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Consolidation in China’s electric vehicle space is “inevitable”

The electric vehicle sector now sees its “most exciting moment” – and consolidation in the sector cannot be avoided, says Helen Liu of Bain & Company.

“I will say that consolidation is an inevitable trend in this industry,” Liu, a partner at the consulting firm, told CNBC’s “Capital Connection” Tuesday. He cited reasons such as the capital-intensive nature of the electric vehicle sector and heavy technology.

“Historically, we have seen invisible hands as the market and also visible trends, regulations, has navigated the industry through the trend of consolidation continuously,” he said.

On Monday, China’s minister for industry and information technology the country has “too many” EV producers. Those comments have raised fears of further regulatory action by Beijing, this time aimed at the autonomous vehicle sector following previous moves in other industries such as private education and technology.

Huaibin Lin of IHS Markit said he sees little likelihood of regulatory intervention from Beijing in the short term. Calls by the minister of industry and information technology for the consolidation of the automotive sector are not new and have been happening for the last 20 years, he said Tuesday to “Squawk Box Asia “on CNBC.

“I’m in [an] ever-growing market where we have seen tremendous growth over the last 20 years in car … sales, ”said Lin, who is China’s automotive manager at IHS Markit. He added that the new energy vehicle market is currently seeing a strong impulse.

“Are we going to see a drastic consolidation in the industry itself? We think there’s a big question mark over this, as long as the market continues,” he said.

In the next 10 years, you will find very fierce competition in the new energy vehicle industry. No one knows who will survive in the end.

Helen Liu

Partner, Bain & Company

Liu from the consulting firm Bain agreed, saying the growth momentum and the outlook for the sector look very positive at the moment. It is supported by factors such as support policies and most importantly – customer acceptance.

“Based on our Bain study this year, we found that in reality, the acceptance of Chinese customers to VE drives the global type of trends and again, we think it is constantly growing,” he said.

China’s EV boom

Read more about electric vehicles from CNBC Pro

Beyond national competition, IHS Markit’s Lin said China’s electric vehicle manufacturers will also face growth in capital competition over the next decade.

Some of this competition could come from longtime operators in the automotive sector, he said, with traditional manufacturers of internal combustion engine vehicles such as Volkswagen’s Mercedes, BMW and Daimler now come up with “drastic” electrification strategies.

“Over the next 10 years, you will find very fierce competition in the new energy vehicle industry,” Lin predicted. “No one knows who will survive in the end.”


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