Two Chinese electric vehicle firms to watch in 2015
- China is restricting the issuing of car licence plates, to curb smog and congestion
- The rules are less strict for electric cars, creating opportunities for this market
- Carmaker Kandi will release electric models this year, aimed at budget buyers
By Neil Flynn
Earlier this month, I discussed how restrictions on issuing new license plates in major Chinese cities would see car purchase growth decline. The restrictions are designed to reduce traffic congestion in city centres and reduce pollution, which is why electric vehicles either have much more lenient restrictions imposed on them, or are exempt entirely.
The firm’s largest shareholder is Beijing Automotive, which holds a 25.02% stake in Atieva, and the two are currently developing an electric vehicle that will cost about 500,000 yuan ($80,750). Although the branding of the car and whether or not Leshi is involved have yet to be announced, Beijing Automotive expects the car to be more advanced than innovative US carmaker Tesla in terms of technology and to have a driving range of more than 400 kilometres. If true, this would certainly but pressure on Tesla in China, who’s cheapest Model S begins at 649,000 yuan, and have recently announced that sales in China for the fourth quarter are down.
The in-car telematics system would be able to collect big data and uploaded to the cloud, at a forecasted rate of 10GB per hour, which would allow for valuable analytics of driver behaviour.
On the rise ... Leshi's share price trend (yuan)
Typical consumers in this market are first time car buyers who don’t own a licence plate. With licence plates in large cities being both expensive and difficult to attain, these buyers are effectively being priced out of the market. Electric cars have much less stringent restrictions, as local governments are aiming to reduce both traffic and pollution, so they offer a viable alternative to this large demographic of buyers.
Kandi has formed a joint venture with domestic manufacturer Geely in order to form a car rental service. The concept is interesting because users can visit one of the joint venture’s ‘vending machines’ and pay 20 yuan an hour to hire an electric car. Speaking from experience, taxis are notoriously difficult to find in Hangzhou, and the metro is under-developed for a city of its size, which also makes walking inconvenient. Whilst it would be unrealistic to expect traffic congestion to fall considerably in the short run, it provides a genuine alternative to driving a car into the city centre, and to car purchase decisions.
This rental model has been adopted in other cities, as the joint venture began selling vehicles to several new leasing companies in Chengdu (which has an urban population of 7.4 million), Guangzhou (11 million) and Changsha (3.6 million) in December.
However, 2015 looks set to be an important year for Kandi as it will release several new cars to target this market. As well as releasing two new city cars, the K12 City Beauty (C) and the K13 City Cowboy (R), the firm will release the 5-door 4-seat KD17 Cyclone (L). Of the planned releases, this car has the potential to help Kandi break into the mainstream market. In addition to the three planned releases, photos emerged in September of a Kandi electric SUV based on the Geely Emgrand 7 RV. Whilst little is known about the SUV, if it is produced, it will help the firm to rival BYD and other manufacturers in the family car market.
– Edited by Robert Ryan
Neil Flynn is head equity analyst at Chinese Investors. Follow Neil or post your comment below to engage with Saxo Bank's social trading platform.