China Consumer Discretionary 1 December 2016
China New Energy Vehicles Sector
NEV supply chain study: charging ahead
Electric vehicles (EVs) on track to replace those with conventional engines given lower production, operating and maintenance costs Chinese government efforts to encourage adoption of new energy Kelvin Lau vehicles (NEVs) likely to shift focus from OEMs to end-users (852) 2848 4467 Today’s NEV pacesetters should turn their head starts into long-term [email protected] market leadership; we reiterate our Buy (1) calls on BYD and Nexteer Brian Lam
(852) 2532 4341 [email protected]
See important disclosures, including any required research certifications, beginning on page 123
China New Energy Vehicles Sector: 1 December 2016
Table of contents
Car manufacturers: support to take a new form ...... 5 The government’s 2020 target for NEV ownership looks within reach ...... 5 Subsidies: more fine-tuning to come ...... 9 ADAS: still too early ...... 14 Another step towards fully autonomous cars ...... 14 Regulations and legislation to play a key role ...... 15 ADAS in China ...... 17 Charging facilities: a critical step forward ...... 20 Addressing the bottleneck with policy support ...... 20 Charging poles to meet varying levels of demand ...... 24 Non-SOE companies emerging among operators ...... 26 Equipment manufacturers rushing to the market could see costs go down ...... 30 The future: wireless charging technology is approaching ...... 32 Car batteries: the key to success ...... 34 Lower battery costs would lead to more competitive selling prices ...... 34 Longer driving distances make EVs more usable ...... 35 Chinese government nurturing battery technology ...... 37 Appendix 1: EV battery development ...... 41 Rechargeable battery industry evolution ...... 41 LiB shipments set to surge on EV development ...... 48 EV LiB cost reduction will further boost the demand ...... 50 Major global EV LiB players ...... 50 Appendix 2: battery material study ...... 53 Understanding the supply chain ...... 53 LiB components: cathodes ...... 56 LiB components: anodes ...... 58 LiB components: electrolytes ...... 59 LiB components: separator ...... 60
Company Section BYD ...... 63 Nexteer Automotive Group...... 81 Minth Group ...... 89 Zhengzhou Yutong Bus ...... 95 FDG Electric Vehicles ...... 101 Coslight Technology International ...... 109 China Titans Energy Technology ...... 115
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China Consumer Discretionary 1 December 2016
China New Energy Vehicles Sector
NEV supply chain study: charging ahead
Electric vehicles (EVs) on track to replace those with conventional engines given lower production, operating and maintenance costs Chinese government efforts to encourage adoption of new energy Kelvin Lau vehicles (NEVs) likely to shift focus from OEMs to end-users (852) 2848 4467 Today’s NEV pacesetters should turn their head starts into long-term [email protected] market leadership; we reiterate our Buy (1) calls on BYD and Nexteer Brian Lam
(852) 2532 4341 [email protected]
What's new: We have conducted an end-to-end examination of the supply Key stock calls chain for the China New Energy Vehicle (NEV) Sector. Given the speed of New Prev. industry developments, together with effort to reduce pollution and improve BYD (1211 HK) Rating Buy Buy energy efficiency, we consider the segment to be increasingly promising. Target 68.00 65.00 Upside p 45.6% What's the impact: EVs on course to replace vehicles powered by Nexteer Automotive Group (1316 HK) internal combustion engines (ICE). We see a strong possibility that the cost Rating Buy Buy of production for EVs will be comparable to that for ICE vehicles by 2020, given Target 12