Chinese developers rush into rising NEV sector, but risk overcapacity and lack of talent

By Zhang Hongpei Source:Global Times Published: 2018/8/20 20:43:39

Analysts warn of possible overcapacity, lack of talent

Faraday Future's FF 91 prototype electric crossover vehicle is unveiled during CES 2017 in January 2017 in Las Vegas. Photo: VCG

As more domestic real estate developers are scaling up investment in China's new-energy vehicle (NEV) sector, industry analysts warned that the rising sector needs sustainable efforts in technology advancement and talent.

Since the beginning of this year, investment of more than 10 billion yuan ($1.46 billion) has moved into the NEV industrial chain from Chinese property developers including Evergrande Group and Vantone Holdings Co, according to a report of domestic news site on Monday.

Amid tougher regulation of domestic real estate markets, developers are seeking growth opportunities by diversifying their business lines, and the government-backed NEV industry has turned out to be an alluring target, experts told the Global Times.

Evergrande Health Industry Group, a unit of Evergrande Group, which owns a 45 percent stake in US-based Faraday Future (FF), said on August 14 that the NEV start-up has established operating headquarters in China, the Xinhua News Agency reported.

It also plans to build five research and development centers as well as production bases across the country in the next decade.

Yan Yuejin, a research director at E-house China R&D Institute, told the Global Times on Monday that developers' "proper" involvement in the NEV sector is beneficial for risk reduction and their own transformation since China's manufacturing upgrade has generated many opportunities in the emerging sector.

Prior to Evergrande's move, Shanghai-listed Beijing Vantone, one of China's largest privately owned real estate developers, announced at the end of July that it would acquire 78.3 percent of Suzhou-based Phylion Battery, marking the developer's first foray into the electric car sector.

Hui Jianqiang, deputy research director with real estate information provider Beijing Zhongfangyanxie Technology Service, told the Global Times on Monday that faced with uncertainty, developers have to move more capital into sectors related to the real economy.

China's property investment posted slower growth in the first half of this year, the National Bureau of Statistics said in a statement in July.

"Developers have sufficient capital to get into the cash-thirsty auto industry, and for electric cars particularly, the entry level is not as high as traditional gasoline vehicles," said Wu Shuocheng, a Shanghai-based independent auto industry analyst.

"Even so, the NEV sector still has three typical requirements - capital, technology and talent. Real estate developers have no advantage in the latter two aspects," Wu noted.

Yan added that compared with the traditional real estate, the high-tech industry has huge growth potential. "Developers can invest with controllable costs but the key lies in whether technology innovation can take root."

China is releasing a package of policies to enhance the competitiveness of the NEV sector with new regulations on auto industry investment, the Economic Information Daily reported Monday, citing sources from the National Development and Reform Commission.

New manufacturers of electric vehicles are required to have a minimum annual production capacity of 100,000 units, and sustainable development capacity will be a must, said the report.

Wu warned that the possibility of some developers acquiring land in the name of making electric cars cannot be excluded.

"NEV investment is different from the property industry. The former is in the real economy category and relies on technology innovation while the latter has witnessed a 'land banking' phenomenon [which developers aggregate parcels of land for future sale or development]," Yan noted.
Newspaper headline: Developers rush into rising NEV sector


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