New Energy

Latest financial news about New enery in China.
Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters specialized about Chinese companies

New Tesla Plant to Charge Up China’s Electric Car Market? Not So Fast

Bottom line: Cars from Tesla’s Shanghai Gigafactory could pose a short-term challenge to luxury brands like Audi and BMW, and could help to revive the nation’s flagging NEV market longer-term if they move into more affordable terrain.

Tesla charges into China with new factory

This week I’m taking a few steps outside my usual comfort zone and exploring the high-tech realm of new-energy vehicles with a closer look at global superstar Tesla Inc. (Nasdaq: TSLA) I’ve actually followed this company’s drive into the world’s biggest car market for some time, starting with its earliest days when it tangled with a squatter who registered Tesla’s Chinese name.

I’ll review some of Tesla’s earlier bumpy road into China shortly. But I’ll spend the bulk of this piece looking at Tesla’s relationship with China’s currently sputtering broader new-energy vehicle market as it prepares to open a new chapter in its love affair with the world’s most populous nation.

The company has been in the news nearly nonstop here for much of the last year, as it prepares to open the first production base outside the U.S. for its pricey but high-performance electric cars. In this case the plant is in Shanghai, and will start cranking out lower-end versions of Tesla’s mainstay Model 3 sedans at the start of next year. Even the most basic Model 3 model isn’t exactly cheap, with a price tag of 355,800 yuan, or roughly $50,000.

The company made headlines this week when it announced that the China-made Model 3 cars would be eligible for local subsidies, unlike other Teslas that have been sold in the country so far, which have all been imported from the U.S. Such subsidies were quite generous when China was trying to supercharge sales to promote the industry’s development. But they’ve been sharply rolled back this year, and Tesla buyers in China will have to settle for a modest subsidy of up to 25,000 yuan, equating to a relatively modest discount of about 7%.

The much bigger back story here is that China’s electric vehicle market has lost direction since the middle of this year, when most of the generous subsidies for both manufacturers and buyers were canceled. China took the drastic action after earlier subsidies were heavily abused by companies looking to pocket government money, either by pumping out large volumes of very low-quality cars or exaggerating their sales figures.

The latest stats are telling: sales of the vehicles plunged 46% year-on-year in October to just 75,000, following a 34% dive in September. Industry bellwether BYD Co. Ltd., one of the largest domestic manufacturers, posted an even larger 63% decline in November sales.

What’s more, the vast majority of purchases now come from big fleet owners, such as taxi and bus operators. A top executive at General Motors Co.’s main Shanghai joint venture recently estimated that of the 900,000 NEVs sold in the first nine months of this year, just 100,000 were purchased by ordinary mass-market consumers. That’s important because to really succeed in China, NEV makers will ultimately have to convince mass market consumers to buy their products rather than rely on government-linked entities whose decisions often cater to the latest party line.

Tesla to the Rescue?

Amid all the clutter of names like BYD and BAIC Motor Corp Ltd., which rely heavily on such politically-motivated buying, Tesla stands out as a stark exception. Before starting to set up its Shanghai plant, Tesla had no real local backing due to its status as an importer that didn’t bring any major economic benefits to local governments or businesses.

Thus its sales to date have been almost all commercially driven, and most of its customers have been status-conscious consumers willing to pay prices mostly associated with luxury brands like BMW and Audi. I can personally testify that Teslas are a relatively common sight here on the streets of Beijing, and that the cars enjoy a high degree of status and brand recognition among the upwardly mobile Chinese who will be needed to help the company succeed.

That image has been built gradually over the last five years, and has definitely gone through some ups and downs in that time. As I mentioned earlier, the ride was initially bumpy due to a trademark row that was ultimately settled in August 2014. Around that time, Tesla’s founder Elon Musk wowed China by personally visiting the country to launch its first vehicles.

Tesla has encountered another few speed bumps since, including a handful of scandals involving car accidents and some strategy and personnel adjustments in the early years. But at this point, the company does appear to be hitting on all cylinders, so to speak, with its China revenue surging 64% in this year’s third quarter to $669 million – just over 10% of its total for the period.

I talked with a couple of analysts to gauge what the company’s future may hold, with rollout of its China-made Model 3 cars coming in January. Both agreed the company is unlikely to single-handedly recharge the struggling new-energy vehicle market right away, especially since its higher-priced cars don’t really compete with most domestic players. Instead, it’s luxury car makers like BMW and Audi that could feel a slight pinch if and when higher-end Chinese buyers decide to test out the trendier and certainly more politically correct Tesla brand.

One analyst pointed out that Tesla is likely to take a top-down strategy, aiming first at higher-end buyers and then moving to middle-end ones over the next few years as the market and technology mature. He predicted Tesla could roll out one or more models next year priced in the 200,000-plus yuan range, which would mark an important inroad to mid-market affordability at the equivalent of the $30,000-plus range.

The company certainly has the capacity to crank out lots of such mid-priced cars, since the Shanghai plant alone is designed to eventually produce up to 500,000 vehicles per year.

With all that infrastructure and brand recognition in place, not to mention government goodwill following the Shanghai plant opening, the market could well become a major growth engine for Tesla if it doesn’t make any major missteps. That means names like BMW and Audi should watch out in the short term, and that over the longer term Tesla could provide a significant boost to lift China’s struggling new-energy vehicle market out of its current doldrums.

IPOs: What’s Up With Spikes, Declines for Nio, Qutoutiao?

Bottom line: Big volatility for first-week trading debuts of Nio and Qutoutiao point to problems with pricing and investor indecision in the current market, and could point to more rocky debuts for at least the next few weeks. 

Nio, Qutotiao go “pop”, but then fizzle

When I previously wrote about low expectation for an IPO last week by new energy startup Nio (NYSE: NIO), I wasn’t all that surprised when the company notched a more upbeat New York debut with a 5 percent gain on its first trading day. After all, the company had been so beaten down during the IPO process that this was something akin to a dead-cat bounce and a small present for the money-losing company as it entered the publicly traded realm.

But then the stock suddenly soared by more than 70 percent on its second trading day — something one seldom sees with new IPOs. I was tempted to write the whole thing off as manipulation, even though I had no direct evidence, since the company sold around 90 percent of its IPO shares to just 10 investors. That meant that a couple of large investors could have simply traded their huge blocks of shares between each other at inflated prices, and neither would have lost any money in the process. Read Full Post…

IPOs: Meituan-Dianping Listing Shows Signs of Life

Bottom line:  Nio stock is likely to give back most of its huge second day gains over the next couple of weeks, while Meituan-Dianping could debut strongly but will likely stagnate for its first two years as a public company.

Meituan, Nio display surprising strength

It seems that perhaps I was a bit premature earlier this week when I wrote the latest listing by electric vehicle (EV) maker Nio showed investors had lost appetite for money-losing Chinese tech firms. Nio’s stock has actually done quite well in its first two trading days, after a tepid pre-debut reception. And now we’re getting word that money-losing online-to-offline (O2O) services giant Meituan-Dianping has also priced its own mega-offering in Hong Kong at the top of its range.

Such a sudden shift in sentiment seems hard to explain, and I do suspect there may be at least a little manipulation going on behind the scenes. Still, perhaps investors are feeling just a tad more upbeat about Chinese tech these last few days in light of new signs that the US-China trade war may soon ease with new talks scheduled to try to hammer out a deal. Read Full Post…

IPOs: EV Maker Nio Sputters Out of the Gate With Weak Pricing

Bottom line: Nio’s shares are likely to debut flat to down slightly in a lackluster New York trading debut, capping an IPO process pockmarked by investor skepticism.

Investors fail to charge Nio IPO

Wall Street investors will get a taste of a new flavor of Chinese company very soon, when homegrown electric vehicle maker Nio makes its trading debut on Wednesday. But based on all the signals so far, this offering for a company that some have likened to China’s answer to Tesla (Nasdaq: TSLA) could be a major flop. That would be somewhat appropriate given all of the real Tesla’s current woes, which point to the difficulties of building up a major new car maker from scratch.

Nio’s road to New York has been pockmarked with negative signposts pretty much all of the way. The latest of those has media reporting the company has priced its IPO American depositary shares (ADSs) at the very bottom of their range, at a price of $6.25 apiece, raising a total of $1 billion. (English article) That compares with an initial target of up to $1.8 billion, and I’ve heard that even that figure was trimmed back from initial hopes of more like $2 billion. (English article) Read Full Post…

IPOs: Uxin Files in NY, Battery Maker in China, Mindray on ChiNext

Bottom line: New listing plans by used car platform operator Uxin, EV battery maker Amperex and medical device maker Mindray should all do well, driven by strong growth potential and their leading positions in China.

Bumper crop of new China IPOs headed to market

The latest IPO season for Chinese firms is kicking into high gear on both sides of the Pacific, with announcement of several hot new offerings that each has a slightly different story to tell. At the head of the class is a new listing for used car platform operator Uxin, which is aiming to raise up to $500 million in New York.

That’s followed by a listing plan for electric vehicle battery maker Amperex, which is having to settle for a sharply-lower valuation than it had been originally seeking with a listing in China. Last but not least there’s medical device maker Mindray, which de-listed from New York and has just submitted a plan to list on China’s enterprise-style ChiNext board, after its initial plan to re-list on one of China’s larger main boards was rejected. Read Full Post…

NEW ENERGY: Tesla Takes Its Time With China Plant

Bottom line: Tesla’s announcement that its China plant is three years away puts a clear and realistic timeline on its intentions, which include strong growth in the market banking on supportive policies by Beijing.

Tesla gets realistic about China car production

Anyone who was hoping that electric car superstar Tesla (Nasdaq: TSLA) would start cranking out its products in China anytime soon will have to think again. Founder and celebrity CEO Elon Musk has poured cold water on all the speculation about his company imminently building a China manufacturing base by saying local production is at least 3 years off. That’s just a single data point, but it’s quite a significant one considering all the talk that’s been swirling around these days.

That talk dates back a couple of years, when reports first emerged that Tesla  was interested in such a move. One of the stumbling blocks all along has been the ownership issue, since China now limits foreign ownership of any car-making joint venture to 50 percent. But that looks set to change, which had fueled speculation that Tesla would step on the gas pedal once it got the green light, pardon all the car metaphors. Read Full Post…

NEW ENERGY: ReneSola, Canadian Solar Focus on Plant-Building as New US Tariffs Loom

Bottom line: Diversification moves away from manufacturing by Canadian Solar and ReneSola could bring more stability to the companies, while panel makers are likely to take a big hit from new US anti-dumping measures.

ReneSola, Canadian Solar in new diversification moves

A trio of solar energy stories are in the headlines that underscore difficulties panel makers are facing due to a recent glut that looks quite typical in this highly cyclical sector. Two of the stories reflect a trend that has panel makers trying to diversify into the less cycle-prone business of solar plant building, with major new developments from Canadian Solar (Nasdaq: CSIQ) and ReneSola (NYSE: SOL). The third has a research house predicting demand for the panels, which are the main component of such plants, could dive by up to half in the US this year, following a major new anti-dumping ruling by Washington.

Again, all of this shows that the world is still swamped with too much solar panel-making capacity and is in sore need of a downsizing. The main obstacle to that is coming from China, where many companies have slipped into the loss column but refuse to slim down due to resistance from local interests intent on staying in the business come hell or high water. It’s a bit unclear who will blink first in this battle to stay in business, though in this kind of war the market usually determines who emerges as victor. Read Full Post…

NEW ENERGY: BYD Wins Hometown Business, Launches Monorail

Bottom line: BYD’s new order from Shenzhen shows its continued reliance on state support for new energy vehicle sales, while its new monorail product could become a cash cow in 1-2 years if the technology works well.

BYD gets new order from Shenzhen, launches monorail

Futuristic transport company BYD (HKEx: 1211; 002594) is in a couple of headlines as the new work week begins, seeking to show its potential and justify why people like billionaire investor Warren Buffet should buy and hold its shares. One headline has the company announcing a major new contract for its core electric vehicles from its hometown government of Shenzhen. The other has the company formally launching its newest business helping cities build monorails.

I’ll admit I wasn’t even aware of the company’s monorail plan, which apparently is aimed at providing cheaper mass transit alternates for big cities to traditional subways and light rail. The idea certainly sounds interesting, though we would probably require a more seasoned urban transport expert to talk about the pros and cons of such systems. Still, it does show the company is trying to innovate and stay ahead of the curve. Read Full Post…

NEW ENERGY: Solar Panel Makers Face New Storm From India

Bottom line:  India is unlikely to levy anti-dumping tariffs on Chinese solar panel makers, despite the likelihood that it will launch an investigation.

India set to launch anti-dumping probe on Chinese panels

The news just seems to be getting worse and worse for China’s embattled solar panel makers. First the group was hit a few years back by anti-dumping tariffs from the US and Europe, and more recently the highly cyclical industry has gone into a downturn that has pushed a growing number of players into the red. As if that wasn’t bad enough, media are reporting that India may be getting set to launch an anti-dumping investigation against the group.

The news has been spooking investors somewhat, but not as much as you might expect. In fact, most of the solar shares have been on a rally for the last month, and have pulled back a little in light of this news from India. Perhaps that’s because some are saying an anti-dumping probe will take at least a few months to complete, and also that it’s far from clear that India will actually rule against the Chinese companies. Read Full Post…

NEW ENERGY: Tesla EV Plan Lands in Shanghai — Again

Bottom line: Tesla is likely to announce a new $9 billion electric car joint venture in Shanghai within the next two months, which could begin production as the industry starts to gain traction in the next 1-2 years.

Tesla on cusp of electric car JV

Almost a year to the day after media reported an imminent deal that would see electric car maker Tesla (Nasdaq: TSLA) set up a plant in Shanghai, new reports are emerging saying the long delayed deal will finally be announced. Anyone sensing a bit of “boy who cried wolf” with the latest reports is probably justified in feeling slightly skeptical. But I would quickly add this time perhaps we could finally see an announcement. It may not be as imminent as the reports are indicating, but perhaps within the next month or two.

Anyhow who feels compelled can go back and look at the reports a year ago, at which time I also predicted an announcement could be coming in the next month or two. (previous post) I tend to probably believe such reports a bit too much, mostly because China is a famously leaky place for such news. But that leakiness means that talks for deals often get out when they’re still in the relatively early stages, whereas in the west most such leaks don’t occur until the deal is nearly done. Read Full Post…

INTERNET: Tencent in High-Powered Mapping Investment with Europe’s Here

Bottom line: Tencent’s new investment in Nokia’s former mapping unit Here reflects the Chinese herd mentality to pile into new technologies, but also looks like a relatively savvy way to enter the space by pairing with experienced partners.

Tencent ties with mapping giant Here

Internet giant Tencent (HKEx: 700) doesn’t want to be left behind in the race with rivals Baidu (Nasdaq: BIDU) and Alibaba (NYSE: BABA) into self-driving new energy cars that may someday dominate the streets of both China and the world. That appears to be the message from the latest headlines, which have Tencent involved in a somewhat complicated deal that will give it a small stake in a high-powered mapping company that counts car giants BMW, Daimler and Audi as its main investors. Read Full Post…