Now, it is impossible for any analyst or investor to ignore a major technological trend that is under way, that is, the electrification trend of the entire auto industry.

In the United States, in addition to industry leader Tesla, Inc., established automakers such as General Motors Co and Ford are also going all out to achieve the goal of all-electric, spending a lot of money on electric vehicle production plans.

However, more and more analysts believe that China will become the dominant player in the global electric car market in the future.

Jeffery attached great importance to this prospect. Analysts led by Alexious Lee previously pointed out in a research report that because of the "top-down guidance" of the Chinese government and the "bottom-up ambitions" of traditional auto giants and hundreds of start-ups, Chinese cars, especially new energy vehicles, are likely to remain the world's most important market for the next decade. Later, in a shareholder letter released in April, Jeffery management re-emphasized the study, calling it one of the company's best annual research ideas.

Favorable regulatory policy

For a long time, although China is "the largest single car market in the world, with the most complete traditional manufacturing supply chain", Chinese-made cars still have a certain gap compared with established car manufacturers in Europe and the United States in terms of speed and quality.

However, the Chinese government is determined to take the lead in the global electric car market. They support companies to enter the field of electric vehicles with comprehensive subsidies and various targeted incentive programs. The results of these measures have now been shown, such as emerging electric car companies NIO Inc. Automobile and XPeng Inc., with strong first-quarter delivery figures.

China's top-down efforts towards electrification can be clearly seen in a series of newly released documents. At the same time, China will also benefit from the global decarbonization trend, as more than 70% of global battery capacity is expected to be in China and from Chinese suppliers by 2025. "

China's win-win concept

China's electric car market will also benefit from the strong willingness of the country's technology giants to work with traditional carmakers. Big technology companies such as Baidu, Inc. and BABA are providing financial and technical support to help traditional car companies and emerging electric vehicle start-ups provide more intelligent products to the market.

"the technology industry and the automobile industry join hands, this is a deep cooperation, not a simple supply agreement, this is the Chinese win-win concept. Li analyzed, "in our view, the so-called concept of Baidu, Inc. Automobile and BABA Automobile is a typical example of this cooperative relationship, which is completely different from the outsourcing arrangement between NIO Inc. Automobile and Jianghuai Automobile. More money will be invested in R & D in the future. "

Another encouraging sign for electric cars in China is that consumer acceptance is accelerating. As they gradually emerged from the novel coronavirus epidemic, Chinese electric car manufacturers' sales rebounded sharply and faced growing demand, mainly due to "the increase in the number of alternative products." and consumers are gradually adapting to the reality of reduced incentives for car purchases.

2.6 million goals in 2022

Electric car manufacturers are facing a huge potential market in China, where the number of cars per capita is still far lower than that of developed countries in Europe and the United States. Li predicts that China's car penetration will reach 150 per 1,000 people by 2025 and 182 per 1,000 people by 2030.

Overall, Jeffery expects total sales of new energy vehicles in China to reach 2.6 million in 2022, driven by stricter emission standards, the launch of more new models, and better battery charging solutions in small and medium-sized cities. A total of 1.3 million electric vehicles were sold in China in 2020, accounting for most of the annual sales of new energy vehicles, according to data released by the China Association of Automobile Manufacturers.

To help investors capture this strong momentum, Jeffery compiled a watch list of 18 companies that are most closely related to the future of self-driving and electric cars in China.

Three of these companies, DiDi Global Inc., AutoX and Xiao Ma Zhixing, have not yet listed on the stock market, while the shares of other companies have been listed for trading in the United States, Japan and China.

1. Great Wall Motor

Code: 601633 CH

Jeffery rating: buy

General trend of electrification exposure: volume production of L3 new energy vehicles

two。 BYD

Code: 002594 CH

Jeffery rating: buy

General trend of electrification exposure: volume production of L3 new energy vehicles

3. NextEV

Code: NIO US

Jeffery rating: hold

General trend of electrification exposure: volume production of L3 new energy vehicles

4. XPeng Inc.

Code: XPEV US

Jeffery rating: hold

General trend of electrification exposure: volume production of L3 new energy vehicles

5. Baidu

Code: BIDU US

Jeffery rating: buy

General trend of electrification exposure: L4 level software / app commercialization

6. BAIC Blue Valley

Code: 600733 CH

Jeffery rating: buy

Major trend of electrification exposure: L5 level deep learning product development

7. Geely Automobile

Code: 175 HK

Jeffery rating: buy

Major trend of electrification exposure: L5 level deep learning product development

8. Li Auto Inc.

Code: LI US

Jeffery rating: buy

Electrification trend exposure: enhanced battery life, lithium iron phosphate battery and battery replacement technology

9. Weichai Power

Code: 000338 CH

Jeffery rating: buy

Electrification trend exposure: enhanced battery life, lithium iron phosphate battery and battery replacement technology

10. Guoxuan high-tech

Code: 002074 CH

Jeffery rating: buy

General trend of electrification exposure: lithium iron phosphate battery and battery replacement technology approved

11. Denso

Code: 6902 JP

Jeffery rating: buy

Electrification trend exposure: hybrid electric mode to reduce average fuel consumption

twelve。 Japan Electric Power Company

Code: 6594 JP

Jeffery rating: buy

Electrification trend exposure: hybrid electric mode to reduce average fuel consumption

13. The Big Dipper

Code: 002151 CH

Jeffery rating: buy

General trend of electrification exposure: smart City Development

14. Starr semiconductor

Code: 603290 CH

Jeffery rating: buy

Electrification trend exposure: replacing similar foreign products (IGBT, radar, sensors, cameras)

15. Four-dimensional drawing new

Code: 002405 CH

Jeffery rating: buy

Major trend of electrification exposure: rapid adoption of digital maps