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China's electric car surge: roadblocks and opportunities

Managers share their views on the investment outlook of electric cars

Citywire AA-rated Aisa Ogoshi, JP Morgan Asset Management
Portfolio manager

Despite the government’s incentive program to promote new energy vehicles (NEVs), actual penetration of electric vehicles (EVs) in China remains low.

Many local original equipment manufacturers will likely struggle once the NEV subsidies are phased out. 

In order to make NEVs more affordable, automakers would have to commit to high investments, which, in turn, would affect their financial results.

Meanwhile, sales volumes of NEVs may suffer in the future due to the emergence of Mobility as a Service businesses.

 

 

 

 

 

 

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Citywire AA-rated Aisa Ogoshi, JP Morgan Asset Management
Portfolio manager

Despite the government’s incentive program to promote new energy vehicles (NEVs), actual penetration of electric vehicles (EVs) in China remains low.

Many local original equipment manufacturers will likely struggle once the NEV subsidies are phased out. 

In order to make NEVs more affordable, automakers would have to commit to high investments, which, in turn, would affect their financial results.

Meanwhile, sales volumes of NEVs may suffer in the future due to the emergence of Mobility as a Service businesses.

 

 

 

 

 

 

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Fabian Smeets, NN Investment Partners
Head of research, sustainable equity investments

Though we are bullish on EV demand in the next few years, we are not playing any EV manufacturers at the moment.

This is because we believe it will be difficult for the EV manufacturers to become cash flow positive.

This is despite the Chinese government’s efforts to stimulate the expansion of NEV production and the battery supply chain in the past few years.

 

 

 

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Citywire A-rated Jian Shi Cortesi, GAM
Portfolio manager, China and Asian equity strategies

China auto sales had a year-on-year decline in August, although electric vehicle sales continued to see a strong increase.

Localisation, batteries, electric cars and autonomous driving are all themes to play in the Chinese auto sector, as all these areas have good long-term potential.

Auto parts suppliers that focus on energy efficiency are good investment candidates, given the tax incentives for energy-saving vehicles.

 

 

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Naomi Waistell, Newton Investment Management
Portfolio manager, emerging and Asian equity team

The investment community has focused a lot of attention on the raw materials that go into electric vehicles and the batteries that support them.

We pay particularly close attention to lithium and cobalt, as the EV market accounts for about 45% of their usage.

We are already invested in a range of EV-related stocks, and within this landscape we see most value accruing to battery manufacturers and lithium producers.

 

 

 

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George Saffaye, The Boston Company
Global strategist

Lithium is an essential component of the batteries that will power the EV revolution.

Current global production of lithium is highly concentrated, both geographically and in terms of corporate ownership.

Mewanwhile, power is another important commodity that could be affected.

As the uptake of EVs continues, the consequences for how we generate and store electricity could be far-reaching. This is a key component of our ‘electrification’ theme. As more and more people buy EVs, power management will be critical.

 

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Felix Lam, BNP Paribas Asset Management
Senior portfolio manager, Asia Pacific equities

We continue to prefer the larger automakers in the long run, simply because scale continues to be more important in the industry.

The largest players are spending so much more on research and development and technology acquisition that it is hard to see the others keeping up.

We continue to closely monitor the developments of new technologies in the auto industry, whether it is car batteries, power semiconductors or driverless systems.

 

 

 

 

 

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Related Fund Managers

Aisa Ogoshi
Aisa Ogoshi
1/112 in Equity - Asia Pacific Including Japan (Performance over 3 years) Average Total Return: 35.71%
Jian Shi Cortesi
Jian Shi Cortesi
7/74 in Equity - China (Performance over 3 years) Average Total Return: 33.39%