In a world increasingly turned towards electric vehicles (EVs), Chinese manufacturers will certainly present a competitive alternative to traditional manufacturers. However, this in no way guarantees the dominance of a single manufacturer.
Will the transition to electric vehicles be disruptive? Yes. Established auto companies must re-establish their differentiated value proposition to consumers. Newcomers (or “pure players”) must offer differentiated products that define what an electric vehicle should be given the relatively early stage of the segment. As the electric vehicle revolution continues, we expect Chinese manufacturers to gain market share both domestically and globally. It remains to be seen to what extent.
Evaluating the businesses of electric vehicle manufacturers and traditional automobile manufacturers requires fundamental analysis at both the company and industry level. Investors should focus on the competitiveness of each company in terms of technological capabilities, including battery technology, internal software operating platform, management strength and track record, product competitiveness in terms of autonomy and battery efficiency, while taking into account the positioning of the products in the different vehicle segments, and the ability of each company to finance the investments necessary to develop internally and sometimes with partners.
Most of the traditional automakers now focusing on building an electric vehicle business. Investors must therefore analyze each of them by comparing them to high-end players in the sector who have started to establish themselves as leaders. It is important to maintain a global perspective due to the considerable differences that exist in each key region and to assess market conditions, consumer behavior, as well as local regulations and incentives for electric vehicles, by market.
Traditional automakers face major challenges for the structure of the industry in which they have operated for many decades. They must invest in disruptive new technologies as their traditional business models face increasing competitive threats. The companies that resist will be those that have innovative and differentiated platforms, able to adapt quickly to changing trends. These businesses will also need the scale, financial strength, stewardship and strong brands that consumers will demand during this dynamic transition.. Many well-capitalized companies stand a chance of being competitive in the electric vehicle world provided they have brands that are known to consumers and that they can trust.
New entrants have an advantage because they are starting from scratch, but that does not guarantee their success; many of these companies do not have established brands and do not have a full service capability to reassure consumers.