Summary of a television interview · Based on the recording of the conversation
In brief
On Bloomberg TV Bulgaria, Kliment Robev discusses BYD’s new discounts and the deepening price war in China’s car market. In his view, lower prices are good news for consumers and will speed up the adoption of electric cars, but they worry investors because they squeeze margins and push the sector towards consolidation, in which smaller manufacturers will be absorbed or forced out of the market.
Key points
- Kliment Robev expects BYD’s discounts to force rivals to cut prices too, accelerating the “transport revolution”, but for investors this means lower margins, the risk of consolidation and harder financing for smaller producers, which is why in the coming quarterly reports he will be watching gross margins, free cash flow, capital expenditure and deliveries.
- He explains the move as a fight for market share in an overcrowded Chinese market where sales are high but growth is slowing – in April BYD reported its sharpest slowdown in delivery growth in four years – while the company’s vertical integration, including battery production, allows it to sacrifice margins for scale at a time when its competitors are already struggling to turn a profit.
- He expects a wave of consolidation over the next one to two years, splitting companies into three groups – those that move into a different segment, those that become targets for mergers and acquisitions, and those that close capacity and withdraw – and draws an analogy with smartphones, where excitement about innovation gave way to a search for value and pragmatism.
- In his view, Tesla’s only sensible response is to position itself in the premium segment and rely on its AI projects, such as the robotaxis due to be presented in Austin in June, rather than trying to compete with Chinese manufacturers on price – an approach he also sees for European brands such as Volkswagen in China.
- He describes CATL, which carried out the largest IPO of the year so far – around $5bn in Hong Kong – as a company with a potentially revolutionary business model: batteries rented out for a subscription fee, which would allow electric cars to be sold without a battery and become more affordable, though building such infrastructure requires considerable time and capital.
- He presents Nissan as the opposite example – heavily indebted, loss-making, operationally inefficient and losing market share in China and Japan – and, in what he calls a speculative answer, expects it to become the subject of a merger or acquisition by a company already established in the innovative segment that could make use of its patents and loyal customers.
Context
The conversation was prompted by BYD’s decision to offer discounts of up to 35% on more than a dozen models, after which shares in major Chinese carmakers fell; it also covers Elon Musk’s return to Tesla after stepping back from his role in Donald Trump’s administration, the CATL IPO and Nissan’s restructuring after its failed merger talks with Honda.
Views reflect his position at the date of publication and are not investment advice. Regulatory information
