China’s Growing Electric Vehicle Industry May See Consolidation

Recent remarks by China’s Minister of Industry and Information Technology that there are “too many” electric vehicle manufacturers reflect a booming electric vehicle market, but they also raise fears of potential regulation in the long run. term, reports CNBC.

Helen Liu of Bain and Company, partner of the global management consulting firm, said in an interview with CNBC that consolidation is an “inevitable trend,” but has happened several times in the industry.

Liu refers to the growing capital that is currently in the industry as well as its technologically intensive nature as reasons why she anticipates consolidation.

“I would say consolidation is an inevitable trend in this industry,” she told CNBC’s Capital Connection. “Historically, we have seen invisible hands like the market and also visible trends, regulations, continuously navigate the industry through the trend of consolidation.”

Others recognize that while consolidation is likely, there does not appear to be any immediate regulatory risk. Huaibin Lin, China Automotive Director at IHS Markit, explained that the Ministry of Industry and Information Technology has lobbied to consolidate the auto industry for the past twenty years.

The rapid growth of the electric vehicle market doesn’t appear to be slowing down anytime soon, with new companies constantly entering the space and the shares of major electric car makers in China, like Nio, continuing to grow.

“Are we going to see a drastic consolidation within the industry itself? We think there is a big question mark about this as long as the market continues to function, ”Lin said.

The Chinese government has already supported space with its target of 20% of new cars being new energy vehicles by 2025.

KARS invests in the growing Chinese electric vehicle market

The ETF KraneShares Electric Vehicles and Future Mobility (NYSE: KARS) invests in Nio and many leaders in the electric vehicle industry in China.

KARS measures the performance of the Bloomberg Electric Vehicle Index, which tracks the entire industry, including exposure to EV manufacturers, EV components, batteries, hydrogen fuel cells and materials raw materials used in the synthesis of the production of parts for electric vehicles.

The index has strict qualification criteria. Companies must be part of the Bloomberg World Equity Aggregate Index, have a minimum free float market capitalization of $ 500 million, and have a 90-day average daily traded value of $ 5 million.

Major holdings of KARS include Tesla Inc at 5.39%, China’s top electric vehicle (EV) producer Nio Inc at 4.72% and BYD at 2.25%.

The ETF has an expense ratio of 0.70%.

For more news, information, and strategies, visit China Insights Channel.

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