Small Electric Cars Big in China
China boasts the largest automobile market in the world with huge domestic demand. It’s a red ocean on the electric production side, though, with more fragmented players than you can count trying to stay afloat and be noticed by investors.
The nation’s highest-profile electric car manufacturer is NIO, but it’s also the most likely to go insolvent testament to how difficult the market is over there. NIO specializes in supercars. It burns through cash faster than rival combustion engine cars burn through fuel, so a big red flag there for investors. The government is suspicious about a bailout.
The nation’s biggest electric car manufacturer by sheer production volume is BYD, backed by Superinvestors Warren Buffett and Charlie Munger. Its cars are a little on the small side per Western standards, but that gives rise to a domestic edge as rival models imported from the Americas are built to carry larger passengers!
BYD’s batteries are also world-class, but world-class isn’t best in class, so most observers do admit the firm’s still playing catch up to Tesla there.
It’s in the electric trucking market where investors gawp. China is the country to beat with over 6,000 wagons on the road already compared to just 222 in Europe and the United States combined, and BYD is at the forefront. It’s even designed a super-silent electric garbage truck!
The test is coming now with Tesla hoping to bring a semi-truck into volume production in 2021 and Nikola on the prowl for a good factory to build its own hydrogen-powered truck. If Nikola’s 14,000 pre-orders come to fruition, and those are global sales, this market will be too close to call. It could end up as a showdown of governments.
There are more climate policies in place in Europe and the United States than in China to separate firms neck and neck, and more generous subsidies on the production side. These help new car-makers scale up to match the unit economics of established brands.
The Chinese government, however, is expected to intervene far more in elevating its own, so investors will probably hedge internationally no matter what winner they pick. It’s all information for investors to crunch, but remember, consumers will get the last word!
