The electric vehicle sector is now experiencing its “most exciting moment” and the consolidation of the sector cannot be avoided, says Helen Liu of Bain & Company.
“I would say consolidation is an inevitable trend in this industry,” Liu, a consultant partner, told CNBC’s “Capital Connection” on Tuesday. He cited reasons such as the capital-intensive nature of the electric vehicle sector and technological weight.
“Historically, we have seen invisible hands like the market and also visible trends, regulations, navigating the industry through the trend of consolidation continuously,” he said.
On Monday, the country’s Chinese Minister of Industry and Information Technology has “too many” electric vehicle manufacturers. These comments sparked fears of a new Beijing regulatory action, this time aimed at the autonomous vehicle sector following previous moves in other industries such as private education and technology.
Huaibin Lin of IHS Markit said he saw little chance of Beijing’s regulatory intervention in the short term. Calls from the Ministry of Industry and Information Technology for the consolidation of the automotive sector are not new and have occurred in the last 20 years, he told CNBC’s “Squawk Box Asia” on Tuesday.
“We are in [an] growing market, where we have seen huge growth in car sales over the past 20 years, “said Lin, who is China’s automotive manager at IHS Markit. He added that the new energy vehicle market is currently experiencing a strong momentum.
“Will we see a drastic consolidation within the industry itself? We believe there is a big question mark over this as long as the market continues,” he said.
In the next ten years, you will see very fierce competition within the new energy vehicle industry. No one knows who will really survive in the end.
Helen Liu
Partner, Bain & Company
Liu, from the consulting firm Bain, agreed, saying the momentum for growth and the outlook for the sector look very positive at the moment. This is backed up by factors such as support policies and, most importantly, customer acceptance.
“Based on our Bain study this year, we found that, in fact, the acceptance of Chinese customers in VE is leading the global type of trends, and in addition, we believe it is continuously increasing,” he said.
The EV boom in China
Beyond competing nationally, Lin from IHS Markit said China’s electric car manufacturers are also expected to struggle with increased capital competition in the next decade.
Some of this competition could come from long-time holders in the automotive sector, he said, with traditional manufacturers of internal combustion engine vehicles such as Volkswagen, BMW and Mercedes from Daimler now presenting “drastic” electrification strategies. .
“In the next ten years, you will see very fierce competition within the new energy vehicle industry,” Lin predicted. “No one knows who will really survive in the end.”