China’s warning about an overcrowded EV market to strengthen first movers, squeeze out fringe players

Name: Luxury shopping centres open new battleground for China’s electric car makers
Uploaded: 2021-09-19T23:30:23.000Z
Duration: 2 min 52 s
Description: Luxury shopping centres open new battleground for China’s electric car makers

China has too many EV companies, many of them small and scattered across the country, Beijing said this month

Well capitalised industry first movers to benefit from any industry shake-out, analyst says

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Chinese EV makers have not had a great year so far in New York and Hong Kong as the government warns there are too many players in the market. Photo: AP

Iris Ouyang

Published: 7:30am, 20 Sep 2021Updated: 9:11am, 20 Sep 2021

China’s warning against overbuilding in the electric vehicle (EV) industry is likely to underpin current industry leaders and support their valuations in a market backed by global money managers, analysts said.

The ministry of industry and information technology this month called for local EV players to consider consolidation and avoid wastage, as more than 500 assemblers joined Xpeng, NIO and Li Auto in chasing windfalls in the world’s biggest cars market. Capacity utilisation in the country’s car-making industry fell to 48.5 per cent in 2020 from 66.6 per cent in 2017, official data showed.

The note of caution came amid a crisis at China Evergrande Group – the Shenzhen-based developer is seeking buyers for its EV unit to ease a liquidity crunch, even before rolling out its first car. A global shortage in automotive chips has also forced carmakers to idle their plants or ration supplies.

“The government’s encouragement benefits leading carmakers and EV manufacturers because they have more resources to purchase the capacity left by other producers” in any industry shake-out, said Tony Shen, analyst at SPDB International in Hong Kong. The chip shortage could last through 2022 or 2023 at most, and fringe EV players could face difficulties in achieving their sales goals, he added.

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Luxury shopping centres open new battleground for China’s electric car makers

The MSCI China All Shares IMI Future Mobility Index, a gauge tracking 116 producers and battery makers, has risen 159 per cent in the 12 months through August, led by gains at the likes of Geely Auto, NIO, BYD and battery giant Contemporary Amperex Technology.