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Move will result in China Mobile being kicked off the Big Board after more than two decades

The New York Stock Exchange will delist China’s three large telecom carriers, after a U.S. government order barring Americans from investing in companies it says help the Chinese military.

China Mobile Ltd. CHL 0.88% —which is among the most valuable of China’s listed state-owned enterprises—will be kicked off the Big Board after more than two decades, along with China Telecom Corp. CHA -0.04% and China Unicom Hong Kong Ltd. CHU -1.56%

The NYSE decision is the latest setback for U.S. investors in these companies, which rank among the largest global telecommunications providers but have largely lagged behind the broader markets since the companies began listing here more than two decades ago.

The exchange’s decision is unlikely to seriously harm the Chinese telecom giants in the near term. Mounting pressure from Washington has already stymied their ability to operate in the U.S., a country that makes up a negligible amount of their international business.

The top three service providers still benefit from hundreds of millions of customers in their home country. That has attracted investors to their Chinese-listed shares. The cellphone carriers have spent billions of dollars on new fifth-generation wireless networks over the past two years with support from officials in Beijing, who have called 5G upgrades a national priority.

A China Telecom spokesman had no immediate comment.

The broader U.S. market impact of the delistings is likely to be limited, in part because large telecom companies haven’t been a hot part of the market recently and in part because these companies will continue to be traded in Hong Kong, where they are more closely followed by analysts and investors.

At the same time, the imminent delisting of several major Chinese companies will get the attention of portfolio managers, after a yearslong push to ensure Chinese firms’ compliance with U.S. audit rules. While the final outcome of that effort is unclear, the NYSE decision underscores the fraught politics of the U.S.-China relationship as the Trump administration comes to a close.

“The delisting issue is a live one with financial clients,” said Leland Miller, chief executive of China Beige Book International, which provides data on China’s economy to international investors. “There are some jittery people out there.”

NYSE said it would suspend trading in securities issued by China Mobile, China Telecom and China Unicom by Jan. 11. NYSE said it would also halt trading in closed-end funds and in exchange-traded products listed on its NYSE Arca exchange if they hold banned stocks.

On Friday, China Unicom said it would release a statement in due course. China Mobile didn’t immediately respond to requests for comment.

An executive order signed by President Trump in November will block Americans from investing in a list of companies the U.S. government says supply and support China’s military, intelligence and security services. The ban starts on Jan. 11 and investors have until November to divest themselves of their holdings.

The list currently includes 35 companies—including China’s largest chip maker—as well as surveillance, aerospace, shipbuilding, construction and technology companies.

It wasn’t initially clear whether the order covered subsidiaries as well as parent companies, and U.S. government leaders clashed over how broad the blacklist should be, The Wall Street Journal reported in December.

However, the Treasury Department said recently that it would add subsidiaries to the blacklist if they were majority-owned—or controlled—by a company that has been named. The Treasury’s Office of Foreign Assets Control, which handles economic sanctions, also said the ban covered derivatives and depositary receipts, as well as exchange-traded funds, index funds and mutual funds.

Last month, index compilers including MSCI Inc., FTSE Russell and S&P Dow Jones Indices said they would remove some Chinese stocks from their benchmarks because of the order, though they didn’t exclude shares issued by subsidiaries and affiliates.

China Mobile’s U.S. stock is thinly traded compared with its Hong Kong securities, FactSet data shows. About 2.1 million American depositary receipts traded daily on average over the past three months, compared with 34 million Hong Kong shares a day. Each ADR is equivalent to five ordinary shares in Hong Kong.

Other U.S. initiatives could also bring more delistings. Last month, Mr. Trump signed legislation that could have Chinese companies kicked off U.S. markets if American regulators can’t inspect their audits within three years. Some Chinese companies, including Alibaba Group Holding Ltd. and JD.com Inc., have already obtained secondary listings in Hong Kong, which could help blunt the impact of such an action.

Since their listing on the NYSE, after the privatization of its predecessor in 1997, China Mobile’s U.S. shares have returned 648%, compared with 501% for the S&P 500, according to Dow Jones Market Data. But the company’s market performance and that of its Chinese peers have fallen in recent years.

U.S. shares in China Mobile, the largest of the three companies by market value, declined 29% over the past year, according to FactSet, while China Telecom dropped 30% and China Unicom fell 39%. Over the same span, the S&P 500 index returned 18% and the communications-services sector of the MSCI World Index rose 22%. All figures reflect total returns, including dividends.

Over the past decade, China Mobile shares have declined 15% including dividend payments, FactSet data show, while China Telecom has dropped 32% and China Unicom has fallen 54%. The S&P 500 has gained 267% on the same basis and the MSCI World communications sector has gained 165%.

Tourism may bounce back this year, but business travel faces a slower recovery

Hotel owners are bracing for a difficult 2021, as the sector continues to reel from a historic drop in bookings caused by the Covid-19 pandemic.

Even though the industry’s worst year in living memory ended with a glimmer of hope, many in the industry expect the celebrations to be short lived.

The start of Covid vaccinations in the U.S. and Europe raised the prospect that people would start traveling again and sent shares in hotel owners and operators soaring. But investors and analysts say bookings will take years to rise back to pre-pandemic levels. Meanwhile, the industry faces growing financial stress as property owners struggle to pay their mortgage bills, wages and other expenses.

Despite the record drop in bookings, many hotels have been able to stay open thanks to debt relief from banks and temporary government aid like the Paycheck Protection Program. Now some lenders are starting to lose patience, brokers and investors say, which could lead to an increase in foreclosures and distressed-property sales in the first half of 2021.

For hotel owners, “it’s all about survival,” said Greig Taylor, a managing director at consulting firm AlixPartners LLP.

In the near term, the slow pace of vaccinations and persistently high numbers of Covid-19 infections are likely to continue holding back bookings. In a November report, S&P Global Ratings estimated that revenue per available hotel room fell by 50% in the U.S. in 2020. The ratings agency expects revenue to pick up in 2021, but estimates that it will still be 20% to 30% lower than in 2019. It doesn’t expect revenues to fully recover before 2023.

Public markets are similarly pessimistic. Although the FTSE Nareit Equity Lodging/Resorts Index surged in November following news of successful vaccine trials, it was still down 25% in 2020. The S&P 500 index was up 16% over the same period.

Business travel is a particular concern. While some analysts expect tourism to resume at an almost-normal pace by the second half of 2021 in many places, cost cutting and the rising popularity of virtual meetings could mean fewer corporate credit cards will be swiped at hotels for the foreseeable future. In a recent report, accounting and consulting firm PricewaterhouseCoopers said that some business travel may never come back.

“I think the biggest change is going to be the last-minute business-travel people on the road for 100 or 150 days a year,” said Michael Bellisario, a senior research analyst at Robert W. Baird & Co. “Because I think they’re going to say: ‘Do I need my employer to spend money on this? Can we do this over a phone call? Can we do this over Zoom?’”

That’s a problem because business travelers are typically hotels’ most profitable customers. They often book at the last minute and tend to be less worried about costs than leisure travelers. Hotels in big cities like New York or Chicago that depend on business travelers will take a particularly long time to recover from the crisis, Mr. Bellisario said.

Nayan Patel, who owns seven hotels in the Washington, D.C., area, including the Georgetown Inn, said his revenues are down around 80% compared with a year ago. Business travelers, formerly an important source of revenue, have virtually disappeared. He said he recently closed one of his properties, the 76-room West End hotel, because the two or three bookings a night couldn’t even pay for his front-desk staff, although he plans to reopen once business picks up again. “If you look at our numbers, they’re abysmal,” he said. “I don’t try to look at them every day, because it’s too depressing.”

Mr. Patel expects the business-travel drought to weigh on his earnings in 2021 as well. “If you look at the calendar for next year for the convention center for D.C., it’s virtually empty,” he said. “That’s a major problem.”

Thanks to debt forbearance from his lenders, Mr. Patel has been able to hold on to his properties, he said, but others haven’t been as lucky. Although the number of foreclosures is still low, it has been inching up. Debt-forbearance agreements negotiated in the spring are expiring, leaving many hotel owners with a choice between asking for help again or handing over the keys. Mark Schoenholtz, a vice chairman at real-estate services firm Newmark, said he expects an increase in distressed-hotel sales in early 2021 as new spikes in infections lead to property closures. “That’s going to force the hand of both owners and lenders in bringing things to market,” he said.

Outside of business-travel hot spots and big conference hotels, the outlook is less bleak. Millions of Americans who have been mostly confined to their homes for the better part of a year are itching to travel again. Analysts say they expect a surge in bookings in popular leisure-travel destinations like Miami or San Diego once vaccines are widely available and people feel safe.

Alan Lieberman, whose South Beach Group owns 17 hotels in Miami Beach, including the Chesterfield Hotel & Suites, and one in nearby Hollywood Beach, said his properties were almost booked out for New Year’s Eve. His biggest issue right now is finding workers, he said. His company laid off around 1,200 people in the spring when it temporarily shut down its hotels. Now he is struggling to persuade some of those former employees to come back at their old wages, which he said are often not much more than what they have been collecting via expanded unemployment assistance. In some cases, he said, staffing shortages have meant managers have had to clean rooms.

Although he expects occupancy to be almost at normal levels through May, when high tourism season winds down, most rooms have been going for bargain rates. His revenues won’t be back at pre-pandemic levels until cruise ships and conferences return, he said. Still, he counts himself lucky to own hotels in a sunny place with a beach. “I would be out of business in Chicago or New York,” he said.

About 70 companies raised prices, albeit at a lower rate than in recent years

The pharmaceutical industry is raising the prices of many products in the new year, albeit at a rate slightly below the past couple of years.

GlaxoSmithKline GSK -0.65% PLC and Sanofi SA are among the companies that raised the prices of hundreds of drugs by an average of 3.3%, according to a new analysis.

Pfizer Inc., PFE 0.19% which has a large portfolio of products, led the way with the most increases, raising prices by 5% or less on more than 200 products. The drug industry normally sets prices for its therapies at the start of the year and again in the middle of the year.

In all, about 70 drugmakers raised prices in the U.S. on Friday, according to an analysis from Rx Savings Solutions, which sells software to help employers and health plans choose the least-expensive medicines. The average increase of 3.3% included changes to different doses for the same drug, according to the analysis. Inflation registered at 1.2% for the most recent 12 months.

This year’s average is lower than that of a year ago, when more than 60 companies raised the prices on hundreds of drugs by an average of 5.8%, according to the analysis. However, it found that companies raised prices on at least 50% more products compared with last year.

The largest price increase, 31%, came via Advanz Pharma Corp. CXRXF -11.80% and its hypertension product Dutoprol, according to the analysis. The drug is a branded combination of two lower-cost generic medicines that have been around for decades. The U.K.-based company didn’t immediately respond to requests for comment.

Pfizer is rolling out a Covid-19 vaccine it developed with Germany’s BioNTech SE in the U.S. and other countries. A year ago Pfizer similarly raised prices on a number of drugs, and has previously been criticized by President Trump for how it has priced its products.

Many of the New York-based company’s products rose in price by 5% or less, according to the Rx Savings Solutions analysis. Among them are breast-cancer treatment Ibrance, which sold about $4 billion globally through the first nine months of last year, plus rheumatoid arthritis therapy Xeljanz and pneumococcal vaccine Prevnar.

A Pfizer spokeswoman said the company’s price increases were in line with inflation, and were necessary to fund research of new drugs. Most of them affected hospital and sterile injectable products, about a third of which are sold at or below its cost of manufacturing, Pfizer said.

It said it is dedicated to growth through expanded use of medicines, not price increases. The company noted its net prices were flat or fell for the past three years.

The price increases for companies affect so-called list prices that are set by manufacturers; most patients don’t pay these prices, which don’t take into account rebates, discounts and insurance payments. Patients without insurance, or those with a pharmacy deductible may pay the full list price.

Drugmakers have said prices are increased in conjunction with rebates they give to pharmacy-benefit managers, or PBMs, in order to get favorable placement on the lists of covered drugs known as formularies.

In fact, net prices have declined because of large rebates to PBMs, which negotiate prices in secret with their clients, such as employers and labor unions.

During the third quarter of 2020, net prices fell 2.3% versus a 4.7% drop in 2019, according to SSR Health LLC pharmaceutical analysts. While list prices have risen on average nearly every quarter since 2017, net prices have declined during that time, according to data from SSR.

In recent years, pharmaceutical companies have increasingly cited the net price phenomenon, saying they don’t actually benefit much from list-price increases and that their net prices are suffering because they are paying bigger rebates to pharmacy-benefit managers.

The drug industry in recent years faced growing scrutiny from patients, lawmakers and health plans over the prices of its products. Some companies responded with pledges to not raise list prices beyond certain levels, including to less than the cost of inflation; but they are also trying new and creative ways to get paid for their most expensive medicines.

The Trump administration’s efforts to lower drug prices have largely been thwarted by lawsuits from the industry, including an attempt to link the prices of certain prescription drugs in the U.S. to their prices in other developed countries. Still, in November, the administration finalized a rule seeking to curb rebates paid to middlemen in Medicare.

President-elect Joe Biden’s administration is also expected to try to lower the costs of prescription drugs, and Mr. Biden has called for limits on the prices of newly launched drugs. Most of his proposals draw from the Democratic playbook for curbing drug prices, including one that would set up an independent government board to determine prices paid by most government purchasing programs, including Medicare.

“Millions of consumers in this country are in dire need of information to make more informed decisions about what their therapy and pharmacy options are, and to steer clear of pitfalls,” said Michael Rea, chief executive of Rx Savings Solutions. Clients of the Overland Park, Kan., company include Target Corp. and Toyota Motor Corp.

Most product prices of his firm’s analysis rose by less than 10%.

Teva Pharmaceutical Industries Ltd. TEVA 0.52% , a major generic-drug company, raised the prices of about a dozen products, including some painkillers, according to the analysis. It also raised the price of its migraine drug Ajovy by 5%, according to the analysis.

A Teva spokeswoman said the Israel-based company sets prices to help allow patients access its products while maintaining commitments to researching products and to shareholders.

U.K.-based Glaxo raised the prices of shingles vaccine Shingrix and meningitis vaccine Bexsero each by 7%, according to the analysis.

A Glaxo spokeswoman confirmed the increases and said the company’s entire portfolio of products average increase was 2.6%. She also said the company made fewer price increases than last year and didn’t raise the price on 18 products.

France’s Sanofi raised the price of more than a dozen products by 5% or less, according to the analysis. A company spokeswoman said the increases are less than the country’s overall health-care spending growth rate, and that the company prices its products responsibly.

Bausch Health BHC 3.69% Cos., which over the summer announced plans to spin off its eye-care business, raised the prices of about 40 products, according to the analysis. Drugs that were affected include stomach drug Xifaxan and antidepressant Wellbutrin, both of which rose in price by 8%.

The company didn’t immediately respond to a request for comment.

French electrical distributor Rexel has a network of outlets that sell sockets, plugs, and a host of other products to tradespeople across the world.

Known as the Amazon. com of the bricks-and-mortar electrical-equipment world, Rexel (ticker: RXL.France) has built a loyal band of customers by driving down prices from suppliers, and imparting expert advice.

The firm has had a tough 2020, along with rivals, who have suffered store closures due to Covid-19 and a slowdown in business. The shares increased 7.8% over the past 12 months—but they have climbed 13.7%, to 13.09 euros ($16.02), in the past month after posting an unscheduled trading update noting a better pickup in business during the second wave of Covid.

The stock could have further to go as it benefits from a shift toward sustainability, automation, and energy efficiency. As more offices and homes are sustainably built, Rexel can capitalize on selling low-voltage kits that work with solar and wind energy, along with the low voltage products they require.

Suppliers such as Schneider Electric (SU.France), Rockwell Automation (ROK), and Siemens (SIE.Germany) benefit from higher margins selling through Rexel’s distribution network than through popular e-commerce sites, which can take up to 35% in commission.

Phil Buller, an analyst at Berenberg, thinks the shares are “fundamentally mispriced” and are “a buying opportunity.” He estimates a rise of 14.5% to €15.

“The company has gone to great efforts to refocus for the digital age, as we shift toward reducing carbon emissions and the electrification of the planet as a result of the pandemic,” Buller tells Barron’s.

Covid-19 provides the impetus for greater investment in energy efficiency and automation solutions around the world, he wrote in a note. Société Générale has also marked Rexel’s stock a Buy with a target of €15.

The Paris-based firm has a market value of €3.9 billion and employs more than 26,000. It fetches 12.7 times this year’s expected earnings and is valued at a 10% discount to its peers.

Rexel posted net income before tax of €321.1 million for the 2019 calendar year, up from €290.9 million in 2018, on sales of €13.7 billion.

CEO Patrick Berard tells Barron’s: “Rexel emerges strengthened from a difficult 2020 and comforted in the strategic choices it has made in the past three years.

“After having repaired the company, deleveraged it, refocused it on customers, made it more agile, and invested heavily in its digital transformation, Rexel now stands to harvest the fruits of its efforts.”

In 1967, French engineering concern Compagnie Lebon, now part of Groupe Paluel-Marmont, created Compagnie de Distribution de Matériel Électrique (CDME), which would be renamed Rexel in 1993. In 1983, CDME was floated on the now-disbanded Second Marché—for medium-size companies—of the Paris stock exchange.

The company expanded through acquisitions. In 1990, the Pinault Group (which later became PPR and then French luxury group Kering) became the biggest shareholder. It was taken private in 2005 and refloated in 2007.

Rexel’s suppliers profit through its distribution network, offsetting concerns in the medium term that it will succumb to the fierce competition from online players such as Amazon.

Berenberg’s Buller, in his note, wrote that Rexel’s transformation could produce better gross and adjusted margins (25% and 5%, respectively), “in which case there’s a powerful incremental return-on-capital play here.”

Rexel said in December that it expects to resume its dividend with a payment in 2021. This, along with tight cost discipline, means Rexel is plugged in for growth.

The new year promises changes on many fronts: economic, political, and public health, to name a few. It may also bring about a major shift in U.S. stock markets. A growing cadre of investors and strategists are betting that 2021 will finally be the year when value stocks outperform growth.

Value has plenty of catching up to do. The Russell 1000 Growth index of U.S. stocks bested its value equivalent by 36 percentage points in 2020, the largest margin on record. It’s the exclamation point on a decade of leadership from growth stocks such as Apple (ticker: AAPL), Amazon.com (AMZN), and Netflix (NFLX), at the expense of old-economy industries, including banks, mining, and energy.

As a result of the divergence, value stocks haven’t been this cheap, relative to growth issues, since the dot-com bubble in 2000, a gap that could narrow with a postpandemic recovery and eventual higher interest rates.

“Value has been in the dog house for the longest period I can remember,” says Mark Boyar, who founded The Boyar Value Group in 1975. “But we think now we’re going into one of these periods where value will significantly outperform growth.”

Jonathan Boyar, Mark’s son and president of the firm’s research division, Boyar Intrinsic Value Research, warns that not all value will benefit. “You really still need to look at high-quality businesses with good balance sheets and strong competitive positions—it’s not just about buying every retailer and airline that’s cheap right now.”

To that end, Boyar and team puts together an annual list of 40 stocks they see offering compelling value in the year ahead. They’re not necessarily the cheapest stocks in the market, but they’ve been overlooked and each has at least one positive catalyst on the horizon.

Boyar’s Forgotten Forty portfolio has produced an average annual gain of 9.6% over the past decade, versus about 8%, on average, for the Russell 1000 Value index. The broader index, including growth components, has risen some 12% a year over that period.

The Boyar team gave Barron’s a preview of its 2021 Forgotten Forty list. Here are some highlights presented in alphabetical order, with context from Jonathan Boyar and Barron’s:

At a recent price of $30, Bank of America (BAC) trades at 14 times 2021 estimated earnings and 1.5 times tangible book value, cheap relative to the market and its own history. An improving economy, expectations of a steeper yield curve, and a green light from the Federal Reserve to boost share buybacks and dividends in 2021 are all promising catalysts.

Warren Buffett’s Berkshire Hathaway (BRK.A) has been adding to its stake in Bank of America; it currently owns about 12% of the stock. Boyar expects greater capital returns, a cyclical recovery, and Buffett’s vote of confidence to boost Bank of America shares to 1.6 times his estimate of 2022 tangible book value, or about $36—20% above a recent quote. BofA’s dividend currently yields 2.4%.

Coca-Cola (KO) was one of Barron’s top 10 stock picks for 2021, and it makes Boyar’s Forgotten Forty for similar reasons. The reopening of restaurants, stadiums, and other public venues will lead to a near-term rebound in sales, as the world’s largest soft-drink company also begins to benefit from longer-term initiatives in 2021, Boyar says. That includes a push into new categories, including coffee and hard seltzer, along with the divestment of Coca-Cola’s bottling operations. New contracts will continue to give the company favorable pricing with those bottlers.

“That’s a better, more asset-light structure that should expand their profit margins,” Boyar adds, noting that a weaker U.S. dollar will boost overseas profitability. Coke’s stock isn’t particularly cheap at more than 25 times next year’s forecast earnings, but the Boyar team expects it to hold its multiple as the company returns to growth. They see the shares going to $66, 20% above their recent close of $55. The stock yields 3%.

Pharmacy chain CVS Health (CVS) will play a vital role in the U.S. vaccine-distribution effort in 2021, expanding its database of customer information and bringing new patients into its stores and clinics. Boyar cites the advantages of CVS’s omni-channel approach. It has stores close to 80% of the U.S. population, along with a sophisticated prescription delivery business.

At $68, CVS stock looks cheap, trading at just nine times next year’s expected earnings. Boyar applies a 13 times multiple on his 2022 profit estimate to get to a $106 target, 55% above the recent close.

Liberty Braves Group (BATRK) and Madison Square Garden Sports (MSGS) are rare examples of publicly traded sports teams. They own baseball’s Atlanta Braves, and basketball’s New York Knicks and hockey’s New York Rangers, respectively. Those are trophy assets that should be valued by what a potential acquirer would pay for them, says Boyar, rather than the cash flows they produce. Fortunately for the New York basketball team, the value holds up regardless of on-court performance. Still, all three teams can boost their sales and profits in coming years, he says, as television rights are renewed at higher rates and the legalization of online gambling increases fan engagement and attracts more advertising dollars.

Leagues have also opened the door to investors such as private-equity firms. They now can take minority stakes in teams, which could drive valuations even higher. Boyar values Liberty Braves stock at $41 and MSG Sports at $231, giving them estimated upsides of 60% and 24%, respectively. Boyar’s price targets are based on a roughly 30% premium to the teams’ latest valuations from Forbes.

Sysco (SYY) is in pole position to emerge from the Covid-19 pandemic stronger than it went in, as the largest player in the heavily fragmented U.S. food distribution industry. With a market share of just 16%, Sysco generates more in sales than its next two rivals combined. Management has been aggressive in trying to grow through acquisitions and in recruiting new customers.

“In this environment, restaurants and hotels are not only looking for the cheapest-price supplier, but also for companies that will survive this,” says Boyar, who sees Sysco going to $93, from a recent $73.

Walt Disney (DIS), at a recent 72 times next 12 months estimated earnings, isn’t inexpensive, based on traditional value metrics. But the entertainment giant has several catalysts ahead of it. First and foremost is the postpandemic recovery of its theme parks, which Boyar expects to surprise to the upside in 2021. The longer-term story is Disney’s transformation into a streaming-focused global content company, fueled by the rapid growth of Disney+ and its other direct-to-consumer services.

Boyar values Disney using a sum-of-the-parts approach. He applies a multiple of 12 times to estimated 2022 earnings before interest, taxes, depreciation, and amortization, or Ebitda, for Disney’s non-streaming businesses, and 5.5 times to estimated 2022 streaming revenue. That yields a price target of $237, or 30% above the stock’s recent close of $181.

And there’s an argument for giving Disney an even higher target price: Applying Netflix’s current 10 times sales multiple yields a price of $339 per share.

HOCKENHEIM, Germany — The Porsche Taycan rocketed from a standstill so fast that my skull banged against the headrest and my vision went blurry.

It was a demonstration of what can happen when German engineers apply their brainpower to electric cars. And it offered a clue to how German luxury carmakers hope to prevent Tesla from destroying the country’s most important export industry.

A year after Porsche brought the Taycan to market, Mercedes-Benz and Audi are on the verge of rolling out their first luxury cars that were designed from scratch to run on batteries, rather than simply being awkward conversions of gasoline models.

These new purebred electric models will determine whether the German carmakers can retain their hegemony in the high end of the market in the face of an onslaught from Tesla, which is encroaching on their turf — literally — by planting a so-called Gigafactory in a forest outside Berlin. German engineering is confronting Silicon Valley audacity head on, with the future of the German economy at stake.

Tesla also has a lot at stake. The company’s $658 billion stock market value makes sense only if investors believe the company will one day eclipse the traditional carmakers in sales and render the likes of Daimler and Volkswagen irrelevant.

The Taycan, a four-door sedan that Porsche recently let me try out at the Hockenheimring racing complex south of Heidelberg, provides an early example of what the German automakers are capable of. The car, with a starting price a little over $100,000, can blast from zero to 60 miles per hour in well under three seconds.

So, it happens, can the Tesla S. But tests by Car and Driver confirmed Porsche’s assertion that the Taycan can replicate those blastoffs 10 times in a row, unlike the Tesla, which becomes sluggish with repeat use as the battery wears down. Porsche has found a way to maintain explosive acceleration even when the battery is not fully charged.

During an hour of all-out driving on Porsche’s serpentine test track, egged on by a Porsche instructor who encouraged me to probe the car’s limits, the Taycan stayed glued to the asphalt like a roadster and never showed signs of fatigue. I ran out of juice before the car did.

“Our plan from the beginning was that our electric vehicle should be a real Porsche,” Stefan Weckbach, the Porsche executive in charge of the Taycan, told reporters this year.

That pretty much sums up the approach that the German luxury carmakers, after a belated start, are taking to electric cars. Germany is considered the birthplace of the gasoline-powered automobile, and it remains a source of national pride. Its automakers want to show that they can adapt their expertise in high performance, reliability and comfort to electric vehicles.

“We will score points with our classic qualities,” Markus Duesmann, the chief executive of Audi, said in an interview.

The pandemic has only increased the pressure on traditional carmakers to offer true electric vehicles.

Sales of gasoline and diesel cars in Europe have plunged since the virus hit, but sales of electric vehicles have more than doubled, largely because of government incentives.

In November, one out of 11 new cars registered in Western Europe was electric, a record, according to Matthias Schmidt, an analyst in Berlin who publishes a monthly report on the electric car market.

The Germans have decades of experience creating cocoon-like interiors, sinewy suspensions and exteriors dressed in precisely fitted steel. Tesla, founded in 2003, has struggled with quality and manufacturing problems, though it has proved to be a fast learner.

When it comes to electric cars, the Germans lag Tesla. The Taycan cannot go as far on a charge as the Tesla Model S and lacks Tesla’s self-driving software, two features that may be more important to many buyers than drag strip performance. The German carmakers are trying to close that technology gap and, they hope, overtake Tesla before it’s too late.

The first manifestations of their efforts are about to hit showrooms.

Audi, which like Porsche is a part of the Volkswagen empire, began production in December of the battery-powered e-tron GT, which will cost more than $100,000 when it goes on sale in March. It shares many components with the Taycan, but its emphasis is on driving comfort rather than setting speed records.

Later in 2022, Audi plans to begin selling the Q4, a compact electric S.U.V. that will be the division’s first model based on the so-called modular electronic toolbox, a collection of components designed specifically for battery-powered cars that will be shared among Volkswagen car brands. The toolbox allows auto designers to make the interiors of electric cars roomier than those of gasoline cars by arraying the batteries and motors in ways not possible with internal combustion engines. Tesla already applies that principle to its interiors, which are known for their spaciousness and lack of clutter.

Carmakers have been using these collections of shared components, often called platforms, for years, but Volkswagen is one of the first mass-market carmakers to develop one specifically for battery power. By building hundreds of thousands and perhaps millions of cars using the same components, Volkswagen, the world’s largest carmaker, hopes to do what it does best: drive down the cost per vehicle with massive production volumes, and beat Tesla on price.

The strategy is helping to hold down the cost of the Audi Q4, which will start around 40,000 euros, about $49,000, in Germany. That is competitive with comparable gasoline cars and in the same general price range as Tesla’s base car, the Model 3.

Next year, Mercedes, a division of Daimler, will introduce the EQS, a battery-powered counterpart to the company’s top-of-the-line S-Class. The EQS, which will cost more than $100,000, will be the first vehicle built with Mercedes’s so-called electric vehicle architecture, the same idea as Volkswagen’s modular toolbox.

Daimler says the EQS will be able to travel 700 kilometers, or 435 miles, on a charge. That would be slightly more than the current Tesla S. In 2022, Daimler will introduce additional models based on the electric vehicle platform, including a battery-powered S.U.V., to be produced at the company’s factory in Tuscaloosa, Ala.

BMW has been slower than its rivals to offer luxury electric vehicles. The company was a pioneer with the battery-powered i3 compact in 2014, but it never caught on with buyers. BMW does not plan to begin producing its own pure electric platform until 2025, instead offering electrified versions of its conventional models.

Pieter Nota, the head of marketing at BMW, told reporters in November that the company did not expect sales of electric vehicles to take off until 2025. “That’s why we are starting our battery-centric platform by then,” he said.

After stealing significant market share from vehicles like the BMW 3 Series and the Mercedes C-Class, Tesla has been showing some vulnerability. Sales in Europe of the Model 3 have been basically flat in recent months after it decisively outsold the European carmakers last year. The Renault Zoe, a utilitarian compact designed for urban use, overtook the Model 3 to become the best-selling battery-powered car in Europe during the first 10 months of 2020.

Volkswagen is trying to undercut Tesla’s lead in battery technology. The company invested $300 million in QuantumScape, a Silicon Valley firm that is developing solid-state batteries. If the new type of battery can be perfected and mass produced, it will cost less, charge faster and go further than current technology.

“If they succeed in bringing this technology to market sooner than Tesla, then Elon Musk has a problem,” said Ferdinand Dudenhöffer, director of the Center Automotive Research in Duisburg, Germany.

Mr. Musk, Tesla’s chief executive, will strengthen his foothold in Europe when his new factory in Grünheide, east of Berlin, begins producing cars in 2021.

The factory, which Tesla announced in November 2019, hit a snag this month when environmental groups won a court order blocking Tesla from clearing trees on a portion of the site. The groups argued that the construction work threatened an endangered species of sand lizard.

But Tesla has strong support from local political leaders thrilled at the prospect of 10,000 new jobs and the presence of a company that is worth far more on the stock market than all of the German carmakers combined.

The main factory building in Grünheide, on a site already approved, appears to be complete. Mr. Musk, who frequently flies in for quick visits, said he sometimes spent the night in a conference room at the factory because “it gives me a good feel for what’s going on.”

“I’m a big fan of Germany,” Mr. Musk said while in Berlin this month to pick up an award from Axel Springer, which publishes the country’s biggest newspaper. “I’ll be spending a lot of time there.”