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China's electric vehicle race will spur consolidation, analyst says

Key Points
  • Expect consolidation in China's electric vehicle race, said UBS analyst Yankun Hou
China has stepped up its R&D efforts

There will be consolidation in the Chinese electric vehicle industry, an analyst predicted Monday, highlighting the fierce competition in the world's largest market for those cars.

The battle for electric vehicle market share in China is backed by an aggressive drive by Beijing to cut severe — and politically-sensitive — air pollution in the country.

The government has pumped 100 billion Chinese yuan ($15.4 billion) into the sector, said Yankun Hou, UBS head of China equity research.

"On top of that, technological improvements and breakthroughs have reduced the production cost" for electric cars, Hou told CNBC on Monday from the UBS Greater China Conference in Shanghai.

The governmental push has spawned 20 new electric vehicle start-ups in Shanghai alone over the last three to five years, which will eventually result in consolidation for the tech- and capital-intensive industry, he added.

The country sold about 700,000 electric vehicle units in 2017, according to industry estimates.

Beijing provides generous subsidies and state investment in the electric vehicle sector, including building a battery charging network.