Consolidation in China's electric vehicle space is 'inevitable'

The electric vehicle sector is seeing its “most exciting moment” now — and consolidation in the sector can’t be prevented, says Bain & Company’s Helen Liu.

“I would say that consolidation is an inevitable trend in this industry,” Liu, companion on the consultancy agency, instructed CNBC’s “Capital Connection” on Tuesday. She cited causes such because the electric vehicle sector’s capital intensive and tech-heavy nature.

“Historically, we have seen invisible hands like the market and also visible trends, regulations, navigated the industry through the consolidation trend continuously,” she stated.

On Monday, China’s minister for industry and information technology the nation has “too many” EV makers. Those feedback sparked fears of additional regulatory motion by Beijing, this time focused on the autonomous vehicle sector following earlier strikes in different industries comparable to non-public schooling and know-how.

IHS Markit’s Huaibin Lin stated he sees a low likelihood of regulatory intervention by Beijing in the short-term. Calls by the business and data know-how ministry for consolidation of the auto sector should not new and have been occurring in the final 20 years, he instructed CNBC’s “Squawk Box Asia” on Tuesday.

“We are in [an] ever increasing market where we have been seeing tremendous growth for the past 20 years in auto … sales,” stated Lin, who is supervisor of China automotive at IHS Markit. He added that the brand new power automobiles market is at the moment seeing very robust momentum.

“Are we going to see drastic consolidation within industry itself? We think there’s a big question mark over it as long as the market keeps going,” he stated.

In the subsequent 10 years, you are gonna see a really fierce competitors inside the new power vehicle business. Nobody is aware of who truly is going to outlive in the tip.

Helen Liu

Partner, Bain & Company

Liu from consultancy Bain concurred, saying that development momentum and the outlook for the sector each look extremely optimistic in the mean time. That’s backed by elements comparable to supportive insurance policies and most significantly – buyer acceptance.

“Based on our Bain study this year, we have found that actually, the Chinese customers’ acceptance to the EV is leading the global sort of trends and also, we think that’s increasing continuously,” she stated.

China’s EV growth

For its half, China talked about beforehand that it will like 20% of new cars sold to be new energy vehicles by 2025.

Still, the 2 analysts say it is too early to say who may be a transparent winner in China’s EV space.

“I believe that it might be a little bit too early to tell which brand or which name will win at the end,” Bain’s Liu stated.

Read extra about electric automobiles from CNBC Pro

Beyond competing domestically, IHS Markit’s Lin stated China’s electric automobile makers are additionally anticipated to cope with elevated capital competitors in the subsequent decade.

Some of this competitors might come from longstanding incumbents in the auto sector, he stated, with conventional inside combustion engine vehicle makers comparable to Volkswagen, BMW and Daimler’s Mercedes now arising with “drastic” electrification methods.

“In the next 10 years, you’re gonna see a very fierce competition within the new energy vehicle industry,” Lin predicted. “Nobody knows who actually is going to survive in the end.”

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