Shares of auto suppliers including Delphi Technologies (DLPH) and Lear Corporation (LEA) are declining after a media report that China could cut its electric car subsidies. CNN Business columnist Michelle Toh wrote on Tuesday that, according to recent industry data, the Chinese market for electric vehicles could drop this year. The CNN columnist cited data from the China Association of Automobile Manufacturers that "the sales of electric, hybrid and fuel cell cars plunged by over 45% in October, marking four straight months of declines in the sector." INSUFFICIENT DEMAND IN CHINA: According to CNN, the assistant secretary-general of the China Association of Automobile Manufacturers said, " Because of the insufficient demand of the domestic market, the pressure for automakers to upgrade their technology to the national standard, and the major subsidy cuts for new energy vehicles, the recovery of production and sales is still limited. Based on the current developing trend, we may see negative growth for new energy vehicles this year." SUPPLIERS CUTTING COSTS: According to Reuters, Continental AG (CTTAY) and Osram (OSAGY) plan more extensive expense reduction after reporting "weaker" results on Tuesday, "as a global slowdown hits the car industry." Additionally, Delphi, an international auto supplier, cut its FY19 EPS and revenue view, citing moderating growth in all regions. Hari Nair, interim CEO of Delphi, said while speaking to investors in late October, "Growth in all regions, especially China, moderated significantly." PRICE ACTION: Shares of Continental are down almost 2%, while Delphi is lower by over 3%. OTHERS TO WATCH: Shares of other auto suppliers are also falling, including BorgWarner (BWA), Autoliv (ALV), Magna (MGA), Dana (DAN), and Lear (LEA).
