China’s electric vehicle industry is a mess. Is this a good time for investors to buy into new EV ventures? Two more companies today are hoping the answer is yes.
While there are disputes over how to interpret images of mass graveyards of EVs abandoned by failed ride-hailing companies, dozens of EV companies created to chase Chinese government subsidies are in trouble. The convergence of Tesla’s price war, eye-popping auto sector overcapacity and a slumping Chinese economy points to a shakeout.
That’s why it’s newsworthy that China’s state planner has approved plans by smartphone maker Xiaomi to enter the EV business, as reported exclusively by Reuters colleague Julie Zhu.
Xiaomi needs approval from another government ministry to go ahead with its $10 billion foray into EVs.
China’s industrial policy makers have been slow-walking approval for Tesla’s plans to expand its Shanghai factory and Lucid’s effort to enter the Chinese market. Chinese auto factories can already build 43 million vehicles of all kinds annually – and were running at just 54.5% capacity at the end of last year. China’s economy has gotten worse since then.
The dour dynamics of the Chinese auto sector will drive consolidation deals, Breakingviews columnist Katrina Hamlin writes.
Stellantis is exploring a tie-up with Chinese EV maker Leapmotor, following the lead of Volkswagen, which is collaborating to share EV development with China’s Xpeng.
Hyundai, meanwhile, is looking to offload capacity in China by selling a factory near Chongqing.
The gloomy outlook – and the struggles of EV startups such as Evergrande – aren’t stopping another Chinese EV brand, Zeekr, from moving ahead with plans to launch a $1 billion U.S. IPO, Zhu reported.
Zeekr, part of the Geely automotive empire along with Volvo Cars, will test the interest of investors who may be dizzy from watching shares in Vietnamese EV startup Vinfast since its blank-check IPO earlier this month. Vinfast shares have soared, then crashed, then nearly doubled yesterday.