If you have ignored the electrification of the global auto fleet and marked up sales of electric cars to date simply to overzealous environmentalists and idealistic northern Europeans, this report from the WSJ should catch you attention.
The Chinese government’s heavy hand in all economic matters in China is now driving electric vehicle sales in the country. China is the world’s largest electric vehicle market and it is poised to get bigger.
The question now for investors isn’t whether the global auto market goes electric, but which companies will profit from the trend. If you are putting your chips on electric car manufacturers, you may have placed the wrong bet. China is subsidizing its electric car industry and every country has its own auto manufacturing champion. Demand for electric cars is going to increase, but you can be sure there is going to be a whole lot of supply as well.
Trefor Moss explains how China is creating an electric car market all its own:
China has created the world’s largest electric-car market by sheer force of will, a giant bet on domestic production that’s leaving major foreign auto makers scrambling to keep up.
The government is funding its own manufacturers, luring domestic buyers with subsidies and building a vast charging-station network—while strong-arming its consumers by making sure buying an electric car is the only sure way to get license plates in crowded cities.
William Zhou, a 33-year-old software-company manager, recently abandoned his 18-month quest to buy a gasoline-powered foreign car—a middle-class status symbol—when his wife became pregnant.
He drives in gridlocked Shanghai, where severe restrictions on issuing license plates for new gas-powered cars don’t apply to electric or plug-in hybrid models. He settled for a Chinese plug-in hybrid because “I didn’t want to waste any more time and energy on the license plate.”
In the U.S. and elsewhere, there is some skepticism about whether electric vehicles will be a significant market soon. China has made up its mind. One goal is to curb pollution and reduce reliance on foreign oil. China’s chief aim, though, is to use the emerging electric market to improve the patchy quality of its domestic auto makers. To that end, it is using industrial-policy measures to create a giant test bed for its companies’ designs and technology.
Read more here.
Jeremy Jones, CFA
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