales volume.

According to The Wall Street Journal, as an entrepreneur, Musk has always relied on a 'hardcore' philosophy to inspire his team to overcome challenges. Whenever faced with a new challenge, Musk's first action is to send out an email with the subject 'Super Hardcore' to remind employees to prepare for an unprecedented workload.

It remains to be seen whether Tesla's employees are ready to receive a 'hardcore' letter from 'President Musk' at the turn of the year.

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