Chinese EV buyers want luxury — and they're looking somewhere besides Tesla, says fund manager

Published Thu, May 13 202112:05 AM EDTUpdated Thu, May 13 202112:21 AM EDT

Evelyn Cheng @in/evelyn-cheng-53b23624 @chengevelyn

China's booming electric vehicle sector presents a "great opportunity" for domestic companies and fund manager Jian Shi Cortesi says she is "very enthusiastic" about the sector. Speaking during CNBC Pro Talks on Wednesday, Cortesi said there are "big winners" coming from the sector which has seen an explosive growth. The electric vehicle market in China is getting increasingly crowded. And even though Elon Musk's Tesla outsells its domestic peers in the mainland, there's one thing that it lacks: luxury. That's according to Cortesi, who said her team at GAM investment management spoke to Chinese consumers . "Tesla's car, the Chinese consumers tell us, it's very clean and simple looking — but it doesn't necessarily fit the taste of many Chinese consumers that want the luxury feeling," Cortesi said. Instead, they prefer Chinese start-up Nio 's electric cars, which compete in the same high-end SUV market as Tesla does. "When you look inside Nio's car, you have this very luxurious feeling," Cortesi said, pointing to the interior finishing. While Tesla still outsells the 6.5-year-old Chinese start-up, Nio has delivered more cars a month than its domestic rivals, Xpeng and Li Auto — which are also listed in the U.S. like Nio. "We have seen the rising of Chinese EV makers – like Nio , Xpeng and Li Auto," she said. Cortesi said that she expects China's electric vehicle industry will do well because of the country's plans to achieve zero carbon emissions by 2060 — "That means a lot more electric vehicles. And this also means great opportunity for domestic Chinese auto companies," she said. The advantages Chinese start-ups might have over traditional automakers in new energy vehicle technology is another reason for her enthusiasm, she added. Nio's 'smart' business model Nio launched a "battery-as-a-service" product in August that allows customers to pay a lower price up-front for the vehicle, and separately rent the battery for a monthly fee. This business model is "very smart," Cortesi said, "because that lowers the initial cost of acquiring (the) electric vehicle." It also gives the consumer a lot of flexibility and convenience, she said. 'Waiting' to buy back in However, Cortesi warned that the sector may be overvalued at the moment. Although GAM bought Nio's U.S.-listed shares last year based on the company's innovation and "strong potential," Cortesi said the fund cut its position after Nio's stock price soared last year. I think with the strong performance of Tesla last year and the Chinese electric vehicle makers, the market may have gotten a bit ahead of the fundamentals. investment director, GAM Jian Shi Cortesi Nio shares skyrocketed more than 1,100% in 2020 after the struggling start-up received about $1 billion from state-backed investors. The stock is now down 30% so far this year. "To buy a good company, we always need to pay the right prices," Cortesi said. “I think with the strong performance of Tesla last year and the Chinese electric vehicle makers, the market may have gotten a bit ahead of the fundamentals." "We are now waiting, if these stocks correct more ... to enter them at a more attractive valuation," she said. Nio reported a smaller-than-expected loss per share in the first quarter. Management said vehicle margin, a measure of profitability, rose to 21.2% . The increase was due mostly to consumers buying Nio's driving assistance software and upgrading to a more expensive battery subscription plan, management said. Last week, Nio announced plans to enter Norway, its first market outside China. The company said it will start delivering cars to Norway from September.

Fund manager on the 'big winners' coming from China's booming electric vehicle sector

VIDEO3:3203:32

Fund manager on the 'big winners' coming from China's electric vehicle sector

Pro Talks

China's booming electric vehicle sector presents a "great opportunity" for domestic companies and fund manager Jian Shi Cortesi says she is "very enthusiastic" about the sector.

Speaking during CNBC Pro Talks on Wednesday, Cortesi said there are "big winners" coming from the sector which has seen an explosive growth.

The electric vehicle market in China is getting increasingly crowded. And even though Elon Musk's Tesla outsells its domestic peers in the mainland, there's one thing that it lacks: luxury.

That's according to Cortesi, who said her team at GAM investment management spoke to Chinese consumers.