Here’s why big investing firms are steering clear of China’s expensive, underperforming new-energy car sector
- Big investment firms are bearish on Chinese EV makers
- Beijing slashed subsidies on EV cars this year, hurting sales
Big investing firms are driving right by new energy vehicle makers in China, saying they have a lot of proving to do before their shares become attractive.
As a whole, EV makers are way overpriced, have delivered losses to shareholders in a year the Shanghai Composite Index is up 21.5 per cent, and face a push by Beijing for localities to stimulate car sales that will mean tougher competition from combustion-engine rivals.
Meanwhile, Beijing has cut back subsidies by 60 per cent that boosted sales of environmentally friendly vehicles, spurred tremendous innovation and made China the world’s leading EV market.
Share prices of top players such as BYD, BAIC Blue Park New Energy Technology and SAIC Motor have tumbled this year. But not far enough for Xufunds Investment Management and Hengsheng Asset Management, which says it will continue to avoid the sector.
“It’s not a good entry point at this stage because the cut in subsidies has had a huge impact on the industry,” said Wang Chen, a partner at Xufunds Investment in Shanghai. “Sales will hardly pick up in the foreseeable future, unless there’s a big breakthrough in the technology, such as charging and the use of batteries, which can once again fuel sales.”
After years of explosive growth in the EV sector, the government decided to slash the subsidies for new-energy car purchases by two thirds on average starting this year.