UBS loves these electric vehicle stocks — and says one offers China's 'answer to Tesla Model 3'

Published Thu, Sep 7 20237:15 PM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

UBS named electric vehicle stocks it likes in China and described one car as a "Chinese answer to Tesla Model 3." In a research note on "The rise of China EV giants," UBS said BYD 's Seal car has comparable specifications to Tesla's Model 3, a restyled version of which was launched in China and Europe last week. "We conclude it's cost competitive, thanks to its vertical integration, suitable specs, and volume scale. It enjoyed some edge not only over foreign incumbents, but also Chinese EV startups," UBS analysts led by Paul Gong wrote in a Sept. 1 research note. The analysts raised their price target on BYD to 345 Hong Kong dollars ($44) from 320 Hong Kong dollars and reiterated their "buy" rating on the stock. "Though Seal sales [have] been behind Tesla Model 3 due to brand and other BYD models' dilution, it's much higher than competing XPeng P7/P7i or Toyota bZ3. We believe BYD's large engineer team has achieved continuous technology improvement over its frequent new model launches — a key competitive strength hard to be surpassed," the analysts wrote. UBS described the Seal model as having a large interior space, with 5G connectivity and a rotating cockpit screen. "The result is a decent alternative to Tesla Model 3 at 10-20% lower selling price," the analysts wrote. Chinese EV stocks Alongside BYD, the bank is buy-rated on Great Wall Motor , which has several EV models. "Great Wall Motor (GWM) also paved multiple path[s] to EV transition," the analysts wrote. UBS is buy-rated on EV startup Li Auto , describing it and BYD as "top drivers" of growth for China's plug-in hybrid electric vehicle market. The bank also likes battery maker Contemporary Amperex Technology (CATL) "as a key beneficiary of EV transition," and named Changan , with its "multiple" EV models. UBS is buy-rated on both stocks, which trade on the Shenzhen Stock Exchange. In a separate note to investors, UBS downgraded European automakers VW and Renault from "Neutral" to "Sell" due to competition from Chinese automakers. — CNBC's Michael Bloom and Ganesh Rao contributed to this report.