How do you pick the next Tesla stock winner in China’s booming EV market?

Given how quickly electric vehicle companies’ stock prices have rocketed, a short-term correction seems likely. But, in the long term, the sector is supported by structural trends which underpin the case for investing. Here are three things to focus on

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Potential customers chat near a NIO ES6 electric vehicle in Beijing, on November 28, 2020. Despite rapid growth, electric vehicles still make up only around 5 per cent of China’s car market. Photo: VCG via Getty Images

Chaoping Zhu is a Shanghai-based global market strategist at JP Morgan Asset Management.

Published: 1:30am, 6 Feb 2021Updated: 3:10am, 6 Feb 2021

New-energy vehicle (NEV) companies have become a red-hot investment theme in recent months. Since the end of September, the benchmark NEV Power Battery index in the A-share market has surged almost 60 per cent. In the overseas markets, Chinese and global electric vehicle stocks have also soared. But is the rally sustainable?

Given how quickly NEV companies’ stock prices have rocketed, a short-term correction is likely. But, in the long term, the sector is supported by structural trends, including changes in technologies, consumer demand and global environmental policies, all of which underpin the case for investing.

The challenge is in picking the winners in a sector in the very early stages of its bloom. This will become increasingly difficult given the rising number of electric vehicle makers and supply chain companies newly listed in China and overseas, as well as the many traditional carmakers joining the battleground.