23 August 2019

Are e-cars ready to take off in China, or not quite?

Enjoying the government’s policy blessing, the new-energy vehicle sector is generally seen as having a bright and prosperous future in China. However, within the industry itself there are mixed opinions as to whether the alternative-powered cars will indeed ride their way into glory anytime soon. Some players are confident they will be able to reap the rewards quickly, while others feel the sector won’t be profitable for at least 10 years from now.

Leading the bullish camp is BYD Co. (01211.HK), which has been the poster child for electric cars in China since the new-energy revolution began taking root in the country in the last decade. The group plans to launch its luxury electric car Denza {騰勢} officially later this year, marching towards the goal of becoming the Tesla of China.

Denza is being produced via a joint venture with Daimler, with both the partners providing key inputs in the design and development as well as electrical engineering aspects of the new vehicle range.

The move indicates that BYD is confident about the market prospects for electric cars in China. And, it is not the only one to think so.

Car dealer Pang Da Automobile Trade (601258.CN) told the China Securities Journal that the firm will become the exclusive retailer of the luxury electric car in Beijing.

Pang Da feels the car will create hype in the market; so, it is going all out to capture the potential. The retail strategy has already been mapped out, and Pang Da is preparing to fire on all cylinders once Denza sets the official selling price. According to media reports, the price will be around 400,000 yuan (US$65,000).

While both BYD and Pang Da are pinning lot of hopes, some industry players are however taking a far more conservative view on the sector’s prospects.

Power supply system manufacturer Beijing Dynamic Power (600405.CN), for instance, believes the electric car sector will not make money for another 10 years.

As an upstream player, the group has set up a subsidiary in Shenzhen, where it can track the latest developments in battery technology. Also, it has sought patents for some of its technologies. That said, the group is adopting a wait-and-see approach, refraining from aggressive investment at this stage.

The company told the Securities Journal that standardization of the battery and the sky-high price of the vehicles are the two main problems that need to be resolved.

Traditional car maker Beiqi Foton Motor (600166.CN) also has a cautious view on the short-term future of the new-energy automobile sector.

For the automaker’s management, the electric car segment is still a concept, at least for now.

To buttress its case, Beiqi Foton cited tepid sales of hybrids, noting that electric cars are still far too expensive to become popular.

The selling price of an average gasoline-powered commercial vehicle is about 70,000 yuan, while an electric car could cost several times more.

“Prices of hybrid cars are normally higher than the traditional cars by around 100,000 yuan, and the sales of the former have not been able to catch up, let alone pure electric cars, which are much more expensive,” a company official told the Securities Journal.

– Contact the writer at [email protected]


EJ Insight writer

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