The entry threshold for new energy vehicles has been raised, requiring companies to earn "patient money"

Recently, the "Automotive Industry Investment Management Regulations (Draft for Comments)" (hereinafter referred to as the Draft), which was drafted by the National Development and Reform Commission and distributed to local governments, has attracted widespread attention in the automotive industry.

The purpose of the document issued by the National Development and Reform Commission this time is to improve the entry standards for automobile industry investment projects, strengthen on-site and after-the-fact supervision, standardize the investment behavior of market entities, guide the rational investment of social capital, and prevent blind construction and disorderly development.

To this end, in addition to clarifying the "management authority" of automobile industry investment, the National Development and Reform Commission also proposed eight conditions that must be met by corporate legal persons of new independent pure electric enterprise investment projects in the draft opinion. At the same time, special requirements were put forward for shareholders of new independent pure electric enterprise investment projects, the most stringent of which was: "All shareholders shall not withdraw their equity before the project is completed and the output reaches the construction scale."

"This will directly lead to a reduction in investment managers, and resources will be more concentrated in 'leading companies'." Zhang Junyi, partner of NIO Capital, said in an interview with the "Daily Economic News" reporter that after the release of the draft opinion, it will mean that investing in automobiles will no longer be a matter of two or three years, but a long-term investment of five or even ten years.

Businesses will earn “patient money”

Behind the release of this draft opinion is the concern of relevant government departments about the hot investment in electric vehicles.

Thanks to the strong support of national policies for new energy vehicles, my country has surpassed the United States to become the world's largest producer and seller of new energy vehicles since 2016. In particular, the introduction of new energy vehicle subsidy policies has enabled many car companies to make profits from this.

The Ministry of Industry and Information Technology has issued four batches of new energy vehicle subsidies for 2016-2017, involving 424,700 new energy vehicles with a subsidy amount of 44.738 billion yuan.

It is precisely because of the huge profit margins brought by the "policy market" that many "hot money" have entered the car manufacturing field, hoping to take advantage of the opportunity to make a fortune. The draft opinion will make car speculators "wake up from their dreams".

"For new energy vehicle companies, if they are strategic investors, the draft opinion will have little impact on them, because they are indeed here to build cars, but for financial investments and funds with exit pressure, they may be affected." Xinte Auto CEO Xian Yue told the "Daily Economic News" reporter.

In fact, among the new forces in car manufacturing, some companies invest in car manufacturing with the purpose of realizing IPO cash as soon as possible through capital operations.

Zhang Junyi, partner of Weilai Capital, said in an interview with reporters: "The automotive industry needs companies with vision and foresight to enter. Such companies need to earn 'patient money'. Once the future policies are implemented, the quality of the funds themselves will also be improved."

Zhang Junyi pointed out that once the draft is implemented, the "hot money" that has been invested will face the risk of not getting returns as expected, and the problems of "selling old shares" and interest transfer may arise. After all, some funds have an investment return period of ten years or more, while some funds hope to exit in one or two years.

In addition to many well-known and unknown IT cross-border investors led by BAT (Alibaba, Tencent, and Baidu), more social capital and local technology companies are also one of the protagonists of this round of "car-making fever".

Is the construction scale of 100,000 vehicles too stressful?

If Article 13 of Chapter 4 of the draft opinion restricts equity and squeezes out the impetuousness and water brought by "speculative capital" and "hot money", then the construction scale required in Article 14 makes newly established independent pure electric vehicle companies feel more pressure.

The specific requirements are: in terms of construction scale, the number of pure electric passenger vehicles shall not be less than 100,000, and the number of pure electric commercial vehicles shall not be less than 5,000. If this goal is not achieved, the shareholders of the enterprise will not be allowed to withdraw their equity.

"If it is a mature fuel vehicle company, it is relatively easy to reach a scale of 100,000 vehicles, but for a new energy vehicle company, the difficulty and pressure of reaching a scale of 100,000 vehicles are very high," Xian Yue said.

Data shows that among the top ten domestic new energy vehicle companies in terms of sales last year, only BYD and BAIC had annual sales of new energy vehicles exceeding 100,000 units, at 114,000 and 105,000 units respectively, while SAIC Passenger Vehicle, which ranked third, had sales of 44,000 new energy vehicles.

However, in Zhang Junyi's view, the actual situation may not be terrible. "It depends on how the 100,000 vehicles are calculated. The draft opinion does not clearly state whether the construction scale of 100,000 vehicles refers to production or sales, or whether it is single-shift capacity or multi-shift capacity. If it is calculated based on a multi-shift capacity of 100,000 vehicles, the multi-shift capacity is only about 30,000 vehicles, so there is still a lot of room for discussion in the draft opinion."

In fact, China's interim goal for new energy vehicles is to achieve an annual production and sales of 2 million vehicles by 2020. However, according to incomplete statistics from public information from companies and project approval announcements from the Development and Reform Commissions of provinces and major cities, from 2015 to the first half of 2017, more than 200 new energy vehicle production projects were launched in China, involving an investment of RMB 1,026.2 billion, and the publicly announced production capacity reached 21.24 million vehicles, far exceeding my country's new energy vehicle production and sales target for 2020.

In Xianyue's view, the release of the draft opinion will effectively prevent overcapacity in automobile production capacity. While returning to the essence of the industry, it will play a pragmatic role in cultivating companies with advantages in the field of electric vehicles.

It is understood that the draft has ended its comment period and the regulation will be officially issued in 2018. At present, some new energy vehicle companies have submitted relevant opinions and suggestions to the NDRC.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.