One of China’s fastest growing priorities is reducing its environmental impact. As smog and pollution are continuing to contribute to a rising level of respiratory problems and diseases, the pressure has been on Beijing to make changes, and fast.
One of the ways the government has decided to improve the situation is by imposing regulations on the automotive industry. As Reuters reports:
Car makers will need to amass credits for so-called new-energy vehicles (NEVs) [electric plug in or hybrid] equivalent to 10 percent of annual sales by 2019, China’s industry ministry said in a statement on Thursday. That level would rise to 12 percent for 2020.
Such a measure is both drastic and necessary given its issues with “pollution and competition.” However, this initiative amy not just be a win for the environmentalists.
Bloomberg released an article discussing investments that could be related to this new growth in the electric car market:
Rather than trying to pick a champion among the many car builders, investors might want to instead consider the companies that supply the parts. Those firms can benefit from the switch to electric cars, regardless of which manufacturer wins.
Their logic is sound; investors have realized just how much of a correlation exists between suppliers and manufacturers with the latest iPhone release. Several suppliers were clobbered by negative reviews, but investors may not have as much of a reason to fear in this case.
Because this initiative is being put forward by the Chinese government, the policy will need to be executed until it says otherwise. Suppliers will need to adapt to the increased demand from automotive manufacturers who won’t abandon the Chinese market. In fact, Reuters revealed that most manufacturers are more than ready to meet the challenge, citing Ford, Honda, and General Motors. This unlocks massive potential for investors and should be looked at as a possible investment.
If you would like to read Reuters’ report on the new Chinese regulations, click here.
If you would like to read Bloomberg’s guide to investing in the electric car industry ahead of China’s reform, click here.
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