China has unveiled plans to consolidate the country’s electric vehicle (EV) industry, which Beijing believes is unable to evolve as it has far too many players.
“Looking forward, EV companies should grow bigger and stronger. We have too many EV firms on the market right now. The firms are mostly small and scattered,” Xiao Yaqing, China’s minister for industry and information technology, said at a press conference in Beijing, adding that authorities see merging and restructuring as ways to propel the industry to success.
“The role of the market should be fully utilized and we encourage merger and restructuring efforts in the EV sector to further increase market concentration,” the official stated.
A number of Chinese EV producers traded in red following the news, with Xpeng Inc. losing 2.3% in Hong Kong trading, and Li Auto Inc. dropping 1.4%. In mainland China, BYD Co. fell 1.8% and BAIC BluePark New Energy Technology Co. plunged even deeper, shedding 4.6%.
China’s electric car industry is one of the world’s biggest, with about 300 carmakers, which the government considers an overcapacity. Also, according to CNBC, the number of new Chinese businesses related to “new energy vehicles” jumped by a fourth in 2021, bringing the total to some 321,000. This is the result of Beijing’s own actions, as it increasingly subsidized the industry amid the agenda of turning to cleaner energy sources in the automotive sector to cut pollution.
Total government subsidies for new energy vehicle purchases amounted to 33 billion yuan ($5.1 billion) from 2015 to 2020, data from the Ministry for Industry and Information Technology shows.
Now, however, Beijing is drafting measures to rein in the bloated industry, considering options like setting a minimum production capacity utilization rate, Bloomberg reported, citing sources familiar with the matter. Last year the average production capacity utilization rate for automakers in China was little short of 53%, according to the National Development and Reform Commission.
“This has been a liability for the local players since the beginning: too many companies dividing the market, which fragments the supply chains for the core components. It’s imperative to concentrate on a few key manufacturers and suppliers of the ingredients of an EV,” Bill Russo, founder and CEO of Shanghai-based advisory firm Automobility Ltd, told the news outlet.Tu Le, founder of Beijing-based advisory firm Sino Auto Insights, says the government’s current move is just another way “to trim the [number] of [EV market] entrants.”
“They likely [saw] a buildup of overcapacity [and] too many brands that won’t be able to compete in the market with products. This has happened often in the Chinese market across sectors and leads to a race to the bottom where companies compete solely on price. It stresses the entire sector,” the expert stated, as cited by CNBC.
He also noted that China’s major EV business players – Nio, Xpeng Li Auto and BYD – may benefit from consolidation practices if they come to pass, “since it will eliminate potential competitors and perhaps allow them to acquire a team or technology to enhance their products.”
European gas prices have hit another record in Wednesday’s trading, exceeding $960 per 1,000 cubic meters, as EU countries continue to argue over boosting Russian gas supplies via the recently completed Nord Stream 2 pipeline.
The price of the October futures on the Dutch TTF exchange jumped by 20% in mere minutes, exceeding $875.84 by 8:00 GMT. Some time later, it exceeded $900 and, by 11:00 GMT, had reached $964.
Russian experts earlier this week predicted that gas prices could climb further, up to $1,000 under certain conditions. These include the situation in Asia’s gas market, the weather in Europe and the oncoming winter season, as well as the timing of the launch of Russia’s Nord Stream 2 pipeline. Low gas-storage volumes across the continent and unusually high demand for the current season also add to the prospect of new record highs on the European gas market.
Despite the setbacks caused by relentless US sanctions, Russia’s newly-completed Nord Stream 2 pipeline could ease Europe’s gas shortages once it launches deliveries. Its daily capacity of gas supplies is comparable to the entire volume of liquefied gas that is now supplied to Europe. The 1,224 kilometer, $11-billion Nord Stream 2 project consists of two pipelines, collectively capable of delivering up to 55 billion cubic meters of natural gas annually from the Siberian fields in Russia directly to Europe via the Baltic Sea.
Russia’s Gazprom says it is ready to begin gas deliveries on October 1. All that remains is for the new pipeline to obtain all the required certification. However, this process could take up to four months, under EU rules.
Former Austrian minister of Foreign Affairs, Karin Kneissl, told RT that the current surge in gas prices could persuade regulators to speed up the certification process.
“The [gas] supply contracts are there. And we will see to what extent the German regulator will speed up the certification process for Nord Stream 2, which, construction-wise, is done. Some people say that it could take months. But maybe the current situation will speed things up,” Kneissl said.
Grain production in Russia is expected to reach 118 million tons this year, including more than 75 million tons of wheat, according to a Russian Grain Union forecast.
Data by the Ministry of Agriculture shows that production of grain and leguminous crops has amounted to 98.9 million tons as of September 14, against 113.6 million tons collected last year.
Some 70.7 million tons of wheat has been threshed from 24.4 million hectares of planted area. Russian farmers have also reaped 17.5 million tons of barley. Production of sunflower and soybeans reached 1.9 million tons and over 700,000 tons, respectively.
Russia’s booming agricultural production has surged by more than 20% over the last seven years. The country has managed to capture more than half of the global wheat market, becoming the world’s biggest exporter of grain, thanks to bumper harvests and attractive pricing. Since the early 2000s, Russia’s share of the global wheat market has quadrupled. In 2018-2019, Russia delivered 35.2 million tons of wheat to the global market.
The country is projected to retain its leadership in the world’s wheat market in the coming years.
The current sharp rise in gas prices in Europe has nothing to do with Russia, but the launch of the newly constructed Nord Stream 2 pipeline may stabilize the energy market, presidential spokesman Dmitry Peskov says.
“Undoubtedly, the early commissioning of Nord Stream 2 will significantly balance the price parameters for natural gas in Europe, including on the physical market; this is obvious,” the official said, commenting on the unprecedented rise in European gas prices over the past 24 hours.
He stressed that given the current low storage volumes of the commodity, Europe is likely to need more gas than it currently receives, and to need it soon.
“The demand for gas is great; besides, it is still unclear what the winter will be like; if it is cold, then, of course, even more gas will be needed,” Peskov stated.
Despite the completion of Nord Stream 2, Europe should not expect the Russian pipeline to start deliveries this year due to bureaucracy within the EU, Russian Foreign Minister Sergey Lavrov warned on Wednesday.
“Now the process of obtaining the necessary permits from the German regulator is underway. The process is not fast. The beginning of 2022 has been indicated,” Lavrov told the press.
Experts say this could be the reason behind the current surge in gas prices, which have been smashing records for several days now. According to the press secretary of the German Federal Network Agency (BNetzA), Fita Wolf, Nord Stream 2’s certification may take several months, a prospect which practically forces market participants to raise prices.
To add to the problem, the pipeline’s main adversaries, Ukraine and the United States, have both vowed to complicate the certification procedure.
According to Lavrov, there will be many roadblocks before certification is finally granted.
“I have no doubt that attempts to attack this gas pipeline will continue,” the Russian foreign minister said.
Gas prices in Europe have risen 20% since the start of trading on Wednesday. The price of October futures on the Dutch TTF exchange exceeded $964 per 1,000 cubic meters by 11am GMT, ICE data shows.
