China’s battery makers, car part producers hitch a ride on Tesla’s Shanghai-made electric cars to the top of investor portfolios

A series of events leading up to the unveiling of Tesla’s Model 3 last week fuelled investors’ interest in Chinese parts suppliers

That includes the companies that build charging stations, and even the miners of the lithium used in battery packs

Reading Time:3 minutes

Tesla vehicles coming off an assembly line at its Gigafactory in Shanghai, on January 7, 2020. Photo: Xinhua via AP

Published: 7:15am, 13 Jan 2020Updated: 11:12am, 13 Jan 2020

Companies engaged in the production of batteries and components for electric vehicles (EVs) are enjoying a bull run in China, as they hitch a ride with the first Tesla electric car to roll off the company’s Shanghai assembly.

A series of events leading up to the unveiling of Tesla’s Model 3 last week fuelled investors’ interest in Chinese parts suppliers, including the companies that build charging stations, and even the miners of the lithium used in battery packs.

First, Tesla cut the price of its China-built Model 3 cars by 9 per cent, after securing tax exemptions from the Chinese government. Then, Tesla’s chief executive Elon Musk unveiled a plan to produce the Model Y sports utility vehicle (SUV) in China. To top it off, a Shanghai factory director said Tesla plans to increase its use of locally sourced parts to 100 per cent by the end of 2020, up from the current 30 per cent.

That was a shot in the arms for China’s parts makers, like Tianjin Motor Dies Company, which jumped 82 per cent since early December to a two-year high of 7.36 yuan on the Shenzhen exchange. Investors are piling in not just because of optimism that Tesla’s demand for Chinese parts and raw materials will climb in the coming years, they are also hoping for Tesla to spearhead a top-notch supply chain that can lead to home-made champions, like what Apple did to China’s smartphone industry.

“The impact of the localisation of Tesla on China’s EV car part supply chain could be similar to that of Apple on China’s smartphone supply chain,” said Ian Zhu, managing partner at Nio Capital, a technology-focused fund co-founded by Chinese electric vehicle maker Nio. “China will build a strong and competitive ecosystem of EV car part producers. Many Chinese carmakers will benefit from it, as costs decline and technology advances.”

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x