In the last part of this series, we zoom in on the last two investment themes in the Greater Bay Area that rides on the emerging trends of electric vehicle and P2P lending.
Investment Theme 8: Electric Vehicles Will Become The Norm
As part of its new tech focus, the Greater Bay Area will be pushing for high value-added manufacturing services. In particular, new energy vehicle development will be a key focus. The Greater Bay Area currently houses two important automobile players in GAC Group (GAC) and BYD Auto Co (BYD).
GAC is the fifth largest automobile group in China, based on 2018’s sales volume. It has already entered into collaborations with multiple foreign global automakers such as Honda, Toyota and Mitsubishi. Together with its Japanese partners, GAC is embarking on a strategy to accelerate electric vehicle development.
GAC is also investing Rmb4.7 billion in a new energy vehicle hub in Guangzhou with an initial capacity of 200,000 units. By 2020, GAC plans to achieve electric vehicle sales of 1 million units, which account for 20 percent of its total sales volume.
Another recommendation under this investment theme is BYD. China is the leader in the emerging electric vehicle field. According to DBS, BYD is currently leading China’s developmental efforts in electric vehicle with the largest electric vehicle production base in the country. Last year, BYD took about 20 percent of the domestic electric vehicle market share and 10 percent of global electric vehicle market share.
Recommendations: GAC, BYD
Investment Theme 9: Innovative P2P Lending
The Greater Bay Area’s focus on transforming into an innovation and technology powerhouse will pave the way for the peer-to-peer (P2P) segment to grow. DBS notes that the P2P players are well-positioned to serve the “underserved” consumers in China. Under the Greater Bay Area Development Plan guideline, the Chinese government will be implementing multiple policies to support the financial services industry.
The addressable market in China’s P2P segment should reach Rmb8-10 trillion with 400-500 million individuals as target customers. Of the P2P platforms in China, 20 percent are registered in Guangdong and contributes to 16 percent of outstanding loans. This reflects Guangdong’s position as a cradle to innovation and technology development in China. As such, DBS estimates the P2P loan growth to hit 17 percent compound annual growth rate (CAGR) by 2030F with Guangdong being one of the three major P2P hubs in the future.
Recommendation: LexinFintech Holdings
Guide To Investing In China’s Greater Bay Area (Part 3)