In the past few weeks, we have seen the report cards delivered by the various electric vehicle car companies. And most, if not all have doubled in sales compared with their previous financial year. Tesla for example has delivered more than 300,000 cars during the 2021 fourth quarter alone, hitting record sales numbers and exceeding the general market expectation of ~260,000 cars. With subsidies falling by as much as 30% (https://www.cls.cn/detail/907260), some EV carmakers have already announced plans to increase prices for their vehicles.
Given that sales figure is one of the most important metrics for EV market evaluation, it has reflected strong demand and also EV car makers’ ability to scale up their supply. It has also cleared the air about the global shortage of computer chips.
So, should we be worried about the gradual removal of subsidies and future price hikes? I don’t think so. As we speak, the EV car market has already transited from policy-driven to market-driven. It was also made clear in 2020 policy announcements that subsidies will gradually decrease by 10%, 20%, 30% respectively from the previous year’s base during 2020 to 2022, hence within the market’s expectations. As a result, Tesla has led the way to increase prices for Model 3 and the Model Y. Though Tesla has benefited from strong local demands, future sales could still be affected if other makers decided not to follow suit.
In summary, the future remains bright for EV makers. As projected by analysts, in 2022 we should be seeing more quality products coming from the likes of BYD and NIO, and local sales could reach more than 5.1 million units. Valuations are definitely at a very high level hence we recommend focusing instead on the leading companies within the industries’ smaller segments. For example, areas with high barriers to entry like ternary anode integration and anode material integration.
