Capital no longer believes in fuel cars.

As the impact of the COVID-19 pandemic gradually subsides, the automotive industry is at a pivotal moment of industrial innovation after a year of challenges. On one hand, there is an overcapacity of battery raw materials, especially lithium iron phosphate, with bottlenecks in new technologies increasingly emerging. On the other hand, market competition is becoming more intense, and the slow growth in product sales has not kept up with the rapid expansion of capacity, implying that the industry may continue to experience a reshuffling over the next few years.

In the end-consumer market, the overexpansion of new infrastructure projects is gradually converging. Although the ratio of charging piles to cars is quickly decreasing, the actual utilization rate is still less than 10%. At the same time, the financing market is indeed showing some warning signals — after years of rapid growth, car companies are seeing a decrease in financing amounts, and the number of mergers and acquisitions in the automotive industry, as well as the total amount, have significantly decreased.

Under the watch of capital markets, transactions in new car-making forces, batteries, and autonomous driving technology account for nearly half of the upstream merger and acquisition cases. The electric vehicle field is undoubtedly the standout in the overall car market. Looking forward, how to cleverly use existing advantages and continue to lead the market is a considerable challenge for every enterprise in the new energy vehicle industry chain.

The report reveals that among the numerous transactions, enterprises in the field of electrification and intelligent driving have become hotspots for capital pursuit. Market leaders such as Contemporary Amperex Technology Co. Limited (CATL), Coda Technology, and Gotion High-Tech have had outstanding performances in financing, indicating that electrification and intelligentization are development trends that the industry cannot ignore.

Regarding the battery technology used in new energy vehicles, there are mainly two types: lithium ternary batteries and lithium iron phosphate batteries. Lithium ternary batteries are often used in high-end models due to their long endurance, while lithium iron phosphate batteries with lower energy density are common in mid-to-low-end models in the market. Despite falling prices due to the overcapacity of lithium iron phosphate batteries, this has not hindered the pace of technological breakthroughs in this field, such as the rise of sodium-ion and solid-state battery technologies.

As the core component of new energy vehicles, innovation in battery technology and the improvement of energy efficiency have always been the focus of the industry’s pursuit. Whether it is CATL’s sodium-ion battery, Polestar and StoreDot’s semi-solid-state battery, or Geely Group and WeLion New Energy’s research and development of solid-state batteries, they all signify the relentless efforts of enterprises in the industry in battery technology innovation.

In terms of autonomous driving technology, market enthusiasm has gradually faded in comparison to battery technology. The commercialization of L4-level autonomous driving is not progressing smoothly, and the industry has collectively entered a more rational cooling-off and ebbing period. Some leading companies are starting to look for breakthroughs in specific scenarios such as parking and docks by exploring new business models with L2 or L3 level autonomous driving, instead of the higher but challenging L4 level.

Currently, as autonomous driving technology rapidly evolves, Tesla CEO Elon Musk’s claim of introducing Robo Taxi (an autonomous ride-hailing service) in August has garnered immense attention. This progress has undoubtedly increased investors’ interest in Tesla.

Cathie Wood, a well-known investor, predicts that Tesla’s stock price is expected to soar to $2000 by 2027. Compared to the current stock price, this forecast implies a tremendous growth in Tesla’s stock price over the next few years.

Currently, Tesla’s FSD (Full Self-Driving software) version has been updated to V12.3.3. According to feedback from international users’ test drives, the performance of FSD is increasingly approaching that of human drivers, with impressive technical capabilities, maintaining its position as an industry pioneer.

In the field of whole vehicle manufacturing, many enterprises are facing transformation challenges, and competition is intensifying; transaction amounts and average transaction volume in the whole vehicle manufacturing field have declined. Despite this, investments in the new energy vehicle sector continue to heat up.

The ratio of new energy passenger and commercial vehicles is rising rapidly, with the transaction amount for commercial vehicles almost quadrupling on the basis of 2022; the transaction amount for the intelligent commercial vehicle market has doubled.

Facing the cancellation of the new energy vehicle purchase subsidy policy, several car companies such as BYD and Volkswagen have announced price increases. However, Tesla has reduced prices against the market trend, with price adjustments for its Model 3 and Model Y, sparking price competition in the domestic new energy vehicle market.

Domestic car companies such as BYD, Wuling, Changan, and Neta have also begun to adjust their prices accordingly. At the same time, sales of domestic “second generation” car companies like GAC Aion, Dongfeng Lantu, and SAIC Zhiji have shown significant growth, with smartphone manufacturers such as Huawei, Xiaomi, and Meizu joining the car-making industry, intensifying market competition.

It is worth noting that although the market competition is fierce, only a few car companies such as Tesla, BYD, and Li Auto have achieved profitability; most car manufacturers are still operating at a loss. Enterprises must raise funds through the capital market to survive and maintain cash flow.

Cross-border mergers and acquisitions bring more possibilities to the whole vehicle manufacturing market, with companies such as Chery, NIO, and Lixiang having obtained overseas financing, striving to survive in the highly competitive market.

The expansion of the new energy vehicle market has also stimulated investment growth in new energy infrastructure construction such as charging piles and battery swap stations. By the end of 2022, the number of new energy vehicle charging piles in the country exceeded 5.209 million units, 6.7 times that at the end of 2018.

In recent years, the rapid expansion of China’s infrastructure has also led to a series of problems. According to the latest data, by the end of 2022, the ratio of new energy vehicles to charging piles in China was 2.5:1. In comparison, Europe was at 15:1, and the United States was at 17:1. It is expected that by 2025, this ratio will reach 2:1, and by 2030 it is hoped to achieve the ideal state of 1:1. Undoubtedly, the expansion of the charging pile network has played a key role in promoting the development of China’s new energy industry and is one of the important factors for China’s leading position in the commercialization of global new energy vehicles.

However, at the current stage, the effective utilization rate of domestic charging piles is less than 10%, with a severe imbalance between capacity and demand, resulting in many companies having to rely on financing to “bloodmake” in order to maintain operations. In addition, numerous automakers like NIO and Geely are actively constructing their own charging stations. While the intention behind this practice is commendable, when faced with the reality of high construction costs and long investment recovery periods, along with escalating price wars and the pressure of corporate revenue losses, the planning of charging infrastructure becomes particularly complex.

In response to this, the industry is quietly undergoing changes—more and more automakers are moving towards a cooperative model of building and sharing charging and battery swap stations, to improve the utilization efficiency of charging piles and accelerate the development of the charging network ecology. Last July, seven major global automakers, including General Motors, BMW, Honda, Hyundai, Kia, Mercedes-Benz, and Stellantis announced plans to invest at least $1 billion to jointly establish a company to build an electric vehicle charging network, with plans to install at least 30,000 fast-charging stations by 2030. In the field of charging infrastructure, going it alone is clearly not a sustainable strategy, and cooperation for mutual benefit seems to have become the new path for corporate development.

Regarding the issue of new energy capacity, the U.S. Treasury Secretary Janet L. Yellen expressed concern about China’s excess new energy capacity during her visit to China, sparking widespread discussion in the industry. At first glance, the surplus of raw materials and automotive capacity, along with the long-standing presence of price wars, seem to confirm this concern. However, by looking at it from a different angle, we might have a different understanding. By 2023, the global sales of new energy vehicles surpassed 15 million units, with China’s sales reaching 9.3 million units, accounting for 60% of global sales. In terms of exports, China has become the world’s largest automobile exporter, with the export volume of new energy vehicles reaching 1.2 million units, an increase of 83.5% year-over-year.

Looking at the global market, China’s new energy capacity is far from being surplus, but on the contrary, it provides a strong impetus for the global development of new energy. For domestic automakers, since they face fierce competition, it is worth considering turning to overseas markets to find new growth points.

From a global market layout perspective, Europe and Southeast Asia are the two main markets that Chinese new energy automobile enterprises focus on. For example, Thailand has become the main battleground in Southeast Asia for automakers such as BYD, Nezha, Great Wall, and SAIC, which have announced the establishment of factories in Thailand to produce electric vehicles; at the same time, NIO and Xpeng are also turning their attention to the European market, establishing sales networks in several European countries. Although the internationalization of China’s new energy vehicles still has broad prospects, the concept of global development of new energy vehicles is on the rise, and trade protectionism could also become a new challenge. Taking the European Union as an example, last September, the President of the European Commission Ursula von der Leyen proposed the possibility of launching an anti-subsidy investigation against Chinese electric vehicles, mainly for fear that the large presence of Chinese electric vehicles in the EU market could pose a threat to the local electric vehicle industry.

According to the latest trends, if the actions of Chinese new energy vehicle companies in overseas markets become a reality, they may have to face tariffs as high as 10% or more, which would undoubtedly increase their export costs. For the first two months of this year, data reveals that the number of electric vehicles sold by China to the 27 EU countries slightly exceeded 75,600, a 19.6% decline compared to the same period last year. In view of this dual pressure, industry insiders have intensified their concerns about China’s market potentially becoming an “electric vehicle island.”

However, we must face a fact: the current state of global warming has spurred a new round of technological revolutions and industrial transformations. Electrification, intelligence, and low carbonization have become the new trends in the development of the automotive industry, with new energy vehicles becoming a key choice for countries to promote economic and social transition toward green and low-carbon directions.

At present, China’s new energy vehicle industry is facing a concentration of mergers and acquisitions activities among leading enterprises and a slowdown in the overseas listing process, demanding that these enterprises enhance their own “hematopoietic” capacity. Seeking a balance among technology, profitability, and market growth has become particularly important. If this balance is not found, companies may face the fate of bankruptcy or acquisition.

From another perspective, the industry’s shuffling and restructuring can also be seen as a way of market clearance. Just as the capital market’s confidence in traditional fuel vehicles weakens, new energy vehicle enterprises must seek new paths of development.