Continuously leveraging capital strength to promote high-quality development of the new energy vehicle industry

Jia Guanghong

Recently, the 20th millionth new energy vehicle in China officially went offline. Since 2015, China's new energy vehicles have maintained the world's top production and sales for 8 consecutive years, accounting for more than 50% of the global total. In the first half of this year, China exported 534000 new energy vehicles, a year-on-year increase of 1.6 times, ranking first in the world. In order to further promote the development of the new energy vehicle industry, the government has recently introduced policies to continue and optimize the reduction and exemption of new energy vehicle purchase tax, and to support new energy vehicles going to rural areas. At the same time, the "Regulations on the Supervision and Administration of Private Equity Investment Funds" issued in July clearly encourage private equity funds to play an important role in serving the real economy and promoting technological innovation. The author believes that in the critical period of consolidating and expanding the development advantages of new energy vehicles and promoting high-quality development of the industry, it is necessary to further optimize the allocation of capital factors, continue to leverage capital strength to provide a continuous supply of "ammunition" for the industry to step up to new levels, and ensure that China's new energy vehicle industry has great innovation vitality and strong development resilience, becoming a leader in global automotive innovation and development.

Capital Assists China's New Energy Vehicle Industry to Lead the World

At present, the global automotive industry is constantly deepening its transformation, and the supply chain of the industry chain has undergone profound changes. The new industry chain system, which focuses on the core technology of "three electric" and intelligent key components, has replaced the traditional fuel vehicle component system, occupying a dominant position. Lithium resources, chips, and other factors have successively become important factors affecting the stability of the automotive supply chain.

In this round of automobile industry reform, automobile companies, local governments, investment institutions, and others have frequently established or participated in automobile industry funds, and capital has become an important force in promoting the innovative development of the automobile industry. A group of globally competitive enterprises have emerged in China's power battery industry chain. According to SNE Research's global power battery installation data, in the first five months of this year, the total global market share of two leading power battery enterprises in China reached 52.4%, and the six top ten Chinese power battery enterprises in the world collectively accounted for 62.7% of the global market share. The field of intelligent connected vehicles has formed a relatively complete technology chain for intelligent connected vehicles, with independent breakthroughs in key technologies such as autonomous driving, intelligent cockpit, wire controlled chassis, LiDAR, and AI chips, achieving favorable positioning. According to Yole intelligence data, in 2022, four Chinese top lidar manufacturers jointly held over 70% of the global market share; According to Frost Sullivan data, in the field of high computing power autonomous driving chips in the automotive industry, in 2022, the global market share of two leading Chinese SoC companies ranked second and third, respectively, with a total global market share of 11%.

The unfinished business faces numerous challenges and urgently needs capital to continue to exert its power

From a global perspective, China's new energy vehicle industry still faces many challenges. In the downstream vehicle industry, under the background of the "price war", the losses of most car companies continue to deepen. Foreign car companies can quickly return to the "battlefield" by leveraging their brand and financial advantages, utilizing the highly competitive domestic new energy vehicle supply chain, and regaining market share with the "latecomer advantage". In the field of power batteries, although Chinese enterprises have established a significant share advantage, power battery technology continues to iterate. European, American, Japanese, and Korean enterprises are increasing research and development investment in next-generation battery technology such as solid-state batteries. If China's battery industry chain cannot continue to maintain efficient innovation, there is also a risk of being replaced. In the field of autonomous driving, although China's SoC chips can meet the computing power needs of L2+assisted driving, the large computing power chips required for high-level autonomous driving are still subject to human constraints. The supercomputing center chip, which is crucial for improving the efficiency of autonomous driving training, has faced a "bottleneck" situation.

In the past two years, with the adjustment of the stock market, the CSI New Energy Vehicle Index has fallen by more than 40% from its peak, corresponding to the average valuation level of the new energy vehicle sector in the secondary market continuously moving down from over a hundred times PE to the current 20 times PE, which has led to a decline in investment enthusiasm in the primary market. Taking the first half of this year as an example, the number of investment events in the automotive industry is estimated to have decreased by about 30%. Faced with encirclement and interception, the development of China's new energy vehicle industry needs to be vigorously pursued rather than slack off in the middle, and the corresponding capital elements need to be continuously increased and "long-term achievements" are needed.

Various types of capital are struggling, and extensive development is difficult to sustain

Capital has played an important role in promoting the development of new energy vehicles in China. Both traditional car companies and new car manufacturing forces have incubated and invested abroad through industrial capital platforms, filling their weaknesses and strengths, and accelerating the realization of advanced industrial foundation and modernization of the industrial chain. However, the author believes that there are still three major problems in investment around the new energy vehicle industry: short-term investment, disorderly capital investment, and extensive industrial capital.

One is to invest in the short term. The innovation cultivation of the automotive industry requires long-term capital to continuously support early enterprises in the industry chain, and the enthusiasm for investment in the automotive industry has also attracted a large number of transformation funds, guidance funds, and so-called "industrial investment funds" to enter. Its characteristics are short-term and short-sighted investment, pursuing "fast in and fast out". Short term investment has spawned asset foam and industry impetuosity, and created chaos such as "burning money" to create performance and taking IPO as the innovation destination. If the development of the industry falls short of expectations, short-term investment not only cannot accompany enterprises through industrial valleys, but may also "harm each other" and accelerate the decline of scientific and technological innovation enterprises.

The second is the disorder of capital investment. Industry is the backbone of the city, and industrial investment is the center of the backbone. The success of the "Hefei model" has attracted imitations from all parties, but at the same time, new problems have emerged. Various regions have regarded the automobile industry as a key investment attraction industry, but some regions lack the foundation for the development of the automobile industry and the drive of chain owners, resulting in problems such as industrial faults, mutual "digging for the wall feet" of inventory enterprises, policy ineffectiveness and depletion, and "unconventional preferential treatment". Not only has it not formed a combination of industry and finance, but it has also increased the burden on local areas, Encourage some companies to adopt a "short-term arbitrage" mentality. In addition, the recruitment of fund managers with a lack of profound industrial background, and government guidance for funds to go GP further promote the non specialization and disorder of capital.

The third is the extensive development of industrial capital. External investment through industrial capital is an important measure for innovation driven, transformation and upgrading of automobile enterprises. However, due to the fact that industrial capital in China is still in the exploratory stage of assisting enterprise transformation and development, there are still many shortcomings. Industrial capital platforms are different from financial institutions in that they must adhere to a focus on their main business in terms of business direction and strategic investment in terms of business strategy. Some industrial capital platforms have not fully established their core competitiveness, investment investment investment is not precise, and the focus is not enough. It is difficult to implement industrial collaboration, and the role of capital aggregation, industrial aggregation, information aggregation, and project aggregation has not been fully realized.

Utilizing Industrial Capital Tools to Promote High Quality and Sustainable Development of the New Energy Vehicle Industry

Currently, traditional automotive powers such as Europe, America, Japan, and South Korea have raised the development of new energy vehicles to a national strategic level and introduced strong support policies to increase support for local industries. It can be foreseen that the next 5 to 10 years will be a critical period for reshaping the global automotive industry form and pattern, as well as a strategic window period for China to consolidate and enhance its competitive advantage in the new energy vehicle industry and achieve the construction of an automotive powerhouse.

The core of optimizing the allocation of capital elements is to fully leverage the leading role of "industrial" industrial capital, promote high-quality development of the industry, and focus on the positioning of industrial development. Based on the laws of industrial development, technology, and product upgrading, identify key enterprises in key links of the industrial chain, and allocate capital elements in a differentiated and phased manner. The high-quality development of the new energy vehicle industry requires the use of capital tools. On the one hand, it is necessary to use industrial capital's profound understanding of the manufacturing industry to help consolidate China's scale advantage and industrial amplification advantage of new energy vehicles; On the other hand, through industrial capital support, we need to seize new tracks and promote the integration and innovative development of new generation information technology, new material technology, new energy technology, intelligent manufacturing technology, and new energy vehicle technology.

Fully leverage the critical investment power of the automotive industry capital and play a leading role in promoting high-quality development of the new energy vehicle industry. Especially, the industrial capital platform set up by the leading automobile and component enterprises has advantages such as strong financial and technical support from the parent company, accurate market and policy predictions, and continuous empowerment of invested enterprises. Support the expansion and strengthening of industrial capital for such "chain oriented" enterprises, encourage the foundation and empowerment of industries guided by complementary and strong chains, and promote the deep integration and docking of industrial chains, innovation chains, and financial chains. At the same time, strengthen policy coordination, strengthen source control, implement differentiated supervision, guide more policy funds, social capital to increase cooperation with industrial capital, accumulate "new" momentum, layout "new" tracks, and seize the forefront of "new".

The automotive industry capital adheres to the original intention of serving entities and assists in the construction of an automobile power. The capital of the automotive industry should have a correct understanding and grasp of the development laws and characteristics of the industry, and play the key role and enormous value of important production factors. Firstly, it should be a "watchtower" for forward-looking technology in the automotive industry, searching for, identifying, and investing in cutting-edge technologies; The second is to establish a "connecting belt" between the automotive industry, innovative enterprises, and the capital market, leveraging more social capital to cultivate high-quality projects in the automotive industry; The third is to strive for innovation as an "incubator and accelerator", based on talents and resources from both inside and outside the automotive industry, to incubate and cultivate forward-looking technologies, and establish a good production relationship for the combination of new technologies and new markets.

Local governments should strengthen cooperation with industrial capital and optimize capital investment. Capital investment should make good use of capital strength, serve the actual needs of enterprises, continue to gather, build a dynamic industrial ecosystem, and form a continuity and competitiveness of industrial gradient development. The automotive industry capital has natural advantages in terms of investment foundation, investment objectives, industrial resources, and professional attributes. Strengthening cooperation between the government and industrial capital through investment attraction will be beneficial for fully leveraging its advantages, focusing on the financial issues and industrial empowerment needs required for the integrated development and cluster development of the automotive industry, and promoting the high-end, international, and leading development of automotive industry projects.

The realization of high-level technological self-reliance and self-reliance in China's automotive industry cannot be achieved without the support of capital. We should pay attention to optimizing the allocation of capital factors, exerting their positive effects and suppressing their negative effects. We should strive to achieve long-term success through good deeds, nourish the real economy with financial vitality, and promote the high-quality development of China's new energy vehicle industry.