NIO Capital Ian Zhu: investment opportunities in the era of new energy vehicles

    Dong Dian Keji

    China is a very huge market. In 2016, 28mn cars were sold, accounting for approximately one-third of the global car sales volume. With such a scale, internationally leading suppliers have been attracted to set up plants in China. The traditional automotive supply chain market is relatively sound in China.

    And the new energy vehicles replace engine, the heart of a car for which foreign carmakers have strong technologies, with motor. Moreover, China actually does not lag behind in such important core components for new energy vehicles as battery, motor and electrical control.
    There are very good motor companies in China, and there are also very good component companies in China. China has very good technology accumulation in motor, which is heart of electric vehicles. Another important segment is battery. Traditional battery plants are in Asia, i.e., China, Japan and South Korea. Now China’s battery enterprises are also increasing accumulation while developing rapidly. Many battery enterprises are striving to catch up with Japanese and South Korean enterprises in producing batteries with optimal performance, and may even surpass Japanese and South Korean enterprises in the near future. With such a foundation, it is quite possible that China will surpass its competitors by virtue of new energy vehicles to grow into a great power in the automotive industry.

    Besides, automation and connectivity are also equally important trends that bring about an impact on the automotive industry, and China is backward in neither of them, for example, in the fields of autonomous driving and artificial intelligence, China has strong ability in algorithms. Many students trained by elite schools are among the top few in international AI rankings, and their algorithms are not backward. And to work out a good program, first, you should have algorithm, and second, you should have data. If you are able to apply a good algorithm to the car quickly and accumulate data, in the future, you must provide the best user experience in autonomous driving. So Chinese enterprises will not lag behind in this field either. In the field of IOV, Chinese consumers also have very strong demand. From the perspective of penetration rate of connected cars, independent brand carmakers in China have constructed connected cars quickly than joint venture brand carmakers, so we can see that Chinese carmakers are better positioned to grasp new markets than foreign carmakers. Based on these major trends, China will face a very good chance in the automotive industry.

    China is a very huge market. In 2016, 28mn cars were sold, accounting for approximately one-third of the global car sales volume

    New investment opportunities will also arise from these trends. NIO Capital focuses on four areas in the entire industry chain
    The first area is the electrification of the automotive industry. NIO Capital will invest in complete build-up new energy and electric car brands and component companies that supply to new energy vehicle companies. Even if we invest in a number of complete build-up new energy vehicle enterprises, neither of them may not grab a large share, but if we put them together, the shares may add up to 20%, 30% or even higher. Then the quantity of products supplied by suppliers can be secured. With security of quantity, the cost will be reduced. In addition to complete build-up vehicles, we also focus on core components. If these suppliers can provide batteries and motors with higher performance, they will have the chance to be accepted by carmakers.The second area is the area related to new energy. Because electric vehicles have a profound impact on the energy industry, the energy industry is of the same size as the automotive industry. The emergence of electric vehicles will have a huge impact on the energy structure, there will be great investment opportunities in the construction of basic charging facilities, the application of energy storage and access to renewable energy, etc.The third area is the automation and connectivity of the automotive industry, including autonomous driving and application of IOV.The fourth important area is the investment in new materials. Lightweight car batteries and new batteries can be applied to the field of new materials for electric vehicles.

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