"The Chinese government has always been very slow in forcing substantial changes by way of mergers, acquisitions, or closure of enterprises." — on the historical hesitance of Chinese authorities to eliminate obsolete industrial capacity

Key Takeaways

• The absence of Chinese business leaders during Xi Jinping's U.S. visit likely stems from a mix of historical precedent and American national security concerns
• A new cross-shareholding deal between two state-owned legacy automakers signals the start of a slow, government-led consolidation in China's car market

By Rene Vanguestaine and Doug Young

During Chinese President Xi Jinping’s recent trip to Washington, the world watched closely as the leaders of the world’s two largest economies held their second summit of the year. Yet, beyond the official diplomatic dialogue, there was a striking parallel in how Beijing manages its corporate landscape — both abroad and at home. This overarching state control was glaringly obvious in two separate spheres this past week: the total absence of a Chinese business delegation in the U.S. capital; and a rare, state-backed merger between two of China’s largest state-run automakers back home.

We'll start with the Washington visit, which was the talk of the town in both capitals. In the week leading up to the summit, rumors swirled that Xi would bring a major delegation of corporate titans, including leaders from smartphone giant Xiaomi (1810.HK) and CATL (300750.SZ), the world’s largest EV battery maker. In the end, neither of those two, nor any other Chinese business leaders, showed up.

Everyone has been guessing what happened. We think there are two highly plausible explanations. First, historically speaking, Chinese businesspeople rarely travel with Xi on official state trips. The pre-summit chatter may have simply been media fantasizing, or corporate fabulating meant to force politicians' hands for an invitation.

More importantly, it's highly plausible that the U.S. administration objected to certain companies attending due to national security concerns. The products of companies like CATL have dual-purpose capabilities, which is a diplomatic way of implying they could be utilized by the Chinese military or its surveillance apparatus. Notably, both Xiaomi and CATL have largely been excluded from the U.S. market. You don't see Xiaomi phones in America, and a planned CATL battery factory recently seems to have gotten scrapped.

This absence provided a sharp contrast to the U.S. side. American business leaders, including Jeff Bezos and Mark Zuckerberg, were prominently involved. We've seen this before: when Donald Trump went to China in May, he was accompanied by CEOs like Jensen Huang, Tim Cook, and Elon Musk. The U.S. is a capitalistic environment, making the confluence between the corporate and government sectors inevitable. China operates on a vastly different model. The primacy of the Communist Party over everyone, including successful entrepreneurs, is simply a fact of life.

A sluggish push for auto consolidation

That exact primacy brings us to a second development that underscores Beijing's tight grip on corporate China. Back at home, we're witnessing a rare merger of sorts between two of the country's largest state-owned automakers, FAW and GAC (2238.HK; 601238.SH).

This isn’t an outright acquisition, but rather an entwinement through cross-shareholdings. The deal was notably announced just three days after China’s auto regulator publicly expressed its support for industry consolidation. FAW is one of China’s oldest state automakers owned by the central government, while GAC is a younger, highly successful company owned by the affluent Guangdong provincial government.

It's a well-known fact that there are way too many car manufacturers in China. Even for a market of 1.4 billion people, having 100 to 120 automakers is unsustainable. Yet, the government has historically been slow to force substantial changes — whether through mergers, acquisitions, or closures — largely to protect local employment.

Why choose these two companies now? Both are deeply tied to struggling legacy formats. GAC is a main joint venture partner with Toyota and Honda, while FAW partners with Toyota and Volkswagen. The sale of internal combustion engine cars in China has plummeted. Volkswagen, BMW, and Mercedes have been slow to transition to EVs and are suffering dramatic sales declines in China. State-owned companies like FAW have also largely failed to successfully navigate the EV transition.

Conversely, private companies are faring much better. Automakers like BYD (1211.HK; 002594.SZ), Xpeng (XPEV.US; 9868.HK), Li Auto (2015.HK, LI.US), and Nio (9866.HK; NIO.US) are dealing with a brutal domestic price war, but they're positioned almost exclusively in the EV space and are seeing massive growth in overseas sales across Southeast Asia, Latin America, and Europe. Geely (0175.HK) is a similar success story, benefiting from exports and its ownership of EV brands like Volvo and Polestar. Beijing has tried to force private companies to behave and consolidate, but those efforts have largely failed. It makes sense that the government is now starting with the laggards it controls most closely. Whether this cautious, cross-shareholding approach will translate into meaningful capacity reduction remains to be seen. But in both Washington and Guangdong, the message is clear: Beijing is firmly in the driver's seat.

China’s securities regulator has given the green light to the battery materials maker’s Hong Kong listing application, but only after a year of scrutiny

Key Takeaways:

• Tinci Materials has been approved by China’s securities regulator to list in Hong Kong, reporting a sharp decline in profitability from the first quarter to the second
• The regulator asked for more details after the battery materials maker filed its first listing application a year ago, before giving its consent last month

By Edith Terry

The road to a Hong Kong IPO has been anything but smooth for Shenzhen-listed Guangzhou Tinci Materials Technology Co. Ltd. (002709.SZ), the world’s top maker of materials for electric vehicle (EV) batteries. The deal could be quite large, potentially raising $1 billion or more, which may have made regulators more cautious in granting approval.

Last October, the China Securities Regulatory Commission (CSRC) asked for more details a month after Tianci first applied for the Hong Kong listing.  A year later, in an announcement dated Aug. 18 but published last Friday, the regulator finally approved the listing plan, with Tianci aiming to sell about 413 million shares in Hong Kong.

The lengthy review is just the latest bump in the road to Tianci’s Hong Kong listing, as the company’s own profitability showed signs of deteriorating this year amid growing signs of oversupply in China’s fast-growing EV battery sector.  

Despite all those challenges, investors in the company’s Shenzhen-listed shares reacted with guarded enthusiasm to the CSRC approval, bidding Tinci’s stock up by 2.4% over the next three trading days after the announcement last week.

That gave Tianci, whose shares are still down nearly 30% this year, a market cap of about 67 billion yuan ($10 billion) and a price to earnings (P/E) ratio of 17. By comparison, shares of peer Capchem Technology Co (300037.SZ) have risen by over 40% this year, giving it a P/E ratio of 36 despite its smaller size.

Tianci last submitted a publicly available prospectus for the Hong Kong IPO in March, and has yet to submit a new public document to the Hong Kong Stock Exchange following the CSRC approval. But it may have submitted an updated prospectus under a recent rule change that allows some companies to make confidential filings.

Market leader

With roughly 36% of the global market for the electrolytes that are a key component in lithium-ion batteries, Tinci has a commanding position in the EV supply chain. In its March listing document, the company pointed out it is “proactively positioned” in the advanced materials supply chain not only for intelligent driving, but also other emerging areas like low-altitude aircraft and AI-related thermal management.

That said, its profit and revenues are quite variable, fluctuating with a battery market that is fast exhibiting signs of oversupply following a rapid buildup in capacity. Reflecting that, Shenzhen-listed shares of leading EV battery maker CATL fell 10% over two days earlier this week, their steepest decline in over a year, amid the latest signals that the company may be preparing to scale back its production.

Tinci has lots riding on the EV battery market. It was the world’s top electrolyte supplier for lithium-ion batteries last year, the ninth consecutive year in that position. It supplied eight of the world’s 10 top battery manufacturers, all top 10 energy storage system (ESS) battery makers, and nine out of the top 10 consumer battery manufacturers.

Its financials reflect its leading position, though they’ve been as bumpy as the road to its Hong Kong listing. Its profit tumbled 74.4% in 2024 to 483.9 million yuan from 1.89 billion in 2023, thanks to increased competition that led to a slump in lithium battery material prices. Its revenue dropped by 18.7% that year to 12.52 billion yuan from 15.4 billion yuan the year before.

Both its revenue and profit rebounded last year, the former up by 33% to 16.7 billion yuan, and the latter nearly tripling to 1.36 billion yuan. The company’s revenue continued to rebound this year, growing 91% in the first quarter year-on-year and by an even stronger 127% in the second. But its profit sputtered amid falling prices, rising by just 5.2% in the second quarter after a more than 10-fold increase in the first.

Booming EV market

The strong revenue gains come on the back of a global boom for EV sales. The International Energy Agency predicts that 23 million electric cars will be sold in 2026, representing 29% of all car sales. Robust sales in emerging markets this year have counterbalanced weak sales in China and North America, with Southeast Asia among the growth leaders.

Tinci leads in a global electrolyte market worth an estimated at $15.84 billion this year, according to Mordor Intelligence. The company has a current capacity of 860,000 tons of lithium battery materials annually, and is adding another 200,000 tons over the next two years in the U.S. state of Texas, with another 150,000 tons in Morocco.

The company has also been moving beyond battery materials into specialty chemicals for personal care. But at 686 million yuan in the first half of this year, the segment still represented just 4.7% of its revenue for the period. Over the same period, revenue from its core lithium-ion battery materials rose 117.2% year-over-year to 13.69 billion yuan, accounting for 93% of the total.

Both the CSRC and Hong Kong’s Securities and Futures Commission (SFC), as well as the listing committee of the Hong Kong Stock Exchange, have been putting more pressure on listing candidates and their underwriters recently to improve their disclosure quality, amid one of Hong Kong’s strongest IPO markets in years. That may partly explain why Tianci’s listing took so long to get the CSRC’s approval, despite the prestige of having big names like JPMorgan and Citic Securities among its joint sponsors.

The CSRC recently asked nine Chinese companies seeking Hong Kong listings to provide additional information on their shareholding structures and litigation, while the SFC recently suspended shares of biotech firm Cloudbreak Pharma over concerns about IPO manipulation.

With some 500 applications now on the Hong Kong Stock Exchange’s website, and HK$651 billion ($97 billion) in funds raised from IPOs and secondary listings in the first eight months of the year, caution may be warranted. At the same time, the Stock Exchange launched its biggest listing reforms in July in nearly a decade, reducing financial and market capitalization thresholds for companies with weighted voting rights and introducing confidential listing applications.

It’s possible Tinci took advantage of the new procedures to file an updated prospectus confidentially, giving the exchange time to make sure the document is not only up to date but meets its criteria for high quality. “Regulators care more about bringing in high-quality companies with real investment value than about simply racking up the number of listed companies,” Hang Wang, chief representative in Beijing of international law firm Baker McKenzie told the South China Morning Post in a recent interview.

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"If they stick with being pure-play, when the cycle turns, they will benefit from that in terms of stock price compared to other companies." — view on the investability of solar companies seeking to weather their sector’s current massive supply glut.

Key Takeaways

• Solar manufacturers like JinkoSolar are attempting to escape massive industry oversupply by pivoting into high-risk AI venture capital investing
• Beijing has paused new energy storage construction to prevent the kind of unbridled competition and overcapacity seen in the EV and solar sectors

By Rene Vanguestaine and Doug Young

China's once-booming new energy landscape is currently grappling with severe growing pains. Across the board, manufacturers are facing the harsh reality of massive overcapacity, forcing both companies and regulators into unusual maneuvers. In the struggling solar sector, desperate panel makers are abruptly transforming into venture capitalists to chase the AI wave. Meanwhile, in the closely related energy storage space, the Chinese government has taken the rare step of freezing new infrastructure projects to prevent yet another bubble from forming.

We’ve watched the solar panel sector suffer from massive oversupply for the last two years. Tired of waiting for a cyclical turnaround, JinkoSolar (JKS.US) abruptly announced last week that it’s entering the high-tech investment business. It unveiled its first moves as a venture capitalist in frontier industries, pouring between 70 million yuan and 100 million yuan ($10 million to $14 million) each into high-flying AI startups Moonshot, StepFun, and SiliconFlow.

We often refer to these types of businesses as "chameleon companies" because they are constantly changing their colors to match the latest market trends. However, investors weren’t thrilled by this transformation. JinkoSolar's stock plunged nearly 10% over the three trading days following the announcement, demonstrating that the market saw right through this attempt to create artificial excitement.

This reaction is hardly a surprise. The company used to be a pure-play solar manufacturer with nearly 20 years of expertise in that field. Now, it’s acting as a hybrid solar manufacturer and high-tech venture capitalist. Most investors prefer pure-play businesses. If they want to put money into venture capital, they can choose from plenty of asset management firms with strong track records, rather than relying on a solar company stepping far outside its core competency.

Yet, JinkoSolar is not alone in this pivot. Back in June, another solar materials company, Daqo New Energy (DQ.US), announced it was moving into the manufacturing of electrical equipment for AI data centers. With solar stocks currently trading near all-time lows due to the massive overcapacity, we expect to see more of these manufacturers attempting to tie themselves to AI — today's biggest investment theme — just to generate some buzz.

However, for investors looking at the solar sector, we believe the best strategy is to stick with pure-play companies that have not strayed from their central business. AI is highly volatile and increasingly suffering global backlash. Eventually, government intervention and the natural elimination of obsolete capacity will turn the solar cycle around, and pure-play companies will be the ones positioned to benefit.

Putting the brakes on energy storage

Jinko’s pivot away from the bursting solar bubble looks a lot like another rapidly inflating bubble: energy storage. According to a recent scoop from financial media outlet Caixin, Beijing has ordered a pause on the construction of new power and energy storage projects pending an industry review.

Energy storage facilities have become all the rage lately for storing the massive amounts of excess power produced by China's solar and wind farms. Because the state-managed power grid was unable or unwilling to absorb overcapacity from these farms, energy-saving batteries became the next logical step. Chinese entrepreneurs adopted a "why not?" mentality, and solar manufacturers — including JinkoSolar — pushed heavily into this field. Inevitably, swarms of competitors blindly chased the promising trend.

But central authorities became alarmed when they noticed that planned new capacity for this year had already climbed to roughly 1.5 times China's total projected battery output for 2025. Consequently, Beijing put the brakes on all new construction in mid-May. Moving forward, only companies that can demonstrate relatively high utilization rates for their existing energy storage capacity will be allowed to proceed with new construction next year.

This proactive halt is highly unusual. Beijing typically loves infrastructure spending, frequently using it to spur economic growth during troubled times. However, it seems the government has finally learned from the unbridled, irrational competition that plagued the EV and solar sectors. They are stepping in much earlier in the process to keep the genie in the bottle and prevent destructive involution.

There is a notable irony here. This domestic crackdown on excess capacity is happening exactly as the Chinese government tells the U.S. and Europe that there is no overcapacity in China, claiming the issue is a Western fabrication designed to limit China's growth. It is not totally surprising to see the apparatus speaking out of both sides of its mouth. While a portion of this battery-saving capacity is undoubtedly meant to meet growing global export demand, Beijing is clearly terrified that unchecked competition will destroy profitability, lead to sustained losses, and ultimately threaten domestic employment and social stability. For those looking to invest in newly listed energy storage companies, our advice mirrors our outlook on solar panels. The market is waiting for order to be restored. Until Beijing allows capacity to be built again, we advise sticking with bigger, established names that possess scale, reasonable capital, and proven management teams who have successfully navigated earlier down cycles. Success in China's new energy sector remains a waiting game — and entirely a question of timing.

The solar panel maker will drop the “solar” from its English name, as it builds up a second business pillar investing in frontier industries

Key Takeaways:

• JinkoSolar is adding a second business pillar by investing in emerging high-tech industries like AI, complementing its struggling legacy solar business
• The company’s pivot includes early investments of typically 100 million yuan or less in AI startups Moonshot, StepFun and SiliconFlow

By Doug Young

The old adage “what’s in a name” is taking on new significance in what at first glance appears to be a somewhat cosmetic name change by leading solar panel maker JinkoSolar Holding Co. Ltd. (JKS.US). But a closer look at the announcement, which says the company will drop the words “solar” and “energy” from its English and Chinese names, respectively, turns out to be quite a game changer for one of China’s oldest solar manufacturers.

The company revealed that its main solar business will become one of its two main pillars, alongside a new second pillar that invests in emerging high-tech industries like AI, advanced materials and other “frontier technologies,” according to its announcement last Wednesday. Reflecting that shift, its board has voted to change the company’s English name to Jinko Holdings Ltd., losing the word “solar.” Similarly, its new Chinese name will lose the word “nengyuan,” or “energy.”

The big backstory is that China’s solar sector is suffering from massive overcapacity due to a huge state-led buildup over the last decade. That’s caused prices for solar panels and materials used to make them to plunge, sending companies throughout the supply chain deeply into the red.

China is taking steps to try fix the situation by closing or consolidating many of the smaller players, and forcing everyone to shut down capacity used to make older, less efficient panels and solar components. But the process has been quite slow, and investors lost their patience with this group of companies long ago. What’s more, it’s not at all clear that the government will continue to support all the current manufacturers through this difficult transition, meaning one or more major players may ultimately be forced to leave the sector.

All that has weighed on solar stocks, many of which have lost half or more of their value over the last year. JinkoSolar is typical of the group, with its stock down 57% this year alone, now trading at an eight-year low. The company also passed a dubious milestone in mid-June, when its market value dropped below the $1 billion mark that defines “unicorn” companies in emerging sectors. That said, some might argue solar is already quite mature, and companies from the sector lost their eligibility to be called “unicorns” long ago, regardless of their market value.

Investors were unimpressed with JinkoSolar’s latest pivot, as the stock sagged by a further 8% in the three trading days after last week’s announcement. Even analysts, normally a pretty positive group, are quite bearish on the company and its peers. Of the seven polled by Yahoo Finance, just one rates the company a “buy,” while four rate it a “hold” and one rates it an outright “sell.”

The company’s core solar business, which will continue to be held under its Shanghai-listed Jinko Solar Co. Ltd. (688223.SH) subsidiary, saw its revenue decline 45% between a peak in 2023 and last year. The figure fell another 31.3% year-on-year to 12.4 billion yuan ($1.85 billion) in the second quarter of this year. Jinko also fell into the red last year, and reported a net loss of another 697 million yuan in the second quarter of 2026.

Venture investor

Despite its woes, Jinko remains relatively cash rich, which is apparently what it will use for its new second pillar as a venture capital investor. The company had about 17 billion yuan in cash at the end of June, though that was down from 22.8 billion yuan just three months earlier. Part of the decline inevitably owes to the challenges the company is facing for its solar business, but part probably also owes to its new role as a venture investor.

"The proposed new name reflects what the company has become, a holding company anchored in a world-class solar and energy storage business and building a second engine of value creation through strategic investment," said CEO Du Dimi Du. 

Jinko quietly alluded to the change in its second-quarter earnings announcement in late August, which contained a section on “strategic investment highlights” with information on investments in two companies, LaPlace Renewable Energy and Hangzhou Gold Electronic Equipment. The latest announcement reveals that Jinko has been actively making minority investments in startups since the beginning of this year, with about 400 million yuan placed in eight companies so far, including LaPlace and Hangzhou Gold.

Among its other six investments, the three largest were about 100 million yuan invested in StepFun, 70 million yuan in SiliconFlow and 69 million yuan in Moonshot. Not surprisingly, all three of those are startups from the red-hot AI sector where company valuations are soaring as they consume huge amounts of cash to develop their products. Jinko’s other investments so far include 15 million yuan in Noetix Robotics, and 8.6 million yuan in Jabon Metallic Materials.

Jinko points out that it has already exited the LaPlace investment, netting 250 million yuan in realized gains, and that it recorded a 400 million yuan fair value gain for its investment in Hangzhou Gold, which recently completed its listing on Shenzhen’s ChiNext board.

The big issue with this type of investment is its huge level of risk, which can be difficult for less experienced investors like Jinko to manage. It’s quite easy to make money on such investments in the current market when valuations are soaring. But once the situation reverses, which many believe is inevitable, valuations are likely to come crashing back to earth. That could leave Jinko with huge losses if its investments fall below their valuations at the time it purchased its stakes.

Jinko isn’t the only solar company looking for relief from the struggling sector. In June, solar materials maker Daqo New Energy (DQ.US; 688303.SH) announced a similar pivot to AI data center electrical equipment, drawing on part of its past before it moved into polysilicon manufacturing for solar panels.  Investors haven’t been too impressed with that pivot either, with Daqo’s U.S.-listed shares losing about 30% of their value in the three months since that announcement.

At the end of the day, we can’t get too excited about these new pivots, even though we understand why the solar companies are taking these steps. In effect, both Jinko’s and Daqo’s moves look aimed at jumping from one burst bubble into another inflating bubble that’s almost certain to burst as well. Any bursting of the second AI bubble will only add to the growing losses from their solar business.

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The new energy vehicle maker has recorded adjusted profits in the last three quarters, yet its stock now trades near a 52-week low

Key Takeaways:

• Nio reported an adjusted profit in the second quarter, as its net loss also narrowed significantly
• The new energy vehicle maker’s adjusted profit and gross margin both fell sequentially in the second quarter from the first

By Cheng Shui Tong

The uphill slog continues for electric vehicle (EV) maker Nio Inc. (9866.HK; NIO.US), as it stays locked in a race for survival with dozens of Chinese rivals. That said, the company’s second-quarter results, released last week, show it continues to stay near the front of the pack in that race.

Nio reported its net loss narrowed by 86% in the latest three-month period to 722 million yuan ($108 million) from 5.14 billion yuan a year earlier. It was profitable on a non-GAAP basis, reporting an adjusted profit of 24.8 million yuan for the period, reversing a 4.13 billion yuan loss a year earlier. Significantly, the latest figure marked Nio’s third consecutive quarter of adjusted net profits.

Its second-quarter revenue also rose by a healthy 69% year-over-year to 32.1 billion yuan, while its gross margin reached 18.4%, up 8.4 percentage points from a year ago. While those figures marked a substantial improvement year-on-year, they represented some backsliding from the first quarter. Specifically, Nio’s second quarter adjusted profit was down 44% sequentially, while its gross margin fell by 0.6 percentage points over that time. That may partly explain why Nio's U.S. stock fell after the announcement, dropping below the $4 mark to trade near a 52-week low.

Turnaround story

Nio’s stock has been through ups-and-downs since it listed on the New York Stock Exchange in 2018. It hit an all-time low of about $1.20 the next year, but then staged a massive rebound just a year later to reach an all-time high over $62 in February 2021.

Like many of its peers, Nio has consistently lost money. Despite that, the stock initially soared after the company made a remarkable turnaround from a near collapse in late 2019, when founder William Li was dubbed the “most miserable man” of that year. But then the company got a massive 7 billion yuan lifeline from funds tied to the city of Heifei, capital of Anhui province where it has close ties, in April 2020. Nio clawed its way back from there, banking on its premium market positioning and flagship battery-swapping technology. As that happened, its total deliveries rose to more than 43,000 vehicles in 2020, more than double the previous year's figure.

Assisting Nio’s case, shares of the global EV leader Tesla (TSLA.US) started to soar at that time. That helped to light a fire under Nio’s stock, as Wall Street investors increasingly viewed the company as the “Tesla of China.”

Six years later, Nio has achieved an operating profit, with annual new car deliveries exceeding 400,000 units — a nearly tenfold increase from those earlier days. So why is its stock hovering near a 52-week low, sitting at less than 10% of its peak? Market enthusiasm was strong in the earlier days, as investors applauded the company for its near-death survival, multiplying sales, and favorable policy tailwinds in its home China market. Many investors were also optimistic that EVs would disrupt the entire auto industry, awarding Nio a hefty premium as a leader in the field.

Fast forward to the present, when those lofty expectations have evaporated. While EV penetration rates have climbed significantly, so have the number of companies entering the market, igniting cutthroat competition and brutal price wars. Making matters worse is the gradual phase-out of national subsidies for new energy vehicles (NEVs) in China, the world’s largest market for such cars. That confluence of factors has slammed the brakes on most companies’ formerly sky-high valuations, sending their shares into a tailspin.

Entering the decisive phase

Speaking at a recent forum, Nio Chairman William Li pointed out that China's auto industry is entering its most brutal and decisive phase — a critical juncture that will determine who survives over the next three to five years. He noted the significance of branding is rising as products become increasingly undifferentiated, even as carmakers are forced to keep spending heavily on R&D and upgrades to their technology and service networks to stay apace with the field.

That raises the question of whether Nio will emerge as a survivor in this Chinese auto race. Despite its low stock price, there are also reasons for optimism. For one, Nio's strong performance in the premium segment has bolstered customer loyalty, leaving room for price hikes. The Nio brand has maintained its lead in the domestic high-end market, winning the company an average transaction price of 400,000 yuan in the second quarter. That climbed further to 430,000 yuan in July, surpassing figures for Mercedes-Benz, BMW, and Audi, ranking Nio first among mainstream luxury brands.

Nio’s battery-swapping model, cultivated over the years, has also given the company an advantage, making its products harder to substitute. Unlike traditional EVs that rely on charging stations, Nio's fully automated process allows drivers to complete a battery swap in just three minutes without leaving their vehicles — more efficient than standard fast-charging. Around 60% of Nio owners currently utilize that service. That approach also facilitates the decoupling of vehicles and batteries. Buyers can purchase cars without batteries, saving tens of thousands of yuan upfront. They then pay monthly subscription fees instead, with Nio responsible for battery maintenance.

This not only improves efficiency for car owners but also deepens their reliance on the brand and positions Nio as a leader in battery-swapping infrastructure.

Major banks lower target prices

Nio may look competitive over the longer term, but its second-quarter performance fell broadly short of expectations, prompting major banks to slash their price targets, further pressuring the stock. Bank of America zeroed in on Nio's second-quarter gross margin contraction on a sequential basis, even though it improved year-over-year. It also noted that Nio’s operating expenses accounted for 19.5% of sales, slightly higher than anticipated. As a result, BofA lowered its target price for Nio's Hong Kong-listed shares from HK$47 to HK$40 and maintained a “neutral” rating.

At the same time, cost pressures for manufacturers are impossible to ignore. Nio's management indicated that the average cost per vehicle in the second quarter rose by approximately 14,000 yuan compared with the fourth quarter of last year. They projected a further increase of 2,000 yuan to 3,000 yuan in the second half of the year, which could put further pressure on the company’s gross margin.

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The company’s flat second-quarter deliveries outperformed a shrinking home market, while overseas expansion and a major robotics initiative offer new paths to growth

Key Takeaways:

• Xpeng’s EV deliveries held steady in the second quarter despite fierce competition in China, but forex and investment losses pushed its net loss sharply higher
• The EV maker is looking overseas and beyond cars for growth, using its technology in Volkswagen projects and humanoid robots

By Hu Minghe

It may not sound like much, but Xpeng Inc.’s (XPEV.US; 9868.HK) ability to keep its electric vehicle (EV) sales steady in the second quarter represented a modest achievement. The feat comes in a Chinese market where sales are hitting the skids after several years of explosive growth, even as automakers continue to churn out new models at breakneck speed. But the picture wasn’t all upbeat for Xpeng either, as currency and investment losses caused its heavy losses to continue.

The company, one of many startups and state-owned EV makers in a crowded Chinese market, delivered 103,295 vehicles in the three months through June, up just 0.1% year-on-year, according to its latest quarterly report released last week. Its revenue rose 8% to 19.74 billion yuan ($2.91 billion), which looked relatively strong in the current climate of steady price erosion, while its gross margin rose to 20.7% from 17.3%.

Despite those improvements, Xpeng continued to hemorrhage money. Its second-quarter net loss nearly tripled to 1.34 billion yuan from 480 million yuan a year earlier, mainly due to foreign-exchange and investment losses.

The second-quarter performance marked an improvement from the first quarter, when the company’s deliveries skidded 33% year-on-year to 62,682, as its revenue fell 17.6% to about 13 billion yuan.

Xpeng forecast its recently stabilizing situation will continue into the current quarter, forecasting deliveries of 115,000 to 121,000 vehicles for the three months through September, representing a 0.9% decline to a 4.3% increase year-on-year.  It also forecast its third quarter revenue would rise between 6.5% and 14.8% year-on-year.

Both its delivery and revenue outlooks fell short of analysts' expectations, as its Hong Kong-listed shares fell more than 9% after the results were released.

The results also showed how founder and CEO He Xiaopeng is trying to make his company more than a carmaker, in a bid to diversify beyond the intensely competitive EV space. Xpeng, its executives and outside investors conditionally agreed to subscribe for $900 million of shares in Dogotix, Xpeng’s former internal humanoid robot division, valuing the recently spun off company at $6.3 billion.

Crowded road at home

China's EV makers are fighting among each other for a market that has stopped delivering easy growth. Domestic sales of new energy vehicles (NEVs), including battery cars and plug-in hybrids, fell 13.4% to 5.09 million in the first half of this year, even as overall sales, including exports, rose 7.3% to 7.45 million, according to industry data. In effect, companies like Xpeng were only able to steady their ships by turning to exports.

The intense competition was highly visible at the Beijing Auto Show in April, where 173 out of 222 new models on display were NEVs. In such an environment of constant launches and rapid price cuts, even hit models can age quickly.

Xpeng’s ability to hold its deliveries roughly steady looks relatively impressive compared to some of its startup rivals. Li Auto’s (LI.US; 2015.HK) deliveries fell 11.5% to 98,330 vehicles in the second quarter, though Nio’s (NIO.US; 9866.HK) grew 49.4% to 107,658. Such variation is often tied to new vehicle launches, which can boost sales temporarily, before they quickly normalize at lower levels.

As the domestic market slows, overseas markets are offering another escape route. Xpeng delivered more than 20,000 vehicles abroad in the second quarter, up 81% year-on-year, as international operations supplied more than a quarter of its revenue in the first half of the year. It expects its overseas sales to keep growing, forecasting deliveries of more than 40,000 in the fourth quarter.

After co-founding mobile browser developer UCWeb, which Alibaba acquired in 2014, He Xiaopeng went on to become an investor and co-founder of Xpeng, alongside former GAC executives Xia Heng and He Tao. He left Alibaba to personally take the wheel at Xpeng in 2017 and later reorganized it after a troubled period exposed management problems in 2022. Volkswagen (VOW.DE) later chose the company’s G9 platform for two China-focused EVs and invested about $700 million for about 5% of Xpeng in 2024.

While the Volkswagen alliance targets the German automaker’s own EV sales in China rather than exported Xpeng cars, it is generating high-margin technology revenue. Xpeng's services and other revenue nearly doubled year-on-year to 2.7 billion yuan in the second quarter, helped by development work for Volkswagen. The segment also posted a 75.1% gross margin, far higher than the 12.1% for vehicle sales.

From four wheels to two legs

Xpeng is also taking technology developed for cars into driverless taxis and humanoid robots. In April, He Xiaopeng said the company’s vision language action (VLA) driving system had beaten Tesla’s (TSLA.US) full self-driving (FSD) system in some complex situations and set an August goal to surpass it more broadly. On the earnings call, he said VLA 2.0 matched the world's leading driver-assistance system on major roads and performed better on narrow roads, campuses and in parking facilities. Tesla began rolling out its FSD (Supervised) in China in May, but has yet to win approval for broader use.

Xpeng is also taking its technology beyond China. It said VLA 2.0, trained mainly on Chinese data, performed nearly as well during tests on German urban roads, and it aims to secure European approval in the first half of 2027. It has Guangzhou approval for tests with nobody in the driver's seat and has completed more than 2,000 internal robotaxi orders. Passenger operations without an onboard safety operator are targeted for 2027.

Then there’s Dogotix, Xpeng’s former in-house humanoid robot division, whose main product is IRON, a model designed to work as a salesperson or guide in shops, showrooms and campuses using chips and AI models developed for its cars. The move into humanoid robots is natural for EV companies, whose cars already combine sensors, batteries, motors and AI. Tesla made a similar leap with Optimus.

But Xpeng isn’t exactly alone with its humanoid robot foray, entering a field that’s quickly becoming as overcrowded as NEVs. AgiBot shipped 5,168 humanoid robots in 2025 and the newly listed Unitree (688836.SH) shipped about 4,200, ranking first and second worldwide, according to Omdia.

Xpeng says 85% of the suppliers for IRON robots overlap with its auto supply chain. Dogotix is targeting scaled production by year-end and external sales in the first half of 2027, with monthly capacity of several thousand units later that year. Other investors in Dogotix include IDG Capital, Gaorong Ventures, Tencent and Alibaba.

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The producer of battery materials posted higher first-half earnings, helped by a rebound in nickel prices, as it expands into new technologies for energy storage

Key Takeaways:

• To keep pace with changing demand, CNGR has been investing in producing lithium iron phosphate batteries for premium EVs and renewable energy systems
• It announced plans to reallocate the remaining proceeds from its Hong Kong IPO from a South Korean nickel project into a Chinese phosphorus facility

By Lee Shih Ta

One of the hardest challenges for the new energy industry is predicting which technology will prevail in the next product cycle. Batteries are a case in point.

Various battery types using different compounds have emerged in recent years to power electric vehicles, electricity grids, solar storage systems and data centers. Automotive ternary batteries, with a cathode mix typically including nickel and cobalt, are now being supplanted by cheaper lithium iron phosphate batteries that can also be used as energy storage units. Meanwhile, next-generation alternatives such as solid-state and sodium-ion batteries are gaining momentum.

In a rapidly evolving market, going all in on a single technology would be a risky move, which is why CNGR Advanced Material Co. Ltd. (2579.HK; 300919.SZ) has decided to hedge its bets, and the strategy appears to be paying off.

Starting out as a leading supplier of materials for ternary batteries, the company has expanded to cover elements for nickel, cobalt, phosphorus, sodium and solid-state batteries. Its operations have also spread upstream to encompass nickel, lithium and phosphorus resources, as well as processing, smelting and recycling

With this diversified approach, the company has just delivered higher half-year profits, helped by rising nickel prices. Earnings released on Aug. 24 show CNGR revenues jumped 57.5% to 33.58 billion yuan ($4.71 billion), while profit rose 78.4% to 1.31 billion yuan. Overall gross profit margin also increased to 12.8% from 11.9%.

Revenue from new energy metal products came to 10.11 billion yuan, around 30% of the total, with the profit margin rising to 12.3% from 7.4% in the year-earlier period, a rise attributed to a recovery in nickel product prices. The gross profit margin of nickel-based materials edged down to 17.1% from 17.8% but gross profit per ton increased to 15,100 yuan from 13,600 yuan, mainly due to higher benchmark prices.

Supply of nickel ore, which is 60% controlled by Indonesia, tightened early in the year, driving prices up more than 30%, according to analysis by Goldman Sachs. The investment bank later raised its forecast for the average nickel price in 2026 by 16% to $17,200 per ton. Indonesia’s annual production quota is also projected to be lower than last year, leaving supply dynamics as a key price driver.

Despite the positive factors for nickel, CNGR’s investment focus is shifting towards the raw materials for lithium iron phosphate batteries, tracking changes in demand.

The company announced plans to redirect the remaining HK$1.20 billion ($153 million) in proceeds from its 2025 Hong Kong listing, which were originally earmarked for a South Korean nickel project, into its phosphate mining and processing facility in Kaiyang, Guizhou.

China’s battery market is in a state of technological flux. In the first half of this year, lithium iron phosphate batteries accounted for 81% of China’s installed power battery capacity, while ternary batteries achieved just 18.9%. More importantly, growth in battery demand is moving from EVs to energy storage systems, where phosphorous-based products can offer cost and performance advantages.

China’s production of power and energy storage batteries rose 53.3% year on year in the first half, outpacing the 12% increase in domestic power battery capacity, indicating that new output is going towards energy storage and exports, Fastmarkets has reported, citing data from the automotive battery industry.

Global battery giants are also adjusting their strategies. LG Energy Solution (373220.KS) is shifting some of its North American EV battery capacity to energy storage. By the end of this year, five of its eight North American plants will produce energy storage batteries, while its technology mix is also moving from more nickel-dependent chemistries toward lithium iron phosphate, which is better suited to static energy storage.

New business starts to pay off

For CNGR, phosphorus has turned from a long-term bet into an income stream. Revenue from phosphorus-based materials rose about 55% to 1.04 billion yuan in the first half, while gross profit margin swung to 7.8% from negative 10.5% a year earlier. The upturn was attributed to economies of scale from the gradual release of production capacity, coupled with a recovery in downstream demand.

But ternary materials could still have room for growth, being widely used in high-end EVs for energy density and extended driving range, particularly in Europe and the United States. In the first half of this year, China’s installed capacity of ternary batteries still rose 14.2%, while global output of ternary precursors increased 26.1%. Meanwhile, many solid-state batteries also use high concentrations of nickel in their cathodes. CNGR holds a 26% share of the Chinese market in ternary precursors, while shipments of solid-state battery precursors reached 100 tons in the first half.

CNGR has been diversifying its battery materials on multiple fronts to stay ahead of technology trends and gain market share. Capital expenditures fell 35.1% to 1.11 billion yuan in the first half, indicating that investment in property, plant and equipment had slowed after a period of rapid expansion.

Nickel prices remain an important factor in near-term earnings. Over the longer term, as the battery industry enters an era of multiple coexisting technologies, the challenge will be to deploy capital where it can generate the highest returns.

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"Inevitably, at some point in time, order had to be restored to that market, and definitely some of the projects have been caught with their pants down." — commenting on the fallout from China stripping away green energy subsidies.

Key Takeaways:

• A Chinese solar executive's arrest in Australia for bribery highlights the clash between Chinese and overseas business practices
• China's shift to market-oriented pricing for green energy is exposing massive overcapacity, forcing solar and wind producers to consider curtailment rates

By Rene Vanguestaine and Doug Young

For China's green energy sector, harsh new realities are setting in both at home and abroad. On the international front, Chinese companies are colliding with strict Western anti-corruption standards, underscored by the recent arrest of a solar executive in Australia. On the domestic front, meanwhile, a massive buildup of green energy capacity is slamming into a painful shift toward market-oriented pricing. Both events serve as rude awakenings for an industry accustomed to operating under different rules and generous state support.

We'll start with the overseas reality check. On July 24, Zhu Guoxin, an executive at solar inverter maker Shenzhen Growatt New Energy, was arrested in Australia. He was charged with trying to bribe an official from the Clean Energy Council, which oversees the certification of renewable energy products in Australia, with $20,000 hidden in a bag of tea during a July 9 meeting.

While giving bribes used to be a common business practice in China, the government has taken steps to stamp it out. Under President Xi Jinping, China has spent about 12 years sending people to jail for corruption with plenty of news coverage. Yet, it's a never-ending story, and we're not confident the practice will ever completely stop.

This case is one of the first we've seen of a Chinese businessman arrested overseas for trying to bribe a local official. If you're a Chinese company planning to export products, you need government approval. We would have hoped the Chinese government would educate would-be exporters on Western overseas practices — especially concerning bribes to win business. But apparently that isn't happening, or some executives simply don't believe the warnings. In developing markets like Africa or Southeast Asia, state-owned Chinese companies can often compete by offering favorable trade-offs, like access to the Chinese government, rather than outright cash. But in the Western world, there's a strict level of oversight on who wins these contracts.

It'll be interesting to monitor how Beijing reacts to this trial. The government is famous for getting outraged and engaging in tit-for-tat actions when its citizens are detained overseas. If Beijing is truly serious about eliminating corruption, we'd expect a mild diplomatic reaction calling for due process, rather than noisy outrage. Since news of the arrest will inevitably reach China, it wouldn't look good for Beijing's domestic anti-corruption image if it tried to help a citizen avoid consequences for bribing a foreign official.

Confronting domestic overcapacity and market-oriented pricing

Back in China, the green energy sector is facing its own messy economic situation. The government is moving its solar and wind power producers toward a more market-oriented pricing system, sending shock waves through the industry. These companies thrived for a long time because the government ordered the grid to pay set prices above market rates as a form of subsidy.

But following a massive construction boom of new capacity, the government is rapidly removing many of those subsidies. The shift hasn't happened overnight — there are cases where solar manufacturers supplying panels to these plants were warned well in advance that everything was moving toward market-based pricing. Still, the situation is exacerbated by severe regional mismatches, with supply often far outstripping demand. The overall result is huge amounts of capacity being forced to sit idle. We've seen instances where developers are now building in curtailment assumptions — essentially non-operating capacity — of as much as 40% in their baseline models for new projects. That's a staggering jump from the 5% to 10% seen in the past.

This overproduction mirrors what we've recently seen in the EV sector. Order inevitably had to be restored, and many projects have been caught off guard. When promoters have to assume 40% of their capacity won't be productive while simultaneously receiving lower market prices instead of subsidies, it's not an encouraging environment. As highlighted in a recent story about Xinyi Energy Holdings (3868.HK), profits are diving as the sector suffers from a "solar hangover" caused by the phasing out of subsidies and falling prices. Similarly, Concord New Energy (0182.HK) has seen its profits plunge amid power curtailment and intensifying competition in market-based electricity pricing.

We expect that some weaker projects will simply be abandoned or disappear, which is typically how overheated, irrational markets clean themselves up. Moving forward, new project construction is definitely going to slow down. Developers will be much more cautious. The big unknown in any power generation equation now — in China, as well as the U.S. and Europe — is AI. We wouldn't be surprised if future projects become specifically tied to AI development, as that's where the big new demand is expected.

China is also dealing with a chicken-and-egg situation. While the country committed to green energy emission reduction targets, traditional coal power remains largely in the hands of state-owned enterprises. These entities aren't thrilled about losing sales, creating a distorted environment where wind and solar energy is left idle instead of being absorbed into the national grid.

The implications are grim across the supply chain, from polysilicon at the source all the way up to solar panels. Chinese manufacturers, who produce close to 80% of the world's panels, are already facing overseas sales constraints in the U.S. and increasingly in Europe. This domestic transition only exacerbates their tight situation. We've been expecting consolidation where weaker producers eventually disappear, but it isn't happening as fast as some thought. Consequently, the stock prices of U.S.-listed Chinese solar manufacturers have come down substantially over the last six or seven months. It's a painful adjustment, leaving little room for optimism in the near term.

The robotaxi operator has even achieved single-vehicle profitability in Guangzhou and Shenzhen, but high R&D and depreciation costs are undermining its high valuation

Key Takeaways:

• Pony AI's robotaxi revenue surged more than sixfold in the first half of the year, as it races towards a year-end target of more than 3,500 vehicles.
• Despite achieving single-vehicle profitability in some markets, the company's net loss continues to widen

By Lee Shih Ta

After years of slow advances, robotaxi commercialization has accelerated significantly this year in China. The leading trio of Pony AI, WeRide and Baidu’s Apollo Go have been putting more vehicles on the road, extending their reach to more cities. Individual fleets are crossing into the thousands of vehicles, lighting a fire under company order volumes and revenues.

Leading that charge is Pony AI Inc. (2026.HK; PONY.US), whose latest financial results, released last week, show its revenue nearly doubled year-over-year in the first half of 2026 to $70.47 million. Within that, revenue from its robotaxi services surged by 534% to $20.64 million from just $3.26 million a year earlier, driving its contribution of the company’s revenue pie from 9.2% to 29.3%. The growth accelerated throughout the period, with the passenger fare growth rate rising from 456.5% in the first quarter to 849.3% in the second.

Among its peers, Pony AI is notable for its rapid expansion. WeRide's (0800.HK; WRD.US) revenue in the first half increased by 73.3% year-over-year to 346 million yuan ($51 million), behind Pony AI. Both companies are still losing significant money, including a first-half net loss of $98.86 million for Pony AI, and a similar-sized 789 million yuan ($116 million) loss for WeRide. WeRide's overall gross margin stands at 36.6%, notably higher than Pony AI's 16.9%. But WeRide’s mix includes L2, L3 and L4 autonomous driving businesses in addition to its robotaxi operation, making the margins a bit of an apples-to-oranges comparison.

Baidu (9888.HK; BIDU.US) doesn’t disclose revenue and profitability metrics for its Apollo Go service. But it said the platform already completed 3.2 million fully unmanned driving orders in this year’s first quarter, up over 120% year-on-year, with orders for a single week peaking at more than 350,000.

Pony AI's global robotaxi fleet reached 1,975 vehicles by the end of June, with plans to boost that figure sharply to more than 3,500 vehicles by year-end. It has more than 1.5 million registered users in China, and its average weekly paid orders in May were more than double the rate in January. More importantly, the company said that Guangzhou and Shenzhen have achieved single-vehicle profitability on a citywide scale. But achieving single-vehicle profitability is still far cry from overall profitability.

R&D expenses of $104.1 million further weighed on the company’s profitability, outpacing its total revenue during the six-month period, while its cash used in operating activities also rose to $118.2 million. CFO Wang Haojun recently said that, based on company calculations, Pony AI will only be able to reach positive cash flow when 40,000 to 50,000 of its robotaxis are deployed domestically in tier-one and tier-two cities. That means that meeting its target of 3,500 vehicles by year-end will still only amount to less than 10% of that threshold.

Regulation remains a wild card on the road to the larger fleets necessary for sustainable operations. Rumors circulated earlier this year that approval of new licenses was suspended after an incident involving Baidu’s Apollo Go service in the spring. But state media subsequently denied a “comprehensive suspension,” and Pony AI also said its business wasn’t affected. Judging from its second-quarter performance, the incident hasn’t significantly slowed the company’s pace of expansion.

WeRide disclosed that average daily orders per vehicle for its robotaxis in China exceeded 21 during the second quarter, up 24% quarter-over-quarter, with a peak of 28 orders. Pony AI doesn’t give data for that metric. However, as fleets grow from thousands to tens of thousands of vehicles, revenue generated per vehicle will become increasingly important to dilute depreciation and operating costs.

Co-built fleets and overseas expansion

Expanding a fleet to tens of thousands of vehicles requires huge capital expense for a company using a self-operated service model. Pony AI previously disclosed that vehicle depreciation accounts for about half of its total costs, and scaling up will further push up vehicle purchasing and maintenance costs.

To defray some of those costs, the company is increasingly turning to a “co-built fleet model,” where partners such as ride-hailing platforms and taxi companies own and operate the vehicles, while Pony AI provides autonomous driving technology and generates revenue from vehicle sales, “virtual driver” services, and fare sharing. The company said revenue from the co-built model achieved significant sequential growth in the second quarter.

Pony AI is turning to a similar strategy overseas, as it plans to deploy over 2,000 robotaxis across five European cities in a partnership with Uber (UBER.US), bringing the committed number of vehicles for overseas partnerships to more than 4,000. The model will make it easier for Pony AI to expand its fleet while better controlling its cash burn.

Despite the ongoing expansion, investors have been starting to question high valuations awarded to robotaxi operators at the time of their listings. Pony AI’s Hong Kong stock dropped more than 5% the day after its results announcement to close at HK$58.60, down by more than half from its offering price of HK$139 last November. Shares of WeRide, which debuted the same day, also currently trade about 40% below their issue price. In terms of price-to-sales (P/S) ratios, Pony AI's multiple has fallen from approximately 100 times at the time of listing to 27 times now, while WeRide's has dropped from 62 times to about 17.

The fact that the P/S ratios are both down by over 70% shows their IPO pricing last year incorporated aggressive expectations for their robotaxi commercialization, and now investors are re-evaluating those expectations. The declining ratio also partly stems from the rapid rise in each company’s revenue. But Pony AI's stock is now down by nearly 60% compared to its IPO price, indicating that high-speed revenue growth is not yet sufficient to support expectations at the time of its listing.

Even after its stock decline, Pony AI's P/S ratio of 27 times is still 60% higher than WeRide's 17, indicating investors are still more bullish on the former for its faster robotaxi growth, aggressive fleet targets, and single-vehicle profitability in Guangzhou and Shenzhen. Now, they will be watching to see if its co-built fleet model can reduce its cash burn and drive improvements in utilization rates, gross margins, and cash flow. Positive developments on those fronts could be cause for some upside to its stock.

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The mid-tier EV battery maker is targeting domestic Chinese investors with its new listing plan, as it aggressively expands its capacity

Key Takeaways:

• Zenergy Battery expects to report its net profit rose between 45.5% and 81.8% during the first six months of 2026
• 15 months after its Hong Kong IPO, the new energy battery maker is seeking a second listing in Shenzhen to help bankroll an aggressive expansion

By Edith Terry

Jiangsu Zenergy Battery Technologies Group Co. Ltd. (3677.HK) has been on a fundraising roll since its April 2025 Hong Kong IPO, tapping the city’s global investor pool for nearly $200 million from the listing and a subsequent private placement last October. Now, it’s turning inward to domestic Chinese investors with plans for a Shenzhen IPO to continue expanding in a race for scale that could determine who survives in the overheated new energy battery industry.

The mid-tier battery maker has completed initial registration procedures with the Jiangsu securities regulator and officially entered the IPO tutoring process required for its planned listing on the Shenzhen Stock Exchange’s Nasdaq-style ChiNext board, according to media reports.

Those reports came just days before the company issued an upbeat earnings previewlast week, saying it expected to report its net profit rose between 45.5% and 81.8% in the first half of this year, equivalent to 320 million yuan ($47.4 million) to 400 million yuan, from 220 million yuan a year ago. Zenergy’s shares jumped by 4.2% the next trading day, but are still down 33% this year, reflecting investor concerns about the longer-term fate of mid-tier battery makers.

The company cited a gradual ramp-up of new production capacity for the profit jump, together with higher capacity utilization. Shipments of electric vehicle (EV) and energy storage system (ESS) batteries both rose substantially, with the latter posting “a significant increase” in revenue, Zenergy said. As its revenue grew, the company’s expense-to-revenue ratio also declined.

After losing money as recently as 2023, Zenergy began to show modest profits in 2024 with net income of 91 million yuan on revenue of 5.13 billion yuan that year. It moved squarely into the black with an 809 million yuan profit last year, as its growing scale, reflected by 58% top-line revenue growth, fueled by a 3.8 percentage point rise in its gross margin to 18.4%.

Well positioned

In a July research report, Goldman Sachs said Zenergy is poised to become the fastest growing company in China’s battery industry, and one of the few where every dollar invested exceeds the cost of capital. Goldman gave a target price of HK$13 for the company’s Hong Kong-listed shares, more than double its latest close of HK$5.585, reflecting its high growth expectations.

Nonetheless, investor skepticism is weighing on mid-range battery producers like Zenergy due to their constant need for cash as they race to catch up with top-tier players like industry leader CATL (3750.HK; 300750.SZ). Zenergy plans to double its capacity to 70.5 GWh this year from 35.5 GWh at the end of 2025 and further boost that to 120 GWh in 2027. Even so, those figures still pale compared with CATL’s 772 GWh in capacity at the end of 2025, with another 321 GWh under construction.

But Zenergy has more up its sleeve outside the cutthroat EV battery business. It sees new growth potential in both ESS batteries used to store excess power at solar and wind farms, and in batteries used to power a new generation of electric vertical takeoff and landing (eVTOL) aircraft. ESS batteries have gained strong momentum recently thanks to improving technology and strong demand from both residential and industrial customers, especially developers of power-hungry data centers used for AI applications.

Zenergy’s ESS revenue actually declined last year, falling to 5.2% of revenue from 9.1% in 2024. The company blamed that on production capacity constraints, which it said will be fixed through capacity expansion.

The Shenzhen listing is key to Zenergy’s plans for building scale. New flexible production lines can produce multiple types of batteries for EVs, energy storage and aviation powertrains. The company also has plans for marine EV batteries.

As of the end of 2025, Zenergy had used up about two-thirds of its IPO funds allocated for construction, but still had 350 million yuan earmarked for capacity expansion from its private placement.

A Shenzhen listing could give Zenergy a valuation boost of as much as 20% to 30%, since Mainland investors often value emerging industry companies more highly than their Hong Kong peers. Zenergy’s inclusion in a cross-border program last September making its Hong Kong shares available to Mainland investors gave the stock a temporary bump. But the shares have struggled this year on concerns over its longer-term prospects, despite Zenergy’s strong 2025 results.

Celebrity chairwoman

Zenergy’s rapid rise has cast its chairwoman and co-founder Cao Fang into the spotlight. Cao is the younger sister of Cao Dewang, one of China’s most famous entrepreneurs as founder of Fuyao Glass, the world’s largest specialized automotive glass company, with roughly one-third of the global market. Cao Fang is 12 years younger than her brother, now 81, and began working for him in 1997 at the age of 39 when Fuyao Glass was just 10 years old.

One observer likens Cao Fang to a top student from a famous martial arts academy who leaves to form her own school, integrating the original academy’s techniques but creating her own moves as well. In 2013, already a vice president of Fuyao Glass, Cao Fang and Fuyao executive director Chen Jicheng set up Changshu Sinogy Venture Capital.

The same year, Cao and Chen invested in a joint venture with Toyota to supply battery packs for the Japanese car giant’s hybrid vehicles in China. Cao Fang and Chen both left Fuyao in 2014, and two years later they bought the assets of Tafel, a battery maker founded by former CATL employees, which became Zenergy three years later. With backing from her older brother and his automobile industry network, her client list soon came to include big domestic names like FAW Hongqi, GAC Trumpchi, Leapmotor, SAIC-GM-Wuling, SAIC-GM, GAC Toyota and Volkswagen.

Based in the city of Changshu in East China’s affluent Jiangsu province, Zenergy’s Series A financing round raised 2.4 billion yuan and made it a local star. Cao Dewang has a 2.5% interest in the company. And despite his own retirement from Fuyao Glass in 2025, current Chairman Cao Hui, who is also Cao Fang’s nephew, is likely to keep up the close relationship between Zenergy and Fuyao Glass going forward.

Whether Zenergy’s Cao Fang can deliver on her strategy of diversifying from EV batteries to ESS and aviation batteries to reach scale is an open question. Her deep experience with the 11.1 trillion yuan Chinese auto industry will likely be one of the company’s biggest advantages as a shakeout looks likely in the hotly contested battery sector over the next few years.

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A rumored move by Elon Musk and a controversial acquisition by a Chinese education giant are exposing growing regulatory minefields in cross-border commerce

Key Takeaways:

• Elon Musk's rumored plan to sell Tesla’s China operations underscores the intense governance and technological pressures facing multinational corporations
• TAL Education’s controversial acquisition of an American digital reading company highlights why foreign firms need to prioritize proactive communication

By Brad Burgess and Doug Young

Geopolitical tensions between China and the West are fast becoming a defining force in the global business landscape, reshaping how multinationals operate across borders. This dynamic is currently playing out in two distinct storylines that, while from entirely different sectors, reveal the subtle but mounting pressures on cross-border commerce. On one hand, reports say Elon Musk may be preparing to sell his Tesla (TSLA.US) China operations to pave the way for a merger with SpaceX (SPCX.US). On the other, Chinese private education powerhouse TAL Education Group (TAL.US) recently made a fire-sale purchase of an American digital kids’ literature company, triggering national security scrutiny from U.S. lawmakers.

According to a report in the Wall Street Journal, Musk is reportedly considering a sale of Tesla's Chinese operation to clear the path for a potential merger between the EV maker and his recently listed space company. Musk has publicly dismissed the report as absurd, but, as we’ve seen in the past, a public refutation doesn’t mean strategic gears aren't turning.

The underlying logic for such a move is relatively straightforward. A divestment would remove any China connections from SpaceX’s highly sensitive business ecosystem, which includes critical work for NASA and the Starlink low-orbit global satellite network. There are also compelling technology and governance incentives. For instance, integrating operations would benefit shared technology initiatives, like the Terafab chip development plan in Texas. Musk’s current control over Tesla is also relatively low compared to SpaceX, so a merger would grant him significantly greater control over the automaker.

Divesting the China business, however, would have a massive impact. Tesla China accounts for more than half of the automaker's global production and is a critical export hub for Europe and Asia. The entity’s structure is also unique. Unlike traditional automotive partnerships in China, it is not a joint venture. It was established as a fully owned business — a concession likely granted both to import best practices to China’s EV ecosystem and as a bargaining chip amid pressure from the first Trump administration.

If a sale happens, it would likely be viewed as a significant loss of face for Beijing. The Chinese government could also plead grievance, pointing out the exceptional benefits it originally extended to the U.S. automaker. We don't view Tesla's modular structure as a new template for Western companies; it remains an exception to the rule. Nonetheless, it’s a striking example of how sensitive technology and political risks are forcing a rethink of traditional global integration. European regulators, already viewing China through a skeptical lens, would undoubtedly keep a close watch on whatever independent entity might emerge.

TAL's U.S. acquisition: A double-edged sword

Looking at the reverse flow of capital, TAL’s recent acquisition in the U.S. provides a textbook example of how sudden regulatory transitions can catch a foreign company off guard. TAL purchased Epic, a leading U.S. digital literature provider targeting children, for just $95 million in a bankruptcy sale last year. It was a remarkable discount, considering Epic’s previous Indian owner paid $500 million for the company just four years prior. The deal generated immediate, massive returns, with TAL booking a $400 million gain in its recent quarterly results, highlighting TAL's aggressive pivot toward overseas growth after facing severe domestic crackdowns.

However, this diversification maneuver is shaping up to be a double-edged sword. Almost immediately, U.S. lawmakers called for a national security review of the transaction. Some might intuitively compare this to ByteDance and the forced divestiture of its U.S. TikTok operations. But we believe the nature of this scrutiny is distinctly different. With TikTok, the core geopolitical fear centers on addictive algorithms and the potential for a foreign government to manipulate content in digital echo chambers.

Epic, conversely, is a children’s digital library. The backlash here stems from an entirely different domestic sensitivity in the U.S.: a heated societal debate regarding parental rights and the appropriateness of reading materials in public schools and libraries. It’s less about fear of Chinese authorities injecting Confucian classics into a kids app, and more about who has the authority to curate children's content.

The primary issue here is one of corporate strategy and communication. The U.S. children’s education space is highly regulated and incredibly sensitive. Yet TAL approached the U.S. market much like it might approach the domestic Chinese market: moving swiftly into a gray space with a cheap deal, while hoping to fly under the radar. It didn't proactively check with political consultants or regulators to explain its content controls or assuage parental concerns. While tech veterans like Alibaba (BABA.US) are slowly learning how to proactively navigate foreign regulatory waters, companies like TAL have little experience outside their home market. Culturally, proactive transparency just isn't in their DNA. But as geopolitical tensions mount, there can be severe consequences for acting first and answering questions later. Moving forward, both U.S. and Chinese companies must realize that cross-border deals can no longer afford to be opaque.

The Shanghai supplier of electric-drive systems kept growing this year even as China’s domestic EV market slowed, but half its revenue depends on a single automaker

Key Takeaways:

• Leadrive’s revenue rose 73.3% in the first five months of 2026, supported by the country’s booming exports, even as China’s domestic EV market contracts
• Half of the electric-drive component maker’s sales come from a single customer, leaving it exposed to customer concentration and price pressure

By Hu Minghe

Leadrive Technology (Shanghai) Co. Ltd. is hoping to land on investor radars alongside China’s higher-profile electric vehicle (EV) and battery producers, positioning itself as a key supplier of the machinery that powers those cars. The company renewed its application for a Hong Kong IPO last week, seeking funds to expand its production of electric-drive systems, the components that control the flow of electricity between an EV’s batteries and its motor.

Less visible than an electric car’s exterior design or battery pack, electric-drive systems play a key role in EVs by controlling how electricity from batteries is converted into motion.

The company’s business has grown rapidly in sync with China’s soaring EV sector. Its revenue jumped more than 10-fold from 159.8 million yuan ($23.6 million) in 2023 to 2 billion yuan in 2025, before increasing another 73.3% year-on-year to 956 million yuan in the first five months of 2026. Its gross margin improved to 9% from negative 8.3% over that time, although the company remained in the red with a net loss of 127.5 million yuan in the latest period.

Founded in 2017, Leadrive is part of an emerging new group of lower-profile Chinese automotive suppliers. China’s first generation of EV champions was dominated by automakers such as BYD (1211.HK; 002594.SZ) and battery giant CATL (3750.HK; 300750.SZ). The next wave consists of less visible companies in the EV supply chain, making everything from power electronics to automotive semiconductors.

Leadrive’s challenge is that this market has some powerful competitors. Many leading automakers, including BYD and Tesla (TSLA.US), develop important electric-drive technologies internally. That means independent suppliers must convince automakers that outsourcing these systems can provide better technology, lower costs, or ideally both.

Exported EV leader

Leadrive has already become a significant player in China, with 3.7% of the country’s motor-controller market in 2025, according to third-party market data in its prospectus. More importantly, Leadrive was first in its class from China based on revenue for motor controllers used in exported vehicles last year, highlighting how the company has benefited from the overseas expansion of Chinese automakers.

That export-leading status also highlights one of Leadrive’s biggest weaknesses, namely, its heavy dependence on its largest customer. It doesn’t name that customer in the prospectus, but the description matches Chery Auto (9973.HK), China’s largest passenger-vehicle exporter.

The relationship has become the main driver of Leadrive’s growth. Its largest customer has been crowding out other buyers over the last three years, growing from 10.7% of Leadrive’s revenue in 2023 to 57.1% last year, before easing to 50% in the first five months of 2026. The relationship now covers 32 vehicle models, with Leadrive opening a factory in Chery’s home city of Wuhu in late 2024 to support the automaker’s expanding production.

That close relationship has helped Leadrive scale quickly, but also highlights the risks of relying on one customer. Automotive suppliers often benefit from such relationships because switching to rival companies can be costly. However, Chery’s agreement renews annually after an initial three-year term, meaning Leadrive would receive a massive blow if the deal gets scaled back or terminated. Chery’s critical role also gives it huge power to demand lower prices for its bulk buying, which could pressure Leadrive’s margins.

For now, at least, Leadrive’s strength in exported EVs has placed it on the right side of one of the strongest new trends in China’s auto market. China’s domestic EV sales have fallen sharply this year as incentives were reduced, ending several years of explosive growth. Domestic new-energy vehicle (NEV) sales fell 13.4% in the first half of the year, as the broader Chinese car market fell even more. But exports surged over that time, with NEV exports more than doubling to 2.36 million units.

Chery has been one of the biggest beneficiaries of that shift. Its first-half exports jumped 71.5% to 943,817 vehicles, while its overall NEV sales increased 32.3% – even as many NEV makers logged declines.

Shielded from domestic slowdown

That export-driven growth has helped shield Leadrive from China’s domestic slowdown, but it also exposes the company to rising trade barriers against Chinese vehicles. The EU has imposed anti-dumping duties on China-made EVs, while markets including Mexico and Brazil have also increased restrictions on Chinese imports. And the U.S. bans Chinese EV imports outright.

At the same time, Leadrive faces pressure from China’s automotive price war, which has trickled down the food chain as carmakers pressure their suppliers for lower prices to stem their losses.

Leadrive’s average motor-controller selling price tumbled from 4,328 yuan in 2023 to 2,473 yuan in 2025, a decline of about 43%. It more than offset that decline with explosive sales volume growth over the same period, as the number of units sold rose nearly 20-fold to more than 614,000 units.

The company has responded to margin pressures by bringing more production in-house to reduce costs. Power modules were previously outsourced but are now produced internally, helping that segment’s gross margin rise to 26.2% in the first five months of 2026. Overall profitability, however, remains limited, with Leadrive accumulating more than 1 billion yuan in losses since 2023.

Leadrive is trying to broaden its customer base beyond Chery. A customer that matches the description of Changan Auto (000625.SZ) contributed 13.3% of its revenue in the first five months of 2026. Another NEV maker that matches the description of Seres Group (9927.HK 601127.SH) contributed 9.8%. And German supplier Schaeffler (SHA.DE), also a Leadrive investor, has become another major customer and provides a route into Volkswagen supply chains.

Leadrive says one Volkswagen-linked project covering four Chinese models has already entered mass production, while another overseas hybrid project is expected to begin production in 2027.

Leadrive has a strong pedigree in the investment community. Legend Capital is its largest outside shareholder, while a separate fund backed by Lenovo also invested. A Volvo investment unit became a shareholder in 2023, linking Leadrive to the Swedish automaker’s parent, Zhejiang Geely, one of China’s leading private carmakers.

For Leadrive, these relationships offer potential bridges between China’s fast-growing EV market and foreign auto networks as it looks to expand beyond its domestic customer base.

Leadrive’s rise shows how China’s EV industry is serving up a new generation of companies for investors beyond car brands and batteries that have taken most of the spotlight until recently. Its Hong Kong listing comes at a crucial moment as the company tries to outrace a looming correction that many believe is long overdue in China’s heavily oversupplied NEV industry.

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Rebounding lithium prices returned the miner to the black this year, but falling spot prices and planned supply restarts are testing the durability of its rebound

Key Takeaways:

• Ganfeng Lithium returned to the black in the first half of the year with a profit of 3.65 billion yuan to 4.6 billion yuan for the six-month period
• Rebounding lithium prices have already pulled back from recent highs, as Ganfeng hopes to leverage volume ramp-ups at its mines to lower costs

By Lee Shih Ta

After a rough period of nearly three years, the lithium market has finally rebounded this year, driving a rapid recovery for miners like Ganfeng Lithium Group Co. Ltd. (1772.HK; 002460.SZ). This industry leader, whose business spans lithium mining, lithium salts, and battery production, is once again at the forefront of a nascent recovery for its cyclical sector.

Ganfeng said last week it returned to the black in the first half of 2026 with a profit of 3.65 billion yuan ($539 million) to 4.6 billion yuan, reversing a net loss of 531 million yuan a year earlier. Excluding non-recurring items, the first-half profit ranged between 3 billion yuan and 4.2 billion yuan, compared to a year-ago loss of 913 million yuan.

It’s worth noting that Ganfeng’s return to the black extended from the first into the second quarter of this year. The company, whose lithium products are a key component in new energy batteries, previously reported its revenue rose by 143.8% year-over-year in the first quarter to 9.2 billion yuan, while its profit totaled 1.84 billion yuan, or 1.42 billion yuan excluding non-recurring items.

Based on calculations using those figures, the company earned a profit of 1.81 billion yuan to 2.76 billion yuan in the second quarter. Ganfeng’s first-half profit is already more than double 1.61 billion yuan profit it recorded for all of 2025, reflecting improvements to its financial health with rebounding lithium prices and higher utilization rates.

The latest profits also include income from asset disposals, as the company sold a portion of its shares in PLS Group during the period, and recorded an increase in investment income from associates and joint ventures. But price hikes for lithium salts, alongside Ganfeng’s ramp-up in output, alongside higher battery production and sales, were the main pillars of this year’s turnaround.

Price rebound

Oversupply in 2024 and 2025 caused lithium prices to hover at low levels for a prolonged period, forcing a large number of higher-cost mines to halt production or delay development. Other factors also affected the industry, including a suspension of production at some of Ganfeng’s lithium mines in Jiangxi province in the middle of last year, and Zimbabwe’s tightening of lithium raw material exports at the beginning of this year.

The resulting decline in inventory, combined with growing demand for data center-based energy storage products created by the rise of AI, have helped to further support lithium prices. As of early June, lithium hydroxide contracts on the CME were up 86% over the last year, returning above the $20,000-per-metric-ton mark for the first time since the end of 2023.

That said, lithium prices have recently pulled back from recent highs. As of July 16, the spot price of battery-grade lithium carbonate in China was about 151,000 yuan per metric ton, down about 10.9% over the past month, although still significantly higher than lows from the middle of last year. Rising expectations for resumption of production in the Jiangxi mining areas, combined with growing expectation for the restart of suspended projects in regions such as Australia, are once again raising concerns that growing supply may outpace demand.

During the latest downturn, the nature of lithium demand has also changed. Electric vehicles (EV) still account for roughly 70% of demand for lithium batteries, but global EV sales only grew by 0.9% in the first five months of this year, while China’s sales actually fell by 15%. Grid-scale energy storage has rapidly picked up the slack, with global installations up by more than 20 times over the last five years to account for about 15% of battery demand last year. The storage industry’s use of lithium iron phosphate (LFP) technology has created a strong second demand curve for the metal, making lithium’s recovery prospects stronger than for other battery metals such as cobalt and nickel.

Ramping up self-owned mines

For Ganfeng, rising lithium prices are only half of its profitability equation. The other half stems from its self-owned resources. The company’s latest profit forecast points out the ongoing addition of new capacity from its lithium projects is an important factor driving its improving cost structure. Phase one of its Goulamina project in Mali is expected to add 506,000 metric tons of lithium concentrate in annual capacity, after already producing 336,600 metric tons last year. Its Cauchari-Olaroz salt lake project in Argentina produced 34,100 metric tons of lithium carbonate last year, with a target of 35,000 metric tons to 40,000 metric tons this year. And the first phase of its Mariana salt lake project in Argentina has also begun production, with annual capacity of 20,000 metric tons of lithium chloride.

Smooth development of those projects will further lessen Ganfeng's reliance on externally purchased lithium ore, which could magnify profits during periods of high prices. And even when prices pull back, self-ownership of its lithium supplies could provide a better buffer. As it produces more of its own lithium and prices recovered, the company's overall gross profit margin last year rose more than 4 percentage points to 15.8% from 11.4%. That figure surged to about 29.7% in the first quarter, based on calculations using revenue and operating costs from the first quarter of this year.

Ganfeng's shares have largely moved in sync with lithium prices lately. When expectations for tighter supplies heated up, the company's Hong Kong-listed shares rose swiftly in May to a 52-week high of HK$91.20 on May 8. But the shares nosedived after that as lithium carbonate prices pulled back, closing at HK$39.84 on July 16, down by more than half from their peak. The stock also fell 4.5% over the two days after its earnings forecast last week.

The analyst community is generally positive on the company, with Soochow Securities maintaining a “buy” rating on its estimates that lithium carbonate prices will range between 150,000 yuan and 180,000 yuan per metric ton this year. But that may be overly optimistic, given the most active lithium carbonate contract had already sunk below that level, to about 147,000 yuan per metric ton, on July 16.

The recent plunge in Ganfeng’s share price seems to indicate that market focus has shifted from the company’s individual performance to the broader outlook for lithium prices. If those prices continue to fall, pressures from inventory, liabilities and overseas investments could continue to haunt the company’s stock in the months ahead.

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The solar farm operator said it expects to report its profit fell between 25% and 35% in the first half of this year

Key Takeaways:

• Xinyi Energy said its profit fell sharply in the first half of 2026, as its margins declined on falling prices with the phasing out of government subsidies for solar power
• China added a massive 315 GW of solar capacity last year, causing the abandonment rate for new plants to rise above 6% as the grid struggled to accommodate new supply

By Doug Young

Call it a “solar hangover.”

After several years of frantic building, China is suddenly struggling to digest massive amounts of new solar power capacity built by companies eager to cash in on state subsidies over the last three years. Many of those subsidies were sharply curtailed or eliminated last year, resulting in a frantic rush to get projects connected to the grid before deadlines in the middle of the year.

At the same time, the massive addition of so much capacity in such a short time has led to a jump in the abandonment rate of new capacity that simply can’t be absorbed by China’s electric grid so quickly. And while all this goes on, the country is gradually rolling out more market-based electricity pricing for renewable energy, replacing an older system where rates were guaranteed at higher levels for builders of new power plants.

All those factors were summed in a forecast on Friday from Xinyi Energy Holdings Ltd. (3868.HK), which warned it expects to report its profit fell between 25% and 35% in the first half of this year from the year-ago period. The company reported a profit of 449.8 million yuan ($66.4 million) in the first half of 2025, meaning it expects to report a profit of 292.4 million yuan to 337.4 million yuan in the first half of this year.

The decline reverses a 27.8% profit increase in 2025, when the figure reached 1.01 billion yuan for the year.

The company blamed the drop in part on lower electricity sales to the grid as it was forced to abandon some of its new capacity that couldn’t be connected, especially for subsidized projects. It also blamed new electricity pricing policies aimed at setting more market-based pricing for solar power, which has resulted in lower overall prices. Lastly, it also blamed the sale of its stake in one solar project at the end of last year, which resulted in a discontinuation of contributions from that project.

Xinyi Energy is one of China’s larger solar farm operators, with about 50 projects in operation at the end of last year with 4.8 GW of approved capacity. It is part of the Xinyi family of companies founded by Li Xianyi, who harkens from the same hometown in South China’s Fujian province as Cao Dewang, China’s “King of Glass.” Xinyi Energy’s parent, the separately listed Xinyi Solar (0968.HK), is China’s largest photovoltaic glass maker.

The company has benefited from a Chinese solar power buildup that has made it the world’s largest producer of the renewable energy source over the last few years. The country added a record 315 GW of solar capacity last year alone, lifting its cumulative total to 1.2 TW. Its additions accelerated toward the end of the year as developers raced to meet building deadlines, with more than 40 GW added in December alone.

Most analysts expect installations to decline this year, ending several years of explosive growth, citing a high comparison base, the reduction of subsidies and introduction of market-based pricing, and ongoing supply chain adjustments.

Growing abandonment rate

An important factor weighing on Xinyi Energy and its peers right now is the inability of China’s grid operators to connect capacity from their recently constructed solar farms after last year’s boom. Acknowledging that, the central government in 2024 raised the maximum allowable electricity abandonment rate for renewable energy plants to 10% from the previous 5%.

Put differently, that means the government only guarantees grid operators will buy up to 90% of any new plant’s installed capacity, instead of the previous 95%.

China’s abandonment rate, also know as the curtailment rate, for solar power has been climbing steadily with the recent building boom, underscoring the wasted spending that is ultimately showing up as lower gross margins and profits for operators. The abandonment rate was as low as 2% at the start of 2023, then doubled to around 4% a year later as the building binge accelerated. It rose further still to 6.6% in the first half of last year.

Xinyi’s falling profits reflect what’s happening to solar farm operators as they are forced to abandon capacity and accept lower, more market-oriented prices. The company’s revenue grew just 0.5% last year to 2.45 billion yuan from 2.44 billion yuan in 2024. But the company actually generated 10.1% more power during the year, thanks to contributions from recently acquired plants in its portfolio, meaning its revenue grew far slower than the power it generated. 

As its costs continued to rise and its revenue plateaued, Xinyi Energy’s gross margin slipped nearly 4 percentage points to 61.8% last year from 65.6% in 2024.

“With the continuous development of the photovoltaic market, the power trading models are gradually evolving toward market-based mechanisms,” the company said in its 2025 annual report. “However, certain market-based transaction prices remain lower than the traditional feed-in tariffs, resulting in a decline in the group’s electricity revenue.

The company managed to report the much stronger 27.8% profit growth that we previously mentioned, though that was mostly due to a one-off gain from the sale of the stake in one of its solar farms, and lower financing and income tax costs. Its earnings before interest, taxes, depreciation and amortization (EBITDA), which better reflects operations of its core power business, rose by a far smaller 6% last year to 2.37 billion yuan.

So, what does the future hold for Xinyi and others like it after this latest bout of “solar indigestion” passes? We expect the company’s situation should quickly stabilize, and it should probably return to profit growth as it becomes more efficient at managing its large portfolio and adapts to the new system. That said, its days of rapid growth through acquisitions of new solar farms could be limited due to the ending of many government incentives.

Reflecting its position, the company currently trades at a trailing price-to-earnings (P/E) ratio of 6.6, similar to the 6.1 for China Suntien Green Energy (0956.HK), and higher than the 5.8 for traditional power supplier Datang International (0991.HK). At the end of the day, none of these companies will impress anyone with their breakneck growth, and are instead more attractive for their dividends and long-term durability. And while subsidies may be winding down, these solar power generators are likely to still enjoy strong government support in other forms going forward.

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The accident has put China’s low-altitude aviation dream under new scrutiny just as eVTOL pioneer EHang is struggling to turn flight certificates into passengers and sales

Key Takeaways:

• A high-profile light-aircraft crash in Beijing exposed safety concerns that could slow development of China’s low-altitude economy, including for eVTOL makers
• EHang is China’s most advanced eVTOL company in terms of regulatory approvals, but weak deliveries and lack of ticketed flights show commercialization remains distant

By Hu Minghe

China’s low-altitude economy has spent the last few years riding a wave of policy slogans, high-profile local-government plans and investor hopes that electric aircraft could become the next electric vehicle (EV) story. The resulting vision paints a space-age scene of small aircraft lifting off from rooftops, scenic spots and transport hubs, carrying passengers over congested roads below without the need for runways.

But a light aircraft crash into the tallest skyscraper in Beijing’s central business district has taken some of the tailwinds from that vision.

On June 26, the two-seat light sport aircraft hit Citic Tower, the 528-meter Beijing skyscraper also known as China Zun, killing the pilot and injuring 13 people on the ground. The aircraft was not an electric vertical takeoff and landing aircraft (eVTOL), and had no link to any eVTOL makers, including EHang Holdings Ltd. (EH.US), the Guangzhou company that has become China’s most visible name in the sector.

But the location mattered for China’s nascent low-altitude economy, which is far less developed than the West’s. The crash occurred near restricted airspace and commercial flight paths. Reuters reported that some general-aviation operators halted scenic flights afterward while waiting for official guidance, and that a Hainan Airlines Airbus A330 had to adjust its descent after its path intersected with the smaller aircraft.

The accident showed how difficult China’s low-altitude push becomes when airspace control, route approval and emergency response are still works in progress for its relatively young aviation sector. Within the futuristic eVTOL space, that matters most for EHang because it is not merely selling a concept. Its EH216-S, a pilotless two-seat eVTOL, has obtained key approvals from China’s aviation regulator, the Civil Aviation Administration of China (CAAC), including a type certificate, production certificate and standard airworthiness certificate. Flight operators linked to the company have also received the country’s first air operator certificates from the CAAC for human-carrying eVTOL services.

Those approvals make EHang the closest thing China has to a public-market proxy for flying taxis. They also create a burden that most of the company’s rivals do not yet face. EHang must prove that a market for eVTOL services exists today, and can no longer simply sell investors on the latest round of low altitude economy policy support and infrastructure spending.

Lots of talk, few passengers

EHang’s latest financial report shows the size of that gap. In the first quarter, the company delivered only four EH216-series aircraft, down from 11 a year earlier and 61 in the previous quarter. Its revenue fell to just 25.7 million yuan ($3.7 million), while its net loss widened to 126.4 million yuan. Aerial media services, mainly drone light shows with no relationship to its core eVTOL business, contributed about 40% of quarterly revenue.

EHang’s passenger eVTOL business remains a work in progress. The company said it was still working with the CAAC and operating partners to meet additional operational and safety requirements before launching public ticketed flights. A Goldman Sachs summary carried by Sina Finance also said remote-pilot training approval remained one of the steps before commercial passenger service could begin.

That is the central tension in China’s low-altitude economy. Beijing has repeatedly promoted the sector as a future growth engine, and the CAAC has said the market could reach 3.5 trillion yuan by 2035. But vertiports, charging stations and flight-control platforms are far from complete. The EH216-S has a listed range of about 30 kilometers, making it more suitable for scenic loops and short hops between controlled sites than for mass urban commuting.

Many of EHang’s post-certification deliveries have gone to local government-backed platforms and state-linked tourism or transport operators. They do not yet prove that ordinary passengers will pay often enough to support large-scale aircraft production.

Thus, the Beijing crash landed on a business model already under pressure. BofA Securities double-downgraded EHang to “underperform” after the accident and cut its price target to $5.40, citing tighter regulatory risk and slower commercialization. It also lowered its 2030 China eVTOL sales forecast to about 2,900 units from 3,500. EHang shares closed at $5.59 on July 10, down about 58% this year and just above their 52-week low of $5.32.

Money keeps flying in

Yet the industry is hardly running low on financial fuel. China has deep supply chains in batteries, electric drives, automotive manufacturing and electronics, all of which will benefit if the industry takes off. Local governments that can benefit from eVTOLs to boost their local economies and easy traffic congestion are willing to provide funds as well.

That explains why the capital continues to flow. Low-altitude financing in the first half of 2026 exceeded 20 billion yuan, with eVTOL makers taking a large share, according to Chinese media reports. Much of the money now comes from state-linked funds, local-government platforms and strategic investors.

EHang’s rivals are using that money to play catch up. Volant Aerotech recently raised 1 billion yuan and is preparing for a possible Hong Kong IPO. XPeng AeroHT, the flying-car affiliate of EV maker XPeng, has reportedly also filed confidentially for a Hong Kong listing, backed by more than 7,000 orders, though most of those are likely intent orders. AeroFugia, linked to car giant Geely, is in the process of seeking a listing on the STAR Market in Shanghai.

Those companies aren’t engaged in an identical race. EHang is betting on a certified, pilotless, short-range aircraft for controlled passenger routes. XPeng AeroHT is leaning on consumer branding and auto-style manufacturing, while Volant and others are targeting larger piloted aircraft for longer trips. Pre-certification companies can still sell investors a future. EHang has passed that stage, and now has to turn its approvals into real revenue.

It’s trying to do that by widening its runway. It has conducted pilotless flights in Switzerland, passenger demonstrations in Mexico and sandbox tests in Hong Kong. It is developing the longer-range VT35, has formed a joint venture with Chang’an Auto to use auto-industry supply chains, and moved into smart unmanned boats.

The Beijing crash won’t end China’s low-altitude ambitions. But it may change priorities. Before flying taxis can become a business, China needs clearer airspace rules, reliable traffic management, trained operators, insurable risks and passengers willing to climb aboard.

That makes the second half of 2026 an important test. Several Chinese eVTOL makers are racing toward certification, financing or IPO milestones. EHang is trying to prove that being at the head of that group can still become a commercial advantage. That means the hardest part for EHang is no longer proving that its aircraft can fly, but rather that they can also help a real business to take flight as well.

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Parent Chang’an Auto’s chairman has said his company will strongly support the NEV brand, whose sales plunged by more than half in the first five months of 2026

Key Takeways:

• Avatr’s new Hong Kong IPO application shows it lost a combined $1.6 billion over three years, as it spent heavily on R&D
• The EV maker’s unit sales dropped by more than half year-on-year to 20,160 in the first five months of 2026, after it sold 122,000 units in all 2025

By Edith Terry

Lest any of the many workers at Avatr Technology (Chongqing) Co. Ltd. worry about their employer’s relatively late arrival to China’s hyper-competitive electric vehicle (EV) sector, they needn’t. At least those were the soothing words coming from Zhu Huarong, chairman of the company’s seasoned parent, Chang’an Automobile Group, one of China’s top four state-owned automakers.

“Chang’an Automobile will fully support Avatr whenever it needs us – providing funds, personnel and technology,” Zhu proclaimed at a car launch event in 2025.

Avatr is just a piece of Changan’s aggressive plan to become one of the world’s top 10 automakers by 2030, with a global target of 5 million units by then, 60% of those new energy vehicles (NEVs). That would mark a more than 70% increase from the 2.9 million total vehicles the company sold in 2025.

Now, Avatr, one of three Chang’an NEV brands, which focuses on the lower end of the luxury market, is aiming to charge up its own finances by filing last week for a Hong Kong IPO.The company has launched four models since 2022, including both battery and extended range models, priced between 200,000 yuan ($29,437) and 700,000 yuan.

Avatr bills itself as combining three well-known brands in an asset-light model. Its batteries come from industry leader CATL, while its intelligent drive technology harkens from smartcar technology giant Huawei. Chang’an provides the company’s manufacturing muscle on an outsourced basis, while Avatr focuses on product design, development and sales.

The joint sponsors for the listing are Citic Securities and CICC, both heavyweights.

Avatr’s latest application is its second, after its original filing last November expired before it could complete its IPO. At the time of its first filing, media reports said it was targeting up to $1 billion in proceeds, which it would use to launch five new models or upgrades by 2026 and 17 new models by 2030. The reports said Avatr planned to expand to over 80 countries by 2030.

Strong revenue growth

The latest listing document shows strong topline revenue growth that rose nearly 70% last year to 25.6 billion yuan ($3.77 billion) from 15.2 billion yuan in 2024. Its unit sales growth has been equally dramatic, rising from 20,021 units in 2023 to 122,702 vehicles in 2025. Its gross margin has been rising as it gains experience and scale, reaching 9.4% last year from 6.3% in 2024 and a negative figure in 2023.

On its bottom line, the company’s loss of 3.5 billion yuan last year was 15% narrower than 2024, though both figures still represent massive red ink. And perhaps most worrisome, Avatr’s total NEV sales plunged by more than half in the first five months of 2026 to just 20,160 units from 43,700 in the same period of 2025, according to industry data.

The drop isn’t too surprising, since China’s domestic passenger NEV sales fell 19.7% year-on-year in the first five months of 2026. But Avatr’s far larger decline than the overall market certainly isn’t too reassuring.

While most of its sales are domestic, the company has also performed poorly overseas. In the first five months of 2026 it sold just 2,949 vehicles abroad from its network of 95 distribution points in 43 countries and regions.

The obvious and unapologetic reason for Avatr’s losses is its high R&D expenses, which are quite typical in the sector. At the end of last year, 2,186 employees, or 55% of its workforce, were R&D personnel. Its 2025 R&D expenses totaled 2.1 billion yuan, or 8% of revenue, roughly triple the 660 million yuan it spent in 2023.

The company shows no sign of slowing down in either its international ambitions or R&D spending. It currently operates a global design center in Munich with 144 employees, who play “a pivotal role in shaping the luxurious appeal and world-class aesthetic complexity of our vehicles,” it said in the listing document. It has hired the former artistic director of menswear for Louis Vuitton to help design a limited edition of its AVATR 012 sedan, as well as the former creative director for Givenchy for its limited edition AVATR 011 model.

Parental backing

Whether Avatr’s strategy is reckless or prudent may depend on just how much Zhu Huarong and Chang’an are ready to backstop the company. Chang’an’s own overall sales fell by 21% in the first quarter of 2026 to 557,500 units, with EV sales down 13% to 168,600 units. Besides Avatr, Chang’an also owns the mass market Deepal NEV brand, and Nevo, a mainstream and hybrid brand.

So, what has Changan done to show its love for Avatr? One of its most consequential steps has been integrating Avatr’s manufacturing with Deepal, which focuses on more affordable NEVs costing 150,000 yuan to 300,000 yuan.

Both brands will continue to be marketed separately, but the backend link will help to reduce costs. When Avatr formed a joint stock company in preparation for its IPO last September, Zhu Huarong stepped down as its chairman and was replaced by the younger Wang Hui, a 22-year Chang’an veteran born in 1981. Media reports say Wang was the driver behind Avatr’s relationship with CATL and Huawei, and was also general manager of Chang’an’s overseas business development and Southeast Asia departments.

Chang’an initially set up Avatr as a 50-50 joint venture with private NEV startup Nio (NIO.US; 9866.HK), before Nio’s own IPO and before Chang’an announced a “joint effort” with CATL and Huawei to build a premium intelligent new passenger electric vehicle (NEPV) brand in 2020. After Nio exited, Chang’an raised 19 billion yuan for Avatr in four financing rounds, ending up with 38 shareholders and a 41% controlling interest in the company.

CATL currently holds 9.2% of Avatr’s pre-IPO shares. Huawei is principally a supplier through its smart automotive business, Shenzhen Yinwang Intelligent Technology, which is an open platform for Huawei’s Qiankun smart driving system.

Avatr and another NEV maker, Seres (9927.HK), now each owns 10% of Yinwang, each investing 11.5 billion yuan. Avatr closed its deal in February 2025, and included its share of profits from the joint venture on its balance sheet for 2025.

Just how big a role Yinwang will play in Avatr’s future is an open question, as the former’s customers also include a long list of other state-owned enterprises, from SAIC Motor (600104.SH) and Guangzhou Auto(2238.HK; 601238.SH) to newly listed Voyah Auto (7489.HK). But a more immediate issue for Avatr, if it hopes to impress Hong Kong investors, will be showing how it plans to halt its skidding domestic sales and how its overseas network can provide a more meaningful contribution to the business.

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"There's no way that this acquisition could help them rebuild their image strongly enough that they could eventually do a listing in the U.S."

Key Takeaways:

• Shein's unlikely acquisition of the ethically focused Everlane brand appears to be a cheap image rehabilitation strategy ahead of a potential Hong Kong IPO
• Canadian Solar is expanding its high-tech cell manufacturing in the U.S. to bypass tariffs, but could face pushback from Beijing

By Doug Young & Rene Vanguestaine

We're currently seeing two major companies with deep Chinese roots use very different strategies to bypass Western skepticism and trade frictions. Embattled fast fashion giant Shein is attempting to buy its way to ethical credibility by acquiring U.S.-based Everlane, while Canadian Solar (CSIQ.US) is moving its high-tech manufacturing to American soil to shed its Chinese identity. While these two industries may be unrelated, there's a clear underlying connection — both companies are urgently trying to blend into Western markets to outrun geopolitical resistance.

Shein recently made global headlines with its unlikely purchase of Everlane. For those unfamiliar, Everlane rose to prominence on a strict commitment to transparency and sustainability, making it highly successful with millennial professionals. The brand reportedly fell on hard times financially, which likely drove it into the arms of such an unlikely suitor. While no official price tag was given, one media outlet that broke the news put it at around $100 million.

This is peanuts for Shein — especially considering Everlane was previously valued at around $600 million. But it stands out as the biggest acquisition Shein has done to date. It's an unusual move given Shein's notorious reputation for lack of transparency and reliance on questionable business practices, including accusations of using sweatshop labor. We don't think Everlane would ever get caught doing something like that.

We believe the driving force behind this deal is pure image rehab. When you've been vilified for your practices, buying a company known for ethical behavior is a calculated shortcut. Shein will probably squeeze the Everlane line by dramatically lowering the cost of goods without compromising quality to boost competitiveness, and they're undoubtedly going to try and extract some PR value out of it.

However, we don't think this deal is enough to fix their biggest headache: a perpetually delayed IPO. Shein was essentially ostracized from listing in the U.S. and London due to intense political resistance and ESG concerns. They’ve reportedly made a confidential filing to list in Hong Kong, but that process has stalled for over a year. There's a lot of ESG-focused Western capital circulating in Hong Kong that will demand assurances of significantly changed practices. While adding Everlane's top management to Shein's board could theoretically help turn around its image, integrating Westerners into the board of a Chinese company is notoriously difficult.

Meanwhile, inside Everlane, the mood is likely grim. If you're a young American who joined the company for its ethical mission, only to be acquired by the poster child for fast fashion excess, you're probably furious. Given the current U.S. labor market — where people legitimately fear for their jobs due to AI — some employees will inevitably swallow hard and stay until they find something better. But many will likely leave because the new ownership fundamentally conflicts with their beliefs.

Moving production offshore: Canadian Solar's American pivot

While Shein tries to buy an American identity, Canadian Solar is trying to build one. Despite being technically founded and based in Canada, the company is widely considered Chinese because its founder is from China and its original manufacturing base was located there. Now, the company has revealed major expansion plans at its two U.S. facilities, one of those a new factory producing high-tech solar cells.

This strategy aims to dodge U.S. tariffs and position the company as a non-Chinese alternative to the dominant market players. But is it going to be a case of once Chinese, always Chinese? We think the label matters deeply. Even if governments come and go, local U.S. manufacturers fiercely defend their turf. They're going to loudly argue that this expansion is just a Chinese operation in disguise.

There's also the question of export controls. On its latest earnings call, Canadian Solar claimed it hasn't faced any official resistance from Beijing regarding the export of cutting-edge manufacturing equipment to the U.S. But we think it's only a matter of time before that changes. China is hyper-focused on retaining control of its advanced technology. We've seen it telling EV makers not to manufacture core technology abroad, and there are some cases where offshore tech transfers initially went unnoticed before facing strict clampdowns — just look at Meta (META.US) acquiring Manus. Given how highly sophisticated and automated the solar supply chain has become, the Chinese government would likely prefer to keep those processes strictly in Chinese hands.

Furthermore, producing solar panels or even cells in the U.S. is just the end of a long, complex chain. Earlier steps — producing high-purity polysilicon, turning it into ingots, and then into wafers — are vastly dominated by China, which controls about 80% of global solar manufacturing. Even major companies like JinkoSolar (JKS.US), Trina Solar, and JA Solar face the same reality.

While alternative suppliers are emerging — such as United Solar in Oman, which produces clean, highly traceable polysilicon — they only cover a fraction of the necessary volume. Even if wealthy Middle Eastern nations try to beat China at its own game with abundant capital and sand, they'll still have to rely heavily on Chinese technology and equipment.

Ultimately, both Shein and Canadian Solar are throwing capital at their geopolitical problems. But rewriting your corporate DNA takes more than a cheap acquisition or a new assembly line — and Western markets are watching closely.

The polysilicon maker will partner with the Kunshan government to build a 6 billion yuan base producing electrical equipment to power AI data centers

Key Takeaways:

• Daqo and the Kunshan Economic and Technological Development Zone will build a 6 billion yuan base to make AI data center electrical equipment
• The move comes just three years after Xu Xiang took over at the helm of the company from his father, and draws on Daqo’s origins as an electric power equipment maker

By Doug Young

Chinese history is filled with succession stories of sons trying to outdo their fathers in running successful family businesses, often with mixed results. One of the latest such stories is shaping up at Daqo New Energy Corp. (DQ.US; 688303.SH), a leading maker of polysilicon that’s the main ingredient used to make the solar panels that are quickly becoming a top source of clean electricity.

That’s our assessment after the company on Thursday announced a major – and somewhat unusual – strategic shift into producing the electrical infrastructure that will power the AI data centers of the future. Such data centers have suddenly become a hot ticket for both developers and investors, who are betting demand will soar with the popularization of AI applications that require huge computing power and equally huge amounts of electricity.

Daqo’s big shift is the brainchild of Xu Xiang, who is in his mid-50s and took over as the company’s chairman and CEO in August 2023. He took the chairman’s position from founder Xu Guangfu, now in his 80s, who is also his father. The CEO’s position had been held by an outsider, Zhang Longgen, for the previous five years.

Xu Xiang was joined by his sister, Xu Xiaoyu, who came in as Daqo’s head of investor relations in May 2023. Not surprisingly, Xu Xiaoyu has risen quickly in the company, named as a director just a half year after joining, and becoming deputy CEO in October 2024.

This brother-sister combination at the top of Daqo looks relatively complementary. Xu Xiang appears to be a product of the Chinese education system, and has been at Daqo since at least 2000, meaning he was probably being groomed to take over the leadership. By comparison, Xu Xiaoyu is a much more recent arrival and has a far more international education, including an MBA in finance from the Wharton School at the University of Pennsylvania and bachelor’s degree from the University of California, Berkeley.

With all that family background in mind, we’ll turn to the strategic shift under this brother-sister team, which will see Daqo establish a manufacturing base in the Kunshan Economic and Technological Development Zone. From a geographic standpoint, the choice of Kunshan is quite different from Daqo’s traditional polysilicon manufacturing base in the relatively remote and less developed Xinjiang and Inner Mongolia regions in interior China. By comparison, Kunshan is adjacent to Shanghai, China’s financial capital and one of its wealthiest cities.

The partnership will focus on next-generation energy solutions and related equipment for AI data centers, including energy storage systems, solid-state transformers, solid-state circuit breakers and solid-state batteries, according to the announcement. It will be built in two phases for about 6 billion yuan ($886 million), starting with a first phase costing 2.1 billion yuan.

“By leveraging our deep expertise and proven technical capabilities of our affiliates, specifically in transformer and circuit breaker technologies, we are well positioned to address this tremendous growth opportunity,” said Xu Xiang. “This investment agreement represents a cornerstone of our broader strategy to diversify our product portfolio … and capitalize on the massive market opportunities presented by the global energy transition."

Dead cat bounce?

At first blush, investor reaction to what looks like a fairly big announcement seems quite positive, with Daqo’s stock rising 5.1% on Thursday after the news. But the jump also looks a bit like a classic “dead cat bounce,” as the shares are still down 43% this year. The company has been dogged over the last two to three years by a massive global oversupply of polysilicon, following the rapid addition of new capacity by Daqo and its peers.

Daqo is typical of the group, spending a massive 17.7 billion yuan over the last three years on a new complex in Inner Mongolia that boosted its annual capacity fourfold from 75,000 MT to the current 300,000 MT. As overall industry capacity exploded, polysilicon prices cratered, sending Daqo and most of its peers into the red, including an $88.4 million loss for Daqo in this year’s first quarter.

Many were hoping for an industry rebound to take hold last year as Beijing encouraged producers to scrap their older, less efficient capacity and consolidate some of the smaller players into a new company set up by the big ones. But progress has been slower than expected, and most companies are still producing polysilicon for more than they can sell it for.

That brings us back to Daqo’s latest move, which may leave some people scratching their heads, especially if they are only familiar with the company’s polysilicon business that is the New York-listed company’s main asset. In fact, Daqo’s earlier history lies in the electric equipment business, and the company’s unlisted parent, Daqo Group, states its businesses include medium- and low-voltage electrical equipment, transformers and switchgear. Much of that is done at its subsidiaries like Nanjing Daqo Transformer Co. and Zhenjiang Daqo Power Transformer Co., which are not part of the New York-listed Daqo New Energy.

That shows that Daqo indeed has the expertise needed to create the kind of power equipment it plans to make at this new venture. What’s more, the price tag, while relatively high at 6 billion yuan, is far less than the 17.7 billion yuan for the big polysilicon expansion.

Daqo also has plenty of resources to undertake such an initiative, with $2 billion in assets that “can easily be turned to cash,” at the end of March, according to its latest quarterly report. And Daqo wouldn’t have to pay for all of the investment either, as the city of Kunshan, which is quite wealthy, is almost certain to foot a big part of the bill.

At the end of the day, this move by Xu Xiang, probably with input from his father and sister, looks like a relatively prudent diversification step for Daqo New Energy to lessen its reliance on the polysilicon industry, which is highly cyclical even in the best of times. But many others are also eyeing these new business opportunities, especially in energy storage, meaning Daqo could ultimately find itself diversifying from one oversupplied sector into another.

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China’s leading car exporter is targeting the insular Japanese market through a Singaporean joint venture, as the domestic car market struggles

Key Takeaways:

• Chery’s 27% stake in a Singaporean joint venture aiming to launch micro-EVs in Japan next year is a cautious first step into the world’s fourth largest auto market
• The carmaker is China’s leading exporter, with 177,666 vehicles sold abroad in May, about three times its domestic sales

By Edith Terry

Japan’s auto market has long been a fortress dominated by hometown giants like Toyota, Honda and Nissan. But Chery Automobile Co. Ltd. (9973.HK) seems to think it has what it takes to break down the walls, as it looks to maintain its status as the largest exporter in China’s increasingly globally focused car-making machine.

Last month, Zhang Guibing, head of Chery’s overseas business division, told Japanese reporters that “a new customer base would emerge in Japan,” by offering cars with “unique features not found in Japanese automakers.” That seemed to imply an initiative involving electric vehicles (EVs), which Japan’s big car brands have largely neglected.

Days later, Yokohama-based EMT Co. Ltd. announced its launch of Emta, a new automotive brand for the Japanese market that it said “addresses the everyday challenges of driving in Japan,” known for things like its narrow streets and alleys and scarcity of parking places.

Emta’s CEO is He Xiaoqing, a former president of Changan Ford, a 50-50 joint venture between Changan Auto (000625.SZ) and Ford Motor (F.US), and its operating company is based in a WeWork office in Yokohama, near Tokyo. It will launch its first car under the Emta brand in the second half of 2027. The model will be a “kei,” or microcar, a unique vehicle class that makes up roughly 40% of the Japanese market, with 1.6 million such cars sold in 2025.

Emta is owned by Electric Mobility Technology, a Singapore-based joint venture that counts Chery as one of its five partners with a 27.27% stake. The vehicles will be produced by another partner, Jiangsu Yueda Automobile Group, which also holds 27.27%. Autobacs Seven Co. (9832.T), Japan’s largest automotive aftermarket retail and service network, holds 18.18%. Chinese battery maker Gotion High-tech (002074.SZ) owns 18.18%, while Anest Iwata Corp. (6381.T), an auto paint supplier, holds the remaining 9.09%.

Chery will provide technology to the venture, including vehicle architecture, electric drive and assisted driving systems. According to Emta’s marketing director, former Nissan China general manager Susumu Uchikoshi, the Emta will aim at a price comparable to gas-powered kei cars.

Boxy hatchback

Emta’s first car, a boxy hatchback, will have the same approximate footprint as the Chery QQ Ice Cream, with a 1.96-meter wheelbase and a lithium iron phosphate (LFP) battery with a range between 155 kilometers and 220 kilometers.

Honda’s (7267.T) gas-powered N-Box micro-van is currently Japan’s best-selling kei car, costing between 1.74 million yen ($10,880) and 2.48 million yen. The model sold 201,354 units last year, ahead of the 166,533 for Toyota’s (7203.T) Yaris kei car, and 165,589 for Suzuki’s (6785.T) Spacia kei car.

Emta will spend 2027 setting up as many as 100 sales and service outlets for its EV foray, working with Autobacs, and will consider manufacturing in Japan after 2030, according to CEO He Xiaoqing.

Emta is not the first EV micro-car in the Japanese market with ties to China. While the Chery joint venture has been ultra-cautious with its plans, leading new energy vehicle (NEV) maker BYD (1211.HK; 002594.SZ) began selling electric buses in Japan as early as 2015, and followed with its EV sedans in 2022. It announced its own kei car initiative last October, with the BYD Racco set to go on sale this summer or fall. Developed for the Japanese market, the model is powered by an LFP battery with a range of 180 kilometers and sells for around 2.5 million yen.

Chery and BYD aren’t alone, with Honda, Nissan and Suzuki also announcing their own electric kei car initiatives.

For the Chinese carmakers, Japan is less about driving into a major new market and more about looking for growth outside their rapidly slowing home market crowded with as many as 100 auto brands. That market is currently the world’s largest, but has recorded seven straight months of contraction amid growing consumer caution, including an especially sharp 21.6% decline in April for new car sales.

First mover

Chery was a first mover among its peers in going abroad, and has been China’s top exporter for 23 consecutive years. But BYD has made up rapid ground lately, exporting 160,000 vehicles in May alone, not far from Chery’s 177,666 vehicle exports for the month. China’s overall vehicle exports are also rising fast, jumping 85% year-over-year in April to 796,000 vehicles, according to the China Association of Automobile Manufacturers.

Japan has been famous over the years for its lack of foreign car brands in the market. That owes to factors like driving habits, regulatory restrictions and the high quality of public transport. Imports have always made up less than 10% of the market, limited mainly to European luxury brands. Chinese brands are almost invisible, accounting for just 3,870 of 243,129 imported cars in 2025, or roughly 5% of total domestic car sales of 4.5 million units.

Japan also discourages private car ownership more broadly due to the country’s high population density. High tolls for inter-city highways make driving from Tokyo to Osaka as expensive as taking the famous bullet train or flying, while Tokyo and other cities are dense with alleys and lanes dating from pre-industrial times. Domestic car sales are also taking a hit from Japan’s rapidly declining population, with the number falling steadily since peaking at 5.3 million vehicles sold in 2018.

Japanese carmakers have also largely missed the EV revolution. Only 95,584 pure EVs were sold in the country last year, or just 3% of total unit sales, although hybrid vehicles have done better. Japanese EV imports last year totaled 30,513 vehicles, according to the Japan Automobile Importers Association.

While it’s still too early to place bets on their chances for success, Chery and BYD should at least be congratulated for tackling one of the world’s most closed auto markets to outside brands. Chery’s strategy of working with local Japanese partners with strong resources in the local car market could also boost its chances of success.

From an investor point of view, the Japanese market is likely to be a mere blip on Chery’s radar. The company’s 177,666 units exported in May accounted for about three-quarters of its total sales of 231,994 vehicles for the month, showing its heavy reliance on overseas markets. If the Emta joint venture proves successful, it could eventually offer Chery an onramp to sell its own vehicles in Japan, as it works to maintain its streak as China’s leading car exporter.

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The 5-year-old eVTOL maker’s latest fundraising includes backers like Legend Capital and HSG, formerly known as Sequoia China, who join investors tied to the Shanghai government

Key Takeaways:

• Volant has raised a fresh 1 billion yuan in its series C+ funding, just a month after it raised $300 million in its series C
• The eVTOL maker reportedly plans to list in Hong Kong, boasting a well-connected executive team and a product in the regulatory certification process

By Doug Young

When it comes to electric vertical take-off and landing (eVTOL) vehicles, Shanghai Volant Aerotech Co. Ltd. certainly looks like a company that’s quite well fueled up in terms of industry prowess, investor backing and its path to a Hong Kong IPO. The company has just completed its C+ series funding, raising a fresh sum of nearly 1 billion yuan ($148 million), just a month after raising $300 million in its series C round, according to media reports.

Despite its short history, only founded in 2021, Volant also has a big list of backers, both private and government-linked, which we’ll review shortly. Its founding team reads like a who’s-who of people from the Chinese and foreign aviation sectors. And last but perhaps most important, it appears to have a product that is rapidly moving towards flight certification, as well as a strong order book from companies that have expressed interest in its products.

All this seems to point to an IPO in the not-to-distant future, and Chinese media have reported Volant has set its sights set on Hong Kong, citing insider sources. Such a listing looks likely to value Volant at more than $1 billion, given that it has raised 5 billion yuan to date, equal to about $740 million.

All that said, we’ll take a closer look at this high-flying company’s credentials, which really do look quite impressive. Volant is zooming into an increasingly crowded global eVTOL market, though also one that’s expected to grow rapidly as such small vehicles become increasingly common for the types of short flights well suited for air taxis, delivery vehicles and at scenic spots.

Many countries are putting strong emphasis on their low-altitude economy for such functions, which means Volant and its peers will get strong policy support, especially in China where the sector has been singled out as a development priority. The sector is expected to grow between 30% and 50% annually through 2030, according to different forecasts, reaching anywhere from $5 billion to as much as $15 billion by the end of that period.

Volant’s flagship product, the VE25-100, looks quite typical of the types of eVTOLs being developed. The aircraft can seat up to six, and carry commercial payloads weighing up to 500 kilograms. It runs using eight electric motors, and has a range of 200 kilometers to 400 kilometers, according to the company website.

According to the latest reports, investors in the company’s C and C+ series fundings included names like Legend Capital and HSG, formerly known as Sequoia China, as well as Dubai-based Stone Venture. Equally important, the company also has very strong government backing from investors including SAIC, Shanghai’s leading government-owned carmaker; and Futeng Capital, which also has strong ties to the Shanghai government.

Such government backing is often critical to any company’s success in China, ensuring everything from access to funding, to other resources like permits and land. In this case, the government connections are especially important as Volant seeks the critical flight certificates it will need for companies to commercially operate its eVTOLs in China. To date, one of the few to receive a certificate is EHang (EH.US), one of the industry’s oldest players whose Nasdaq listing dates back to 2020.

Destination Hong Kong

While EHang has found a place on the Nasdaq, the environment on Wall Street has become increasingly uneasy these days for Chinese companies in leading-edge tech industries like eVTOLs. EHang’s stock has gyrated in sync with the rising and falling sentiment over its own fortunes, as well as the changing sentiment on Wall Street. The company is currently worth just $770 million, though it was briefly worth five times that amount at a peak back in 2021, and was also worth nearly double that amount as recently as early 2025.

The increasingly difficult environment on Wall Street is probably a major factor steering Volant to Hong Kong, which still provides access to global investors, unlike China’s domestic A-share markets in Shanghai and Shenzhen that are largely closed to foreigners. That’s an important distinction for companies like Volant, which are developing their business in China, but clearly have a longer-term eye to the global market and want to build global investor bases.

Volant doesn’t publicly disclose any financial information, and its revenue is probably quite limited so far due to its youth and lack of aircraft certification. The company’s type-certificate application for the VE25-100 has been accepted by the East China Regional Administration of the CAAC, and the application remains under review, according to media reports.

According to its website, the company has received confirmed orders and letters of intent for 1,900 of its aircraft from potential customers including China Southern Airlines, Asian Express and ABC Finance Leasing. It says the potential orders are worth more than 47.5 billion yuan, though the vast majority of that is probably just letters of intent without any firm commitment.

Then there’s the company’s list of top executives, which really does look quite impressive, including people with experience in both the private and government sectors. The latter is quite important, as it means Volant will have good access to the aviation regulators whose approvals will be critical to its success or failure.

Founder and CEO Dong Ming previously worked at leading aircraft engine maker GE, as well as domestic aircraft maker Avic, where he worked on the C919, which is trying to challenge the Boeing 737 and Airbus A320 in the global marketplace. The company’s technical leader Yu Wei, who also uses the name William, has background as the technical manager of aviation systems at CAAC, China’s aviation regulator, as well as at Honeywell, according to his LinkedIn profile.

The company is flying into an increasingly crowded eVTOL sector, not only at home but also globally. At home, it faces competition not only from EHang but also from XPeng AeroHT, owned by electric carmaker XPeng; and Aerofugia, which is backed by automaker Geely. Globally it faces competition from the likes of Joby Aviation (JOBY.US) and Beta Technologies (BETA.US), both of which, like EHang, have already started generating revenue. While Volant is clearly a relative latecomer to the eVTOL game, its strong connections in China’s aerospace industry and government contacts certainly look like strong selling points for its future development. Accordingly, the company could be quite attractive to Hong Kong investors, who are especially interested these days in tech offerings from emerging industries with strong government support.

China’s oldest independent data center operator is finding its footing in the AI era, helped by a new $1 billion investment from battery champion CATL

Key Takeaways:

• Once a data center laggard, VNET has advanced its reinvention as an AI-focused wholesale data center operator through a major new partnership with CATL
• VNET founder Chen Sheng remains firmly in control of his company, as CATL’s nearly $1 billion investment signals its move beyond batteries into AI-ready energy infrastructure

By Hu Minghe

When Chen Sheng, who also goes by Josh, founded VNET Group Inc. (VNET.US) in 1996, China had yet to build its first independent, privately owned data center. Three decades later, including a spotty track record filled with ups-and-downs, VNET thinks it has finally found a formula for success by leaning into an AI boom that has made data center capacity a key asset in the U.S.-China technology race.

That new reality was on display last week, when a consortium linked to leading battery maker Contemporary Amperex Technology Ltd. (CATL)(300750.SZ; 3750.HK) agreed to buy about 38% of VNET’s shares for nearly $1 billion. VNET’s shares surged roughly 25% on the announcement, reflecting not only a big vote of confidence in its prospects, but also CATL’s belief that the stock was highly undervalued at the time.

From pioneer to AI contender

VNET built its early franchise by offering hosting services outside China’s big three state-run telecoms carriers that dominated the data center business at that time. Today it runs more than 50 data centers across over 30 Chinese cities, with 889 MW of wholesale capacity and more than 49,000 retail cabinets. Its customers include internet and cloud service giants like ByteDance, Alibaba and Tencent, whose AI ambitions are driving their demand for data center capacity.

But before the recent AI boom, VNET spent much of the past decade falling behind its faster-growing and savvier rivals. Heavy debt, governance concerns and repeated failed privatization efforts battered investor confidence in the company, leaving its stock undervalued compared with domestic peers GDS (GDS.US; 9698.HK) and Chindata.

VNET’s comeback rests on a pivot to wholesale facilities custom designed for AI workloads. In 2025, it delivered a record 404 MW of new capacity, taking its wholesale capacity in service to 889 MW, with another 452 MW under construction. New wholesale orders totaled 135 MW, lifting the commitment rate for in-service capacity to 95%, while its utilization rate reached 70.1%.

With guidance to deliver another 450 MW to 500 MW in 2026 and projected capex of 10 billion yuan ($1.4 billion) to 12 billion yuan this year, VNET’s AI-centric wholesale business has rapidly become its main growth engine.

CATL’s leap beyond batteries

Then there’s CATL, which has suddenly found a new AI dance partner in VNET. CATL built its dominance in EV batteries and energy storage, but intense competition is now pushing it to look beyond its core areas. This spring it invested in a parent of high-voltage direct-current supplier Hangzhou Zhongheng Electric and signed a large sodium-ion battery contract, before its latest investment in VNET.

The strategic logic is straightforward: pair CATL’s energy storage technology with data center power systems to build a “battery-to-power-to-compute” ecosystem. The model is premised on the reality that data centers are huge energy consumers, and that consumption is rapidly growing with the rise of power-hungry AI applications. Many data centers use onsite solar arrays to power their operations, which also requires energy storage facilities to keep the power flowing even when the sun isn’t shining.

CATL sold 541 GWh of EV batteries and 121 GWh of energy-storage batteries in 2025. But its shipments of batteries for energy storage systems rose only 29%, far slower than the market’s 79% expansion, as rivals including BYD (002594.SZ; 1211.HK) and EVE Energy (300014.SZ) scaled aggressively. The VNET deal gives CATL a captive customer for its energy storage system products, as well as a real-world laboratory to trial new technologies.

A transformative deal, with Chen still in control

Under the transaction announced last Wednesday, two CATL-linked investment vehicles will buy up to 650.4 million VNET Class A shares for $1.4486 each, equivalent to $8.6914 per American depositary share (ADS). If fully executed, the purchase will give CATL about 38.1% of VNET’s outstanding shares.

But CATL is far from taking control of VNET, since a concurrent agreement requires it to vote its shares according to Chen’s instructions. An investor-rights agreement also restricts transfers for a period. In plain English: CATL gets a large strategic foothold, while Chen keeps his place calling the shots at his company.

That may disappoint investors hoping for a full governance reset, given the company’s laggard status in the past. But the market’s reaction suggests investors see more than a secondary share sale. With CATL’s vote of confidence, VNET’s AI push looks more credible, and tied to a partner that understands one of the bottlenecks that matters most in AI: power.

Financing an AI expansion

The strategic backing arrives as VNET ramps up its investment in the notoriously capital- intensive business of building data centers. The company has promoted a “conveyor belt” financing model: it develops projects, then sells mature assets into private real estate investment trusts (REITs) to recover capital. In March 2026, it listed two REITs in Shanghai, raising 6.36 billion yuan. That funding is meant to support VNET’s 2026 delivery plan. Without asset recycling, VNET has suggested it would need to borrow more than 8 billion yuan a year to fund its pipeline.

And other risks remain as well. VNET’s wholesale business depends heavily on a handful of large customers, and any slowdown in their AI build-outs, or a shift toward self-built capacity, could pressure bookings. Delays in REIT sales could also strain the company’s balance sheet.

Still, the market backdrop is favorable. Frost & Sullivan expects China’s carrier-neutral data center service market to grow at an 18.5% annual rate from 2025 to 2030, supported by IT outsourcing, 5G, cloud services and AI.

Energy, AI and the global rivalry

CATL’s interest in VNET underscores a broader shift: in the AI race, electricity is becoming as strategic as the GPUs that power actual AI computing. The International Energy Agency estimates U.S. data center electricity demand will more than double to 426 TWh by 2030, while China’s demand could more than double to about 277 TWh.

China’s edge is its ability to scale power infrastructure quickly. It already generates more than twice the electricity of the U.S. and can build transmission at a pace unrivaled in the West. Pairing VNET’s operational base with CATL’s storage and power-conversion technology dovetails with China’s goal of building a national network of high-capacity data centers to power its AI ambitions.

That matters as the U.S. and China remain locked in a technology standoff. The Trump-Xi summit in Beijing last week produced modest economic deals, but no breakthrough on advanced AI chip exports. Against that backdrop, VNET’s tie-up with CATL looks like more than a corporate transaction. It hints at how China will try to build up an infrastructure advantage as it concurrently plays catchup in GPU chips in the global AI contest.

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The company is increasingly shifting its manufacturing focus to the U.S., including the upcoming launch of a major plant in Indiana making high-tech solar cells

Key Takeaways:

• Canadian Solar will launch commercial production at a major new solar-cell factory in the U.S. in the next two months, as part of its growing shift to North American production
• The company boasts significantly higher gross margins than most of its peers, thanks to its focus on profitable markets and strong margins for its newer energy storage business

By Doug Young

Chinese, Canadian or American?

That’s the big question hovering above solar panel maker Canadian Solar Inc. (CSIQ.US) these days. The company likes to tout its Canadian roots, stating it was founded in Ontario in 2001. But many have considered it a Chinese company for much of that time due to the background of its founder, Shawn Qu, and the use of China as its main manufacturing base for most of its history.

Now, Canadian Solar is trying to convince the world – most notably including U.S. President Donald Trump – that it’s a North American company, with a heavy focus on the U.S. part of the continent. In its latest quarterly report, released last Thursday, Canadian Solar said Shawn Qu has yielded his longtime CEO position to company veteran Colin Parkin, who appears to be Canadian, based on his biographical background.

At the same time, the company detailed plans for the ramp-up of a new high-tech production facility in Jeffersonville, in the U.S. state of Indiana, that looks like it could quickly grow to produce half or more of the company’s solar products. This facility’s focus on solar cells, the central component of solar panels, makes it different from many of the other plants we’ve seen Chinese companies building in the U.S. lately. Those other plants produce solar modules, which are a lower-tech product assembled using solar cells imported mostly from China.

Canadian Solar said the Jeffersonville plant entered trial production earlier this year, with commercial operation set to start in about two months. The project’s first phase will have 2.1 GWp of capacity, with another 4.2 GWp coming in phase two set for addition in 2027, bringing total capacity to 6.3 GWp.

Interestingly, some in the solar and investment communities have been expressing concerns that China may try to block the export of cutting-edge technology like the equipment that will be needed for the Jeffersonville plant. But Qu said that “So far, we don’t see that challenge,” adding his hopes that President Trump’s meeting with China President Xi Jinping in Beijing last week might help to smooth out that element of the rocky U.S.-China trade relationship.

No mention of export restrictions by China was made in published remarks by either side following the meeting, which Western media have cast as large on symbolism but lacking much in actual substance. The U.S. has taken repeated steps to block the export of high-tech chips and chip-making equipment to China, while China has countered by restricting the export of rare earths needed to make special magnets used in many cutting-edge electronics.

In addition to the new Jeffersonville plant, Canadian Solar also operates an older lower-tech facility in the city of Mesquite, Texas, which assembles solar modules. That facility currently has annual capacity of 5 GWp worth of modules, which the company expects to double to 10 GWp by the end of this year. On the earnings call, Qu emphasized that 45% of Canadian Solar’s 2.5 GW in solar module shipments during the first quarter were manufactured in North America, and that all of its North America sales were produced at the Mesquite plant. With the launch of the new Jeffersonville plant, presumably all of the solar cells used in its U.S.-made panels will also be locally produced, in addition to the final solar modules made in Mesquite.

Subsidy eligibility

Canadian Solar’s positioning as a truly North American company could help the company navigate an increasingly tricky landscape in terms of eligibility for U.S. solar subsidies. That story made headlines last week, when Reuters reported many solar installers in the U.S. had stopped buying panels from locally made producers with links to China due to concerns the Trump administration may exclude those products from eligibility for U.S. subsidies. As we’ve previously noted, most of those producers, with links to names like JinkoSolar (JKS.US; 688223.SH) and Longi (601012.SH), were simply making solar modules in the U.S. using cells imported from their China operations.

It wasn’t clear from the Reuters report if Canadian Solar’s U.S.-made panels were ineligible for U.S. subsidies. But the report noted that Canadian Solar was one of several companies recently removed from the list of approved suppliers for leading U.S. solar installer Sunrun (RUN.US). Canadian Solar didn’t raise the issue on its earnings call, nor did analysts, which appears to show the company believes its increasingly U.S.-centric manufacturing may protect it from such risk.

Canadian Solar’s increasingly U.S.-centric approach is part of the company’s broader recent strategy of focusing on its most profitable markets, and scaling back or leaving less profitable ones. We’ve already noted that the company gets nearly half of its sales from the U.S., which has helped it post industry-beating margins as the broader global solar sector suffers from massive overcapacity.

Canadian Solar’s gross margin was 18.3% last year, and the company said it expects the level to be in the 13% to 15% range for the rest of this year. By comparison, JinkoSolar’s gross margin last year was a far lower 2.2%, while Longi’s was just 0.8%. Part of the difference also owes to Canadian Solar’s other businesses building solar farms and in the emerging energy storage sector, in addition to its solar panel business.

Canadian Solar’s first-quarter financials weren’t exactly too impressive, including a 10% year-on-year revenue decline to $1.1 billion, as Parkin described the market as continuing to face myriad ongoing “challenges.” The company’s module shipments fell by a much steeper 64% year-on-year during the quarter. That was partly offset by strong growth for its energy storage business, whose shipments rose 142% year-on-year to 2.1 GWh.

On the bottom line, Canadian Solar reported a net loss of $32 million for the quarter, similar to the $34 million loss it reported a year earlier.

The company’s stock has been quite volatile over the last year, more than tripling at one point over a three-month period from last September to November on hopes of a sector recovery that later turned out to be premature. The stock fell 11% ahead of the latest results, and then was mostly flat the day after the actual announcement, indicating investors were probably hoping for more beyond the relatively upbeat news in the report.

Going forward, much will depend on how well Canadian Solar can convince both solar panel buyers and investors that it’s gradually shedding its China connections and becoming a North American company. Success in that regard could provide some upside for its U.S.-listed stock, which still trades at a relatively low price-to-sales (P/S) ratio compared with most of its peers.

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"Ensuring that they have a stake in the ground but being under the radar and waiting and seeing is probably the wisest path." – Bradley Burgess

Key Takeaways

• The Trump administration's effort to cut subsidies for China-linked solar panels manufactured in the U.S. is forcing Chinese companies to scale back ownership
• A recent flurry of formal U.S. IPO withdrawals by smaller Chinese companies signals a coordinated push by U.S. and Chinese regulators to sift out low-quality stocks

By Doug Young & Bradley Burgess

Donald Trump is creating new headaches for Chinese solar panel makers, just as a slow death seems to be unfolding for new U.S. listings by Chinese companies. We see a shared narrative here. Whether dealing with quiet new policies from the Trump administration or facing intense scrutiny from Wall Street regulators, China Inc. is being forced to adapt. In both areas, Chinese businesses are discovering that flying under the radar and navigating the shifting sands of political and regulatory agendas is the safest way forward.

The solar front has been heating up lately under the Trump administration, which has reportedly tweaked U.S. policies to cut off subsidies for China-linked solar panels, even if they're manufactured in the U.S. These rules dictate that Chinese companies can’t own more than 25% of these U.S. plants. This has led a growing number of solar installers to start shunning U.S.-based Chinese factories operated by names like JinkoSolar (JKS.US), Trina (688599.SH), and Longi (601012.SH).

In what looks like a direct response, JinkoSolar announced last week it's selling 75% of its U.S. subsidiary to a private equity company, though it will retain the remaining 25%. We think this is a highly interesting move. Some fear-oriented Chinese manufacturers might be tempted to jump ship, give up completely, and say they're done with the U.S. We'll skip past the legality of what Trump is doing, as it's almost certain to be challenged in the U.S. courts. But keeping a stake in the ground while waiting and seeing is probably the wisest path for these businesses. It's questionable what value is truly getting added in the U.S., considering a big chunk of the components for these panels are actually made in China at the parent company. Still, profit margins are much better in the U.S.

After all, politics always change. We've seen these winds shifting over the past several years, and that's not going to change. Consider what was going on with cryptocurrency before Trump was elected: the Biden years were notable for a strong agenda against crypto miners, and the SEC was strictly anti-crypto. At the time, Chinese-backed crypto companies needed to be very careful to fly beneath the radar. Once the administration changed, that environment shifted completely because Trump is very pro-crypto.

The current solar policy is clearly agenda oriented. Companies need to be acutely aware of powerful trade lobbies looking to protect U.S. industry, such as those supporting First Solar (FSLR.US). There's a similar dynamic in the battery storage sector, where huge makers like Gotion (002074.SZ) are facing a concerted lobby in certain U.S. regions managed by anti-China politicians. We believe it's smarter for Chinese firms to take measured actions — like Jinko dropping the stake in its U.S. facility to 25% — that align with pending guidance without making radical changes.

A slow death of U.S. listings by Chinese companies

Shifting gears, we're seeing the latest twist in the slow death of U.S. listings by Chinese companies. We've chronicled this story quite a lot, which has seen major listings come to a virtual standstill over the last year. However, the latest development is a flurry of small Chinese companies suddenly formally withdrawing their U.S. IPO applications. In the last month, four companies took that formal step, compared with just two for all the rest of the year. All of these listings were for $20 million or less.

This is somewhat unusual. Typically, most Chinese companies would just quietly abandon their applications without making this kind of formal declaration. This flurry feels like a coordinated response to pressure from both sides. On the U.S. side, neither the exchanges nor the SEC wants meme stocks or penny stocks that lack sufficient quality. U.S. regulators want to protect small retail investors who might open Robinhood at a coffee shop to try and make a quick buck. We've seen a lot of these stocks start off with a small gain and then just crash. There's suspicion that the companies themselves are involved in manipulation behind the scenes, rather than just the mom-and-pop GameStop or Reddit investor crowds.

China is also cracking down on these smaller IPOs. The Chinese securities regulator likely doesn't want poor-quality companies listing in the U.S. because it makes the country look bad. In truth, China would actually prefer higher-quality companies to list on overseas exchanges as an exercise in soft power. A quality business like Chagee (CHA.US) or Pop Mart (9992.HK) reflects much better on society overall, whereas a wave of low-quality equities is a face-losing exercise. We believe there's going to be a refinement — a sifting of the wheat from the chaff. While Hong Kong is emerging as a stronger alternative and picking up many companies that would have previously gone to the U.S., the U.S. market still has the greatest sway and cachet. For mid-sized to large Chinese companies with a true international presence and the ambition to keep expanding outside their home market, the U.S. is still where the global investors are. We'll likely still see serious Chinese companies listing in the U.S., but not as many as we've seen historically.

American solar installers have stopped doing business with China-backed U.S. production centers due to uncertainties about their products’ eligibility for government subsidies

Key Takeaways:

• China-linked U.S. solar panel makers may be ineligible for U.S. subsidies aimed at supporting residential-based solar power, according to a Reuters report
• JinkoSolar is selling 75.1% of its U.S. plant in Florida to an American private equity company in an apparent attempt to keep its products eligible for subsidies

By Doug Young

As Donald Trump prepares to visit China later this week to meet with President Xi Jinping, U.S. protectionist measures against Chinese products are likely to be one of the top items on the agenda. An important part of that discussion could focus on solar energy products, not only ones produced in China but also ones made at Chinese-invested plants in the U.S.

That issue was a central element in a Reuters report last Friday, which revealed that U.S. solar installers, as well as insurance companies and banks, have stopped doing business with China-invested U.S. solar module makers. That includes companies like leading residential solar installer Sunrun (RUN.US), which has stopped buying panels from U.S. plants with links to Chinese companies.

In what looks like a direct response to that challenge, leading Chinese panel maker JinkoSolar Holding Co. Ltd. (JKS.US; 688223.SH) has agreed to sell 75.1% of its U.S. plant in Florida to private equity company FH Capital, according to an announcement from FH Capital the same day as the Reuters report. JinkoSolar would retain the remaining 24.9% in the factory in the city of Jacksonville, which began operations in 2018.

The size of the stake sale is quite revealing, since legislation passed by the U.S. last year, with strong backing from the Trump administration, sharply cut subsidies for residential solar installations, and placed restrictions on subsidies that remained. One restriction prohibited subsidies for any installations using panels produced at factories that were more than 25% owned by Chinese companies.

“We believe this transaction provides the right ownership, management and strategic direction for this new venture to grow capacity and serve the growing demand for high performance U.S.-sourced renewable energy products,” said JinkoSolar U.S. general manger Nigel Cockroft. The two sides added that following the deal, they plan to at least double capacity at the plant, currently at 2 GW annually, and also start producing energy storage systems.

JinkoSolar rival Longi (601012.SH) also recently reduced its stake in its U.S.-based production joint venture in the state of Ohio to below 25%, according to the Reuters report. Other Chinese companies facing similar exposure from their U.S.-based factories include Trina (688599.SH), JA Solar (002459.SZ) and Canadian Solar (CSIQ.US).

Not surprisingly, China has criticized the restrictions, calling them discriminatory, according to the Reuters report, citing a spokesperson for the Chinese embassy in Washington.

Investors applauded the latest move by JinkoSolar, whose shares rose 5.3% on Friday after the announcement. The stock is up 30% over the last 52 weeks on hopes for a recovery for the embattled sector that has suffered for more than a year due to huge overcapacity built up over the last three years.

Signs for such a recovery look broadly positive, as the sector gains fresh momentum from the U.S. and Israeli war against Iran, which has sent oil prices to multi-year highs and underscored the need for more reliable energy sources. Even before that, solar module and panel prices were showing signs of stabilizing after more than a year of declines, as Chinese producers shut down older, more obsolete capacity under encouragement by Beijing.

Low value-added facilities

While the sale of majority stakes of their U.S. plants may help Chinese companies avoid the restriction limiting their stakes to less than 25%, the reality remains that these plants are quite low tech and not really the kinds of facilities the Trump administration wants to attract. That’s because the facilities are mostly involved in final module assembly, with most or all of their key components imported from China.

Accordingly, we wouldn’t be surprised to see the Trump administration call for the Chinese to move more high-tech manufacturing to these facilities as a condition for making their products eligible for subsidies. That could prove tricky, as Beijing has signaled it may try to restrict Chinese companies from exporting their most cutting-edge technology to foreign-based plants – even though it imposed the same requirement on many foreign companies that came to China in the past.

In terms of its business, JinkoSolar got about one-fifth of its sales last year from the Americas, according to its 2025 annual report, which didn’t break down the amount by country. But the U.S. is probably its main market in the region, perhaps accounting for around 15% of the company’s total sales. The importance of foreign markets like the U.S. is also likely to grow this year as China sharply slows its spending on new solar installations after several years of massive additions that made the country home to more than half of the world’s installed capacity.

The U.S. tensions are also significant because other markets, most notably the EU and India, have expressed their own frustrations at China and have taken similar steps in the past.

These issues have been years in the making, and we doubt things will be solved overnight during Trump’s visit to Beijing. But at least the leaders can exchange views directly to better understand the other side’s concerns. China has already shown some willingness to consider the Western point of view with its recent cancellation of a yearslong policy that exempted Chinese solar manufacturers from paying some value-added tax for products they exported.

Meantime, JinkoSolar and its peers, despite the numerous headwinds they’ve faced over the last year, continue to show signs of a rebound.

JinkoSolar reported late last month that its revenue fell 11.5% in the first quarter of this year, which marked an improvement from the 15% decline in the fourth quarter and 34% plunge in the third. More importantly, the company’s gross margin rebounded to 8.3% after hitting a low of just 0.3% in the previous quarter. As its situation improves, the company reported an adjusted net loss for the latest quarter, which excludes certain non-cash items, of 549 million yuan ($80.7 million), marking a big improvement over its 1.07 billion yuan loss a year earlier. 

While its massive losses and thin margins don’t look too impressive on the surface, the trends look broadly positive for a recovery over the next year or two. Now, Beijing needs to work at the more macro level to create favorable conditions for its solar companies to export some of their expertise to reduce or eliminate some of the geopolitics that have plagued the industry over the last few years.

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The company will supply its autonomous mining trucks and related technology to MMD Group, as it seeks to cultivate the international market

Key Takeaways:

• CiDi announced a new partnership to provide its autonomous mining trucks and related technology to Britain’s MMD Group
• The tie-up comes as CiDi tries to diversify beyond its home China market, where stiff competition is eroding its margins

By Doug Young

It made history last December when it became the first company to list among a new generation of Chinese autonomous mining truck makers. Now, CiDi Inc. (3881.HK) has scored another milestone with a deal that could take it beyond its home China market that currently accounts for nearly all of its revenue.

Investors applauded the new partnership with British mining equipment maker MMD Group Ltd., announced last week, by bidding up CiDi shares 5% the day after the announcement. MMD is a relatively niche player in the massive global market for mining equipment, focused on mineral sizers, also known as crushers, as well as feeding equipment. Still, the partnership seems like a significant endorsement of CiDi, both for its autonomous electric mining trucks and also the technology that underpins them.

While autonomous mining trucks are a tiny niche of the much larger autonomous driving sector, they are still quite large, worth 1.9 billion yuan ($278 million) in China alone last year and expected to reach about 40 billion yuan by 2030, according to third-party market data from CiDi’s IPO prospectus last year. The global market is obviously much larger, which is what CiDi is eying with this new partnership.

Autonomous technology is especially attractive to mining companies because it minimizes the potential for injuries and deaths of drivers and other workers when accidents occur at mines. That has translated to strong government support in China, which in 2024 issued a document emphasizing the importance of mining safety and necessity of speeding up development of unmanned mining trucks. 

CiDi’s latest deal will see it supply its autonomous driving systems for use in MMD Group’s mining equipment automation solutions. MMD will also sell CiDi’s core autonomous mining trucks, along with dispatch systems and charging infrastructure, giving the Chinese company an important outlet to extend its global reach.

“This partnership marks a milestone in bringing CiDi’s autonomous mining technology to global markets,” said CiDi co-founder and executive director Ma Wei. “It represents a transition from domestic leadership to international deployment.”

That said, we should point out MMD appears to be a relatively small company on the global mining equipment scene, where much bigger names like Japan’s Komatsu (6301.T) and U.S. giant Caterpillar (CAT.US) are the leaders. As a private company, MMD doesn’t disclose any financial information on its website.

But according to data tracking platform Prospeo, the company’s revenue is relatively modest at around $30 million annually. Its market cap is also relatively small at about $100 million. Those figures are even smaller than comparable ones from CiDi, whose revenue roughly doubled last year to 885 million yuan, or more than $100 million, from 410 million yuan in 2024. CiDi’s market cap is also much larger at about $1.8 billion, including the addition of $90 million from the 5% jump in its stock price after the new partnership announcement – nearly equal to MMD’s total market cap.

What’s more, the fact that CiDi only disclosed the new partnership on its website and didn’t provide an official announcement through the Hong Kong Stock Exchange suggests it realizes the tie-up will have relatively limited impact, at least initially.

Still, the partnership does seem to represent a validation of CiDi’s technology by a significant company outside China. And we should point out the majors like Caterpillar and Komatsu already have their own autonomous equipment divisions, and thus are less likely to look to companies like CiDi for assistance.

Global expansion

CiDi is in a three-way race with two other Chinese companies, Eacon Group and Boonray Intelligent, to build up their autonomous mining truck and technology businesses. Both Eacon and Boonray have also filed for Hong Kong listings, the former at the end of last year and the latter in January. CiDi won that race to market by making its trading debut last December, and its shares have risen about 25% since then.

All three companies have strong backing from the investment community, with CiDi counting names like HSG, formerly known as Sequoia China, Baidu and Legend Holdings among its pre-IPO investors. The other two have more direct backing from the new energy sector, with Eacon counting battery giant CATL among its investors and Boonray getting support from BYD.

The truck-making trio remain mostly confined to China right now, but CiDi points out in the new partnership announcement that it has been working to expand its international presence in Australia, South America and the Middle East. In its first post-IPO annual results announcement, filed last month, the company said it scored its first major order outside Mainland China last year with the sale of 12 trucks to a mine operated by Taiwan Cement.

CiDi’s business has been doing quite well in China so far, though it’s still losing money. The company delivered 630 units/sets of its autonomous mining solutions last year, which was more than four times what it delivered in 2024, bringing its total deliveries to date to 1,500 units. The fact that its revenue only doubled last year, compared to the quadrupling of its deliveries, suggests the company is coming under pressure to lower prices as it fights for market share.

That pressure shows up in CiDi’s gross margin, which fell more than 3 percentage points last year to 21.4% from 24.7% a year earlier. The move abroad, including the new partnership, could help to support that falling metric, since margins abroad are typically quite a bit higher than what companies can earn in the competitive China market.

As its gross margin fell, CiDi’s loss nearly doubled to about 1 billion yuan last year from 581 million a year earlier. Its adjusted loss, which excludes certain non-cash items, was smaller but still nearly doubled to 242 million yuan from 127 million yuan in 2024.

CiDi’s new partnership represents an important validation of its products and technology, which is why investors have generally continued to support the company. But the post-IPO gains for its stock could start to erode unless it starts to show it can boost its margins and chart a path to profitability in the next year or two.

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"There is no way all of these companies are sustainable. There is no way they are making profits."

Key Takeaways:

• The recent contraction in China's overheated new energy vehicle market points to an unavoidable wave of industry consolidation and brand alliances
• A fast-growing online dating company's upcoming Hong Kong IPO relies on thousands of human facilitators, bucking the global trend of AI-driven matchmaking

By Doug Young & Rene Vanguestaine

We're currently witnessing two fascinating shifts in China's corporate landscape — one involving an overdue pause in a booming tech-driven sector, and the other a surprising rejection of modern technology in favor of traditional methods. On one hand, the country's skyrocketing new energy vehicle (NEV) market has suddenly tapped the brakes, forcing a hard look at a needed industry consolidation. On the other hand, a rising star in the online dating world is actively bucking the global AI trend, opting instead for real-life human matchmakers.

We’ll start with the NEV sector, which has been all the rage among Chinese consumers but has hit a sudden speed bump this year. According to the China Passenger Car Association, NEV sales plunged 21% in March. That followed an even weaker start to the year, resulting in a 24% drop in the first quarter. While NEVs still accounted for nearly half of all vehicle sales during the quarter — as traditional internal combustion engine cars also fell sharply — the sudden spin into reverse is impossible to ignore.

We believe this pullback isn't a massive shock. By the end of 2025, at least 50% of all new sales were NEVs. Overall adoption and sales growth have been extraordinary, and it shouldn't be surprising that the market needs a moment to pause and contract. Subsidies have been rolled back or completely eliminated. Furthermore, intense price wars throughout last year pushed massive inventory to dealerships.

While we expect sales to eventually return to growth, the immediate reality is stark: There are still way too many NEV manufacturers in China today. In the U.S., the market operates efficiently with roughly three national brands and a handful of foreign competitors — a landscape historically shaped by the consolidation of brands under umbrellas like Volkswagen and General Motors. In contrast, China boasts more than a hundred NEV manufacturers.

There's no way all of these companies are sustainable or making profits amid a grueling price war. Even some of the bigger, more successful players are losing money. Something needs to give, but we aren't banking on straightforward M&A. Psychologically, many Chinese entrepreneurs equate mergers to defeat. Instead, we're seeing alliances. XPeng has partnered with Volkswagen, Zeekr signed an alliance with the French group that owns Peugeot and Citroen, and Leapmotor (9863.HK) has aligned with Stellantis. While volume leaders like BYD (1211.HK; 002594.SZ) are too far ahead to merge, smaller and weaker companies will likely have to group together rather than simply disappearing.

Finding love the traditional way

Shifting gears to a lighter, yet remarkably profitable market, we're taking a look at a company called Milian. As one of a new generation of online matchmakers for young Chinese, the company has filed for a Hong Kong IPO and boasts impressive financials, including 74% revenue growth last year and a tripling of its profit.

What makes Milian uniquely Chinese — and particularly fascinating — is its business model. Rather than relying heavily on algorithms, the company employs thousands of real-life facilitators. These human matchmakers join the online dating process to keep conversations going and ease newly matched couples through the awkward getting-to-know-you phases.

In a world where AI is everywhere and investors generally demand its usage, we think Milian's human-centric approach is a brilliant strategy for diversification. It solves a specific cultural dilemma: Chinese youth are famous for lacking dating skills because their parents often discourage romantic pursuits until they finish their education. Having a third-party advisor provides a necessary social bridge.

Other platforms, such as the dating app Momo (MOMO.US), have used a similar advisory approach but rely on AI as the advisor. Western counterparts like Tinder (MTCH.US) also increasingly lean on AI to analyze photos, enhance safety, and determine optimum matches. Yet, Milian is actively going against the automated grain. In a market where tech IPOs usually revolve around AI chips and circuit boards, this contrarian model will likely appeal to a very specific type of institutional investor focused strictly on financials and novelty. Its ultimate success will depend on whether users remain satisfied with this distinct human touch over the convenience of traditional apps. Only time will tell, but it's an intriguing story we'll continue to watch.

The maker of lithium-ion battery electrolyte additives is seeking a Hong Kong listing, but its profitability remains highly vulnerable to price cycles

Key Takeaways:

• HSC has applied to list in Hong Kong, saying it’s the world's largest supplier of lithium-ion battery electrolyte additives with 15.2% of the global market
• The company returned to the black last year with a recovery in prices for its products, reporting a profit of 13.25 million yuan

By Lee Shih Ta

In theory, being the world’s top manufacturer for any established product should make profits come easy. But for Jiangsu HSC New Energy Materials Co. Ltd. (688353.SH), which filed last week for a Hong Kong IPO, that logic doesn’t quite hold.

Founded in the 1990s when electric vehicles (EVs) were mostly an unproven concept, HSC moved into the business of making lithium battery electrolyte additives that are a key component for EV batteries in the early 2000s. It was one of China’s first companies to achieve mass production of vinylene carbonate (VC) and later developed a differentiated process for fluoroethylene carbonate (FEC), which are both used in lithium batteries.

After nearly two decades of building its expertise, the company has secured a leading position in this small but important upstream segment of the lithium battery supply chain. It became the world’s largest lithium-ion battery electrolyte additives supplier by volume last year, commanding 15.2% of the market, according to third-party market data in its listing application.

However, the company’s financial results over the past three years show this leading position has yet to translate to stable profits. Its revenue fell slightly from 525 million yuan ($77 million) in 2023 to 505 million yuan in 2024, before rebounding sharply to 869 million yuan in 2025, a yearly increase of 72.2%. But recovery for its profits lagged considerably. The company lost 23.91 million yuan and 174 million yuan in 2023 and 2024, respectively, before returning to a modest net profit of 13.25 million yuan last year. Despite that return to the black, the size of the profit was hardly impressive.

The problem hasn’t been demand. Sales volume for HSC’s two core products, VC and FEC, has been rising steadily over the last few years, driven by rapidly growing sales of new energy vehicles (NEVs) and expansion of the energy storage market. The company’s VC sales volume jumped from about 5,390 tons in 2023 to 12,487 tons last year, more than doubling over that period. Its FEC sales volume also jumped from 2,669 tons to 7,952 tons, roughly tripling over that time.

In 2024, however, the addition of major new industry capacity led to a sharp drop in electrolyte additive prices. Prices of FEC plummeted from an average of 57,400 yuan per ton in 2023 to 31,800 yuan per ton in 2024, with VC prices coming under similar pressure. As that happened, the company’s gross profit fell into negative territory in 2024, resulting in a gross loss margin of 22.9% for the year. The gross loss margin for FEC was a staggering 53.3%, while VC recorded a loss margin of 10.2%. HSC found itself trapped in a situation where the more it sold, the bigger its losses.

Market conditions began improving in 2025 as inventory levels normalized and downstream demand kept growing, with VC and FEC prices recovering in the second half of last year. As that happened, the company’s revenue surged and its gross profit margin returned to positive territory at 9.7%.

At the same time, the company made progress on cost control. By recycling triethylamine, it reduced its consumption of the chemical compound by about 85%. Similar recycling helped to cut wastage for its solvent recovery units by approximately 75%. These measures lowered its cost-to-revenue ratio from 122.9% in 2024 to 90.3% in 2025. Nevertheless, the return to profitability was mostly dependent on the rebound in VC and FEC prices.

Soaring receivables

The company’s profit recovery has been overshadowed by intense pressure on its operating cash flow, which has been negative over the last three years. HSC’s net cash outflow from operating activities widened to 257 million yuan in 2025 from 135 million yuan in 2023. Over the same period, its cash plunged from 1.99 billion yuan at the end of 2023 to 333 million yuan by the end of last year.

Its core issue lies in payment collection from its customers. Its trade receivables and notes surged from 168 million yuan in 2023 to 593 million yuan in 2025, more than tripling over that time. Meantime, turnover days stretched from 127 days to 190 days over that period, as cash-strapped customers took significantly longer to pay their bills.

Fluctuations in the company’s capacity utilization further reflect industry cycles that are playing havoc with HSC’s business. Its VC capacity utilization climbed from 40.6% in 2023 to 63.4% in 2024 on strong demand, even as prices sagged, and reached 95% in 2025 as prices rebounded. After technical adjustments, the utilization for its FEC capacity also hit 102.6% in 2025. Higher utilization helps keep the production lines busy, but the big loss in 2024 and only mild profit recovery last year also suggest the company rapidly ramped up its operations at the first sign of demand recovery.

Undeterred by such cyclicity, HSC still plans to further expand with the addition of 60,000 tons of VC capacity involving a roughly 950 million yuan investment. This move is essentially a bet on future demand and steady prices. But many of its rivals may be thinking similarly and adding more capacity as prices recover.

In terms of valuation, shares of Tinci Materials (002709.SZ), which has also applied to list in Hong Kong, trade at price-to-sales (P/S) ratio of about 5.53 times for its shares already listed in Shenzhen, while Shenzhen Capchem (300037.SZ) trades at roughly 5.02 times. In contrast, HSC’s Shenzhen-listed shares boast a much higher P/S ratio of around 23 times, perhaps reflecting investor bets on the company’s better earnings potential. In its niche of the battery materials market, a rebound in product prices can indeed amplify profits, potentially justifying a higher valuation.

The company retains a technological edge, demonstrated by its 6N-grade VC purity and its differentiated FEC production process, benefiting also from a trend toward silicon-carbon anodes. Yet, these advantages are primarily concentrated in existing products, with no clear second growth curve in sight. Moreover, its profitability remains highly tethered to the electrolyte additive price cycle. Against a backdrop of rising receivables, strained cash flow, and ongoing expansion plans, the company’s ability to maintain stable earnings is an open question. The arrival of another downward cycle, which seems quite likely at some point, could deliver significant downward pressure to its stock.

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The company has raised $175 million in the year since its inception, including more than $100 million in its latest funding from an A-list of private equity investors

Key Takeaways:

• NovaFusionX announced it has raised a fresh 700 million yuan just a year after its founding, as it races to develop its modular-style nuclear fusion technology
• China’s nuclear fusion industry is behind the U.S., but has gained fresh momentum as AI emerges as a major new customer for the cheap but technically complex power source

By Doug Young

China is famous for throwing money at industries it wants to develop, and one of the latest to get that distinction is nuclear fusion – a process that promises to deliver huge amounts of electricity at cheap prices by mimicking the process used in the sun. That campaign for fusion energy has taken on greater urgency with the rise of AI, which is a huge consumer of electricity.

But the latest fusion energy project coming out of China Inc. isn’t state funded at all, and instead is being financed by some of the nation’s top private equity and venture capital investors, including Hillhouse Capital, Legend Capital and Luminous Ventures, formerly known as Lightspeed Capital. That company, NovaFusion Energy Technology (Shanghai) Co. Ltd., also known as NovaFusionX, made headlines last week when it announced a new funding round worth 700 million yuan ($103 million).

The latest funding comes after NovaFusionX raised an initial 500 million yuan last August, bringing its total fundraising to 1.2 billion yuan in just a year after its founding – a record fundraising speed for a fusion-related startup in China. No valuations have been given, but the backing of such major players indicates NovaFusionX may be China’s strongest private sector player to emerge so far in the nuclear fusion space.

That’s not to say that NovaFusionX is the only player in China. Most notably, state-owned giant China National Nuclear Corp. (CNNC) launched its own nuclear fusion company, China Fusion Energy Co. Ltd., last July, with a hefty 11.5 billion yuan in initial funding. That initiative looks like the major fusion play by “Team China,” with backing from the likes of state-run oil major PetroChina, as well as the state-backed National Green Development Fund and Zhejiang Zheneng Electric Power Co.

Apart from its strong support from China’s domestic private equity community, NovaFusionX is also notable for counting a fund connected to internet giant Meituan among its backers. That’s quite significant, as such internet majors are also aggressively developing AI applications, making them likely customers for the massive amounts of cheap electricity that nuclear fusion will produce.

Something similar is happening in the U.S., where nuclear fusion development is more advanced. Google is one of the biggest backers of such energy, investing in TAE Technologies, one of the oldest players in the space with a history dating back to 1998. Google has also agreed to buy future fusion-generated power produced by another player in the race, Commonwealth Fusion Systems. Microsoft is throwing its weight behind another player, agreeing to buy future fusion-generated electricity from Helion Energy.

While China is coming somewhat late to the game, NovaFusionX is off to a strong start in no small part due to its founder Guo Houyang, whose credentials were almost certainly a major factor attracting its A-list of backers. Guo previously conducted nuclear fusion research in the U.S. at the University of Washington, and was a fellow of the American Physical Society. He boasts similarly impressive credentials in China, where he worked at the Institute of Plasma Physics under the Chinese Academy of Sciences. He is among a group of prominent overseas-trained Chinese scientists who have returned to China to pursue careers under a government sponsored program.

Modular reactors

Each fusion company has its own technology, which must be capable of containing the extremely hot temperatures of around 100 million degrees Celsius needed for nuclear fusion to occur on Earth. NovaFusionX is aiming to develop a type of technology called field-inverse small modular reactors (FRC-SMR), which generate electricity in relatively smaller amounts for onsite use, in contrast to other technologies built around a model that uses industrial-sized plants similar to today’s massive power generating stations.

NovaFusionX says Guo Houyang was a pioneer in FRC-SMR technology, and other reports note that he previously coordinated China-U.S. fusion research on behalf of the U.S. Department of Energy. The company’s prototype generator, the Nova One, is currently in the engineering construction phase, and it is aiming to achieve its first discharge of plasma – the ultra-hot state of matter where fusion occurs – by the end of this year.

While all of this sounds promising, NovaFusionX will be reliant on more investment dollars for quite some time to come, as will most of its peers. If all goes according to plan, which is hardly guaranteed, the company aims to commercialize its technology by the mid-2030s, with a target of providing power at the 50 MW to 100 MW level per individual station.

Its relative youth means that many new funding rounds still lie ahead for NovFusionX, whose $175 million raised so far still looks quite modest compared to most of its peers. By comparison, Commonwealth leads the field with $3 billion raised to date, while TAE Technology and Helion have both raised more than $1 billion, not to mention the $1.6 billion raised by the state-backed China Fusion Energy Co. Ltd. at the time of its establishment last year.

All this comes as funding for nuclear fusion is likely to accelerate as the technology moves closer to commercialization. Fusion developers raised $2.2 billion worldwide last year, up 180% from 2024, though behind the record $2.9 billion raised in 2022, according to the Fusion Industry Association.

All that said, it’s not too early to think about when these companies will start becoming available to small investors through IPOs. While most aren’t aiming to commercialize their technology until the 2030s, losing money has never been a disqualifier for a public listing, especially in a hot area receiving growing attention due to its supporting role for the rise of a new AI era.

The most advanced of the major players in that regard is TAE Technologies, which last December announced a plan to merge with Donald Trump’s Trump Media and Technology Group (DJT.US), the owner of Truth Social where Trump usually posts his copious messages. None of the others have announced IPO plans, though all are probably thinking about listing if they can survive over the next few years by raising more cash from private investors.

For now, at least, NovaFusionX appears to have enough private sector backing to keep fueling its nuclear fusion dreams for at least the next two or three years. But if the Hong Kong and China IPO markets are still hot at that time, and the AI story continues to gain momentum, it’s quite possible we could see the company take a shot at a multibillion-dollar listing in Hong Kong, Shanghai or Shenzhen before 2030.

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The leading solar module maker’s loss more than tripled in the fourth quarter of last year, as its gross margin barely managed to stay positive

Key Takeaways:

• JinkoSolar’s revenue fell 15% in the fourth quarter, easing from a 34% decline in the previous quarter
• The solar products maker forecast its shipments would continue to fall this year, as its new CEO called 2026 a “transition year”

By Doug Young

Record gold prices may be getting all the attention in commodities headlines lately, but similarly spiking prices for silver have been causing headaches for solar companies these days. That factor nearly drove JinkoSolar Holding Co. Ltd. (JKS.US; 688223.SH) back into the difficult position of spending more to produce each of its solar cells and modules than it could sell them for, just two quarters after its gross margin returned to positive territory.

The rising yuan, JinkoSolar’s home currency, also worked against the company’s gross margin, which dropped to just 0.3% in the fourth quarter of last year, well below the 7.3% in the third quarter and 2.9% in the second quarter, according to its latest results published on Thursday. Just as disheartening for investors, the company forecast its shipments would continue to decline this year, as its recently named CEO Cao Haiyun referred to 2026 as a “transition year.”

Adding to its woes, the company and its peers took a hit from April 1, as China officially cancelled its yearslong tax rebate policy for exported photovoltaic products. That policy previously dropped the value added tax that solar companies had to pay for their products to 9% for exports from the standard 13%.

That rebate policy was just one of many Chinese government subsidies designed to promote the industry’s development for years – something Western countries often complained about, saying it gave Chinese manufacturers an unfair advantage over global competitors. China is eliminating the export rebate policy as part of a broader campaign to wean its companies from reliance on government support and end a destructive price war that has plunged most manufacturers into the red in the last year.

JinkoSolar was typical of the group, reporting a massive 1.5 billion yuan ($220 million) loss in the fourth quarter, more than triple its 477 million yuan loss a year earlier. Even on an adjusted basis, which excludes changes in the fair value of financial instruments and other non-cash items, the company’s net loss more than doubled in the fourth quarter to 838 million yuan from 431 million yuan a year ago.

JinkoSolar and its peers have been trapped in a downward spiral for most of the last two years after embarking on a government-encouraged building binge that led to massive overcapacity for the global solar panel sector, most of which is now in China. Now, Beijing is trying to correct the situation by encouraging companies to shut down older, obsolete capacity and guide the industry “away from pure competition on scale and price toward a focus on genuine quality and value,” said Chairman Li Xiande.

That process was already a painful one, as JinkoSolar and its peers shuttered older capacity and took massive write-downs in the process. Making matters worse were the yuan’s recent appreciation, combined with spiking silver prices that tripled at one point over the last year. While the price has fallen from peaks in January, it’s still more than double where it was a year ago.

Rising module prices

JinkoSolar executives said the company has been able to pass some of its higher material prices on to buyers, and noted that its module prices have been rising for the last three to five months. But its low gross margin shows that the company must still absorb some of the higher silver costs itself.

Complicating matters is JinkoSolar’s drive to export more of its products as China slows a building binge that has made the country home to more than half of the world’s installed capacity for solar power. But the cancellation of export rebates, combined with the effects of yuan appreciation, will make those overseas sales less profitable.

The company got about 60% of its revenue last year from exports, and expects that figure could climb to about 70% this year. At the same time, the company forecast its overall module shipments will continue to fall this year, dropping to between 75 GW and 85 GW from the 86 GW it shipped in 2025.

None of that excited investors who were hoping for a quicker turnaround. The company’s U.S.-listed shares tumbled 12% on Thursday after the release of the latest results, though they are still up 35% over the last 52 weeks on hopes for an industry recovery.

Despite its market-leading position, with about 13% of the global market for solar modules, the company’s stock only trades at a dismal price-to-sales (P/S) ratio of 0.11. That’s slightly lower than the 0.16 for the smaller Canadian Solar (CSIQ.US) and is well behind the 0.53 for the more comparably sized Trina (688599.SH).

Spiking silver prices, the rising yuan and government policy changes aside, JinkoSolar’s own performance largely continued to reflect industry trends in the fourth quarter. Its revenue fell 15.2% year-on-year to 17.5 billion yuan during the quarter, which wasn’t too exciting but marked an improvement from the 34% decline in the previous quarter. Its module shipments showed a similar trend, falling 4% year-on-year during the quarter to 24 GW, marking an improvement from a 17% decline in the third quarter.

One slightly bright spot for the company was its young energy storage system (ESS) business, whose products are used to store excess electricity generated by solar farms for use when the sun isn’t shining. The company said that business maintained a “rapid growth trajectory” last year with 5.2 GWh of shipments for the year. It added it expects the amount to more than double this year.

Energy storage systems are indeed a hot ticket right now, as reflected by the doubling of shares of Sigenergy Technology (6656.HK), another player in the space, in their Hong Kong trading debut on Thursday, as the company raised more than $500 million in its IPO.

But even energy storage systems are showing signs of becoming a bubble, as often happens in China as companies pile in to the latest hot area being promoted by Beijing. Accordingly, we wouldn’t hold out too much hope for energy storage systems as a cure for JinkoSolar’s current woes. Instead, the company will need to wait for prices to stabilize, and the headwinds of high silver prices and a rising yuan to ease, before its ship can finally stabilize. But that’s likely to take at least another year or two.

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The Geely-owned luxury green-car maker reduced its net loss last year even as its sales plunged, highlighting difficulties of operating in a fiercely competitive market

Key Takeaways:

• Geely-owned Lotus Technology’s revenue dropped 44% in 2025 to $519 million, while its deliveries decreased 46%
• The company's first plug-in hybrid vehicle marks a retreat from its all-EV promise, and its distressed balance sheet raises questions about its viability without parental support

By Warren Yang

For a company whose brand is synonymous with lightweight engineering and razor-sharp handling, Lotus Technology Inc. (LOT.US) is carrying a lot of excess baggage these days.

The latest annual results from the Geely-owned (0175.HK) electric-vehicle (EV) unit of the legendary British sports car maker show its financial health is improving somewhat, at least in terms of profitability. But it doesn’t take much digging to discover the company’s business remains very much on life support, as it navigates a brutal EV price war that has prompted a drastic strategic shift and left its balance sheet in distress.

Lotus managed to narrow its net loss by 58% for 2025 to $464 million, according to the results released last Friday. The fourth quarter was especially good in that regard, as its net loss shrank more than 80% year-over-year to $86 million. In the company’s earnings announcement, CFO Wang Daxue touted "improved margin performance” on the back of “cost optimization and operational efficiency.”

And indeed, Lotus’ gross margin swung from a negative 11% in the fourth quarter of 2024 to a positive 10% for the most recent reporting period. Its full-year gross margin also tripled to 9% from 3%. This seems like progress that puts the company on a promising trajectory. But it is progress from a very deep hole, and the path to profitability doesn’t look easy.

The most glaring problem is the company’s collapsing top line. Lotus Technology’s total revenue for 2025 plunged 44% to $519 million, with deliveries dropping 46% to just 6,520 vehicles. To put the latter figure in perspective, rival luxury brand Ferrari (RACE.MI) shipped more than 13,000 units last year even as it underwent a significant portfolio makeover. The more mainstream Tesla (TSLA.US) moves more cars in an average two-day span than what Lotus sold in all of last year. Even Polestar (PSNY.US), another Geely-backed money-loser, delivered 44,000 vehicles last year.

Lotus’ lifestyle sport utility vehicles (SUVs) and sedans, its mass-market proposition, saw deliveries fall 33% last year. Its sports cars, the brand’s soul, fell by an even large 62%.

Lotus, despite its heritage and Geely’s deep pockets, remains a microscopic player in a global EV race that increasingly demands massive scale. Zhu Jiangming, founder of the much larger Leapmotor (9863.HK) EV brand, said last year that an EV maker requires annual sales of at least 2 million cars for long-term viability – more than 300 times what Lotus sold last year.

Tariff headwinds

In Lotus’ earnings report, "tariff headwinds” are cited as a factor behind the sales slump. That’s particularly revealing, since Lotus has touted its European base, including operations in Britian and the EU, as a shield against the duties Brussels has slapped on Chinese-built EVs.

But in reality, Lotus relies on its Geely-built factory in Wuhan to make most of its mass-market products. On the company’s earnings call, CEO Feng Qingfeng said U.S. and EU tariffs against Chinese-made EVs drove up prices of its cars in Europe, while “for the U.S. market, basically, it is impossible for us to enter.”

Lotus also blamed “gradual” inventory destocking and a “phased rollout” of upgraded models, which basically is an admission that it’s making more cars than it can sell, as consumers balk at the higher prices it must charge as a result of Western tariffs for its China-made cars. As U.S. and EU tariffs kicked in, sales from Europe and North America fell to 50% of the company’s total last year from 61% in 2024.

More fundamentally, demand for luxury EVs has hit a wall globally. Buyers willing to spend more than $100,000 on a battery-powered SUV are no longer as plentiful as they were in the low-interest-rate environment of 2021. Consumers in Western markets, especially the U.S., have also shown less enthusiasm for pure electric vehicles than their Asian counterparts.

Strategic pivot

Lotus’ answer to that reluctance is its first plug-in hybrid electric vehicle named For Me, which began to be delivered in China in March. This may be an inevitable move to spark growth, but it marks a bitter tactical retreat. Lotus spent years and billions of dollars promising a fully electric future. The company went public in 2024 through a merger with a special purpose acquisition company (SPAC) with a mantra of zero emissions. Now, just about two years later, it’s falling back on a car with a gasoline engine range extender, casting doubts on Lotus’ future as a purely green car specialist.

The pivot does make commercial sense. A hybrid offers a longer range than a pure EV, addressing the primary problem with luxury EVs. On the other hand, though, it muddles the brand message. Lotus is now a luxury EV maker that is selling a hybrid to people who aren't ready for purely battery-powered cars.

The state of its balance sheet suggests Lotus didn’t have much choice in the shift as it burns through its cash quickly. Its cash holdings shrank nearly 30% to just $73 million at the end of last year from 12 months earlier.

The liquidity situation would look potentially life-threatening without the implied lifeline from Geely. The company’s total current liabilities of $2.4 billion dwarf its current assets of $911 million. Among its debt, the company had a staggering $784 million in short-term borrowing from related parties alone at the end of 2025, a fourfold increase from a year earlier. Effectively, Geely has become Lotus's bank, writing checks to keep it afloat.

Lotus is also counting on selling technology as part of its business mix. Its service revenue, which includes income from R&D licensing and technical consulting, jumped nearly 70% to $56 million last year. CEO Feng boasts about the company being the second automaker globally to receive UN R171.01 certification for its intelligent driving technology. This is a plausible narrative for a tech firm, but it’s questionable how much this business will grow to offset the company’s massive losses related to its main car business in any significant way.

At this stage, Lotus looks like a restructuring story at best. Its stock popped at one point last Friday after its earnings announcement, but gave up the gains a day later. It trades at a price-to-sales (P/S) of 1.8, well below 13 for Tesla and 7.6 for Ferrari. For all its luxury image, Lotus is increasingly looking like a battered asset that’s becoming an increasing drag on Geely. Investors may want to keep the company in the garage until it proves it has the necessary horsepower to become a competitive player in the brutal global EV race.

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The pioneer in mass production of semi-solid-state batteries has filed for a Hong Kong listing, as cost pressures and technological limitations still constrain its potential

Key Takeaways:

• Qingtao Energy has begun to commercially produce its semi-solid-state batteries, but it has yet to establish a clear advantage over older-generation lithium-ion products
• The company has filed for a Hong Kong IPO, reporting its gross loss widened from 59 million yuan in 2023 to 250 million yuan last year

By Lee Shih Ta

As the current generation of lithium-ion batteries pushes the boundaries of their performance and safety, newer solid-state products are seen as a next-generation solution to power the electric vehicles appearing on streets in growing numbers. Solid-state batteries’ higher energy density and lower thermal runaway risk could radically reshape the industry – if they can complete the long and difficult journey from concept to mass production.

Qingtao (Kunshan) Energy Development Group Co. Ltd., which started out in the material sciences lab of the prestigious Tsinghua University, China’s equivalent of MIT, is among the few companies bringing solid-state batteries to the practical realm. The company submitted an application for a Hong Kong IPO earlier this month, publicly revealing its technological roadmap and commercialization progress for the first time.

Qingtao Energy exemplifies a type of company hatched in academia now making a transition to commercial entity. Spun off by the Tsinghua material science team, the company has been transforming from a maker of solid-liquid hybrid batteries to all-solid-state batteries since its founding in 2016.

It adopted its current semi-solid-state battery technological focus with the construction of a mass production line in 2018, becoming one of China's few companies to achieve commercial deployment for the technology.

Mass production milestone

Qingtao Energy's products power over 30 vehicle models, including ones from IM Motors, Morris Garages (MG), and Foton, with cumulative deliveries of more than 16,800 batteries. The company’s products are also being used in an 800 MWh energy storage project in Wuhai, of China’s Inner Mongolia region. That combination of customers has driven the company’s rapid revenue growth, nearly doubling from 248 million yuan ($36.4 million) in 2023 to 405 million yuan in 2024, and then more than doubling to 943 million yuan in 2025 — representing a near quadrupling over the three-year period.

Globally, U.S.-based QuantumScape (QS.US) and Solid Power (SLDP.US), though listed, remain in the prototype and pilot production stages, generating only tens of millions of dollars in 2025 without consistent shipments. Chinese players, by contrast, have largely embraced a “deploy first” strategy. Qingtao Energy, WeLion New Energy and Ganfeng Lithium (1772.HK; 002460.SZ) are all using solid-liquid hybrids as a transitional step to get their products into vehicles or demonstration projects.

While China’s players appear to be in a pole position for the emerging technology, many of their products remain in small-batch vehicle trials rather than steady use. Qingtao Energy stands out because its products have achieved sustained deliveries, resulting in its impressive revenue growth. Its power battery revenue surged from just 6.34 million yuan in 2023 to 237 million yuan in 2025, growing from under 3% of its pie to 25.1% over that time. That signals its automotive batteries may be entering a rapid commercialization phase, edging closer to true industrial-scale mass production.

That said, its commercial progress remains heavily reliant on a handful of key customers. In 2025, its top five clients supplied 74.9% of its revenue, with the largest alone accounting for 41.8%. While unnamed, industry sources suggest that major client is likely part of Shanghai-based auto giant SAIC, given Qingtao Energy's automaker partnerships. Whoever the customer is, such heavy reliance ties Qingtao Energy’s near-term tightly to a single automaker's rollout schedule and could constrain its ability to penetrate the broader market.

Furthermore, Qingtao's current mass-produced batteries are primarily semi-solid-state, not true all-solid-state cells. While offering better safety and performance over traditional lithium-ion batteries that are the current industry standard, this transitional solution has yet to create a truly generational leap and is unlikely to reshape the industry landscape in the near term. Concurrently, high costs for solid electrolyte materials, complex manufacturing processes, and unstable yield rates are keeping the company’s unit costs stubbornly high.

Widening gross loss

Qingtao's gross loss widened from 59 million yuan to 250 million yuan between 2023 and 2025, with its gross loss margin rising from 23.8% to 26.5% over that time. Its net losses ballooned from 853 million yuan to 1.3 billion yuan over the same period. Even after excluding one-off items, its adjusted net losses expanded from 278 million yuan in 2023 to 766 million yuan last year. All this shows that despite its strong revenue growth, its business model remains in an early, unprofitable phase.

Meanwhile, established battery giants using more mature technology aren’t just sitting still. Industry leader CATL (3750.HK; 300750.SH) continues refining its lithium-ion systems and has introduced quasi-semi-solid solutions, while Japan's Toyota (7203.T) is aiming to mass produce all-solid-state batteries between 2027 and 2030. For Qingtao Energy, the true competition isn't coming only from other solid-state startups, but also the continuous advances being made by lithium-ion battery leaders. Until solid-state batteries can achieve clear performance and cost advantages, these incumbents are likely to keep steering the new energy battery market.

While Hong Kong investors have shown strong appetite for new energy and hard tech firms, valuations for unprofitable companies are more tenuous. Investors are increasingly prioritizing revenue quality, customer diversification and clear paths to profitability. Qingtao Energy's current state — generating revenue but far from profits — places it in an uncomfortable middle ground between growth and concept stock. Against this backdrop, the fate of its IPO will hinge on whether investors believe it can transition from project- and trial-based based income to a steadier income stream from mass-produced EV models.

Ultimately, Qingtao Energy represents an emerging industry still awaiting validation of its long-term commercial viability. It has proven that semi-solid-state batteries can be mass produced, and that buyers exist for such technology. But it has yet to demonstrate that path can be scaled up profitably and sustainably. For investors, this translates to a technology bet with good momentum, but also one that has yet to fully prove itself.

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The smartcar technology company is considering buying a stake in DreamSmart, owner of an operating system linking smartcars, smart glasses and smartphones

Key Takeaways:

• Ecarx’s board has authorized the company to pursue a potential purchase of a minority stake in DreamSmart, whose main asset is the Meizu brand of smartphones
• Both Ecarx and DreamSmart are controlled by Geely, one of China’s most successful private carmakers

By Doug Young

Being a member of a big family has both its upsides and downsides. On the upside, you have access to all the resources of your different family members, many of which may not be available to ordinary people, and often on good terms. On the downside, if and when you succeed, people don’t tend to take you too seriously, saying you have an unfair advantage from your family connections.

In the corporate realm, Ecarx Holdings Inc. (ECX.US) is one such company. Despite its relatively successful business making digital cockpits for smart cars, the company trades at far lower valuation multiples than many of its peers, which appears to be a “family discount” tied to its ownership by Geely (0175.HK), one of China’s most successful private carmakers.

That investor skepticism was on display once more on Thursday, as investors greeted news of a potential relatively large new acquisition by Ecarx with a yawn. The stock initially opened slightly higher after the announcement, and rose as much as 4.2% during the trading day. But it ultimately closed down 1.8% as investors took a closer look at the investment that, if it happened, would be just another shuffling of assets within the extended Geely family.

Ecarx said its board approved a “a preliminary plan to pursue the potential acquisition of a minority interest” in a Singaporean company called DreamSmart Technology. It noted that DreamSmart is an affiliated company, and that its main interest in any potential investment would be DreamSmart’s FlyMe operating system (OS). A potential deal could see Ecarx offer both cash and its stock, though no value was given.

One of DreamSmart’s main assets is Meizu, a well-known name to China tech old-timers that started out operating a popular MP3 audio player, before getting into smartphones that were fairly well regarded. Meizu made headlines in 2015 when Alibaba paid $590 million for an unspecified minority stake in the company back when the e-commerce giant was just starting on a major acquisition binge. That would have valued Meizu at more than $1 billion at the time.

But much has changed since then, most notably Meizu’s fading as a major smartphone brand. Geely bought about 80% of Meizu in 2022 and folded it into DreamSmart. In 2024, DreamSmart hired investment banks to explore a potential IPO that would have valued the company at around $2 billion, according to a Bloomberg report. While that listing has yet to happen, the valuation implies that Ecarx would probably need to pay at least $200 million or $300 million for a meaningful minority stake in DreamSmart.

That may explain Ecarx’s disclosure in February that it was close to securing $200 million in new funds. Not surprisingly, Geely was one of the contributors to that funding, along with ATW Partners, a New York-based investment firm. Ecarx could use the money, since it only had about $125 million in cash and short-term investments at the end of last year.

Lack of respect

While a DreamSmart technology stake purchase could bring an important new partnership for Ecarx, the fact that it’s just another move on the Geely family chessboard takes away some of any potential excitement. The FlyMe OS that appears to be Ecarx’s main reason for pursuing the deal helps to connect Meizu smartphones, smart glasses and smart vehicles.

That means that Ecarx could potentially use the system to help the car makers that are its main customers to incorporate smartphone and smart glasses interoperability into their products. That certainly looks like an important selling point, as Ecarx and its peers try to differentiate themselves in a highly competitive field for smartcar technology. From an investor standpoint, Ecarx also has the selling point of becoming profitable for the first time in the third quarter of last year, and remaining profitable in the fourth quarter as well.

Yet the company’s stock has lost more than a third of its value this year, most of that since it reported its most recent quarterly results in February. At its current level, the stock trades at a price-to-sales (P/S) ratio of just 0.5. That trails just about all of its peers, including much higher levels of 4.3 for Minieye (2431.HK) and 3.2 for Mobileye (MBLY.US), which is what you would expect from companies with big growth potential.

Ecarx currently derives the majority of its revenue from other members of the Geely family, which include names like Volvo, Polestar and Lotus overseas, as well as the Geely, Zeekr and Lynk & Co. names in China. Those brands helped Ecarx to generate nearly $850 million in revenue last year, up 10% year-on-year, led by 27% growth for its core smart cockpits, which accounted for more than 80% of sales.

The company’s revenue growth showed signs of accelerating towards the end of the year as Ecarx gains traction. What’s more, analysts also hold out big hopes for the company this year, forecasting its revenue will cross the $1 billion mark to reach $1.15 billion, which would represent 33% year-on-year growth.

The big catalyst for that growth is German carmaker Volkswagen, which is the only major global brand not connected to Geely so far to try out Ecarx’s products. Ecarx previously disclosed that partnership will eventually see its products used in a “significant number of cars” under both the Skoda and Volkswagen brands initially in India and Brazil. More recently Ecarx has only been talking about Latin America, suggesting the earlier India plans may be on hold for now.

UBS previously said the VW partnership could start delivering meaningful revenue as early as last year, though other reports mention 2027 as a more likely timeline for such gains. Meantime, Ecarx has also said the $200 million in new fundraising will be used partly to build out an R&D and engineering hub in Germany and infrastructure across key growth markets in South America and Southeast Asia, which looks mostly related to the Volkswagen tie-up.

All of that looks relatively positive, including the potential new investment in DreamSmart that could help Ecarx differentiate its products from its rivals. That could imply some potential upside for the stock if Ecarx can continue to lessen its reliance on the Geely family and show it’s a company capable of standing on its own.

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A listing by the world’s leading maker of electrolyte materials used in lithium batteries is likely to raise more than $1 billion

Key Takeaways:

• Tinci Materials has filed to list in Hong Kong, reporting its business rebounded last year after sharp revenue and profit declines in 2024
• The leading maker of electrolytes used in lithium-ion batteries is building new production bases outside China and diversifying into sodium ion battery materials

By Doug Young

One thing that stands out about Guangzhou Tinci Materials Technology Co. Ltd. is the ages of its top managers. The average of the top three executives at the lithium battery materials maker is nearly 60 years old – something you don’t see too often at Chinese tech companies in emerging areas. That depth of experience is probably a factor helping Tinci to stay at the head of the pack of companies producing electrolytes used in lithium batteries that power not only portable devices like smartphones, but also many of the world’s new energy vehicles (NEVs).

But the track record for Tinci, which last week filed to list its shares in Hong Kong, also reflects the pain the NEV industry, including makers of batteries and their components, has felt over the last two years. The emergence of new technologies like sodium ion batteries is also providing a challenge for the company as it plays in a field where products are constantly changing.

Tinci isn’t sitting idly by while all that is happening, and is developing products for emerging new areas. Still, the rapid pace of change shows that it could easily be overtaken by other companies that develop better products, especially in the current climate where Western governments are trying to seize back some of the momentum from Chinese companies that have come to dominate the new energy sector.

All that said, Tinci looks pretty well positioned, at least for now. Unlike many others in the new energy sector, the company has managed to remain comfortably profitable over the last three years, though its profit fell sharply in 2024 at the height of a price war caused by oversupply. It began to recover last year, with its profits bouncing back.

The company is also trying to build up businesses in new areas, including manufacturing of chemicals used in daily products like shampoo and laundry detergent. But those businesses remain small, at least for now, and capacity utilization rates at related manufacturing facilities remain quite low – around 40% – as the company ramps up production of those products and looks for new customers.

Tinci is quite the industry veteran in many ways. It was founded back in 2000 by Xu Jinfu, now 61 and from a first generation of Chinese entrepreneurs after the implementation of market reforms that allowed private companies starting in the 1980s. Xu’s second in command is Xu Sanshan, apparently unrelated, who, at 57, is also from that early generation of entrepreneurs and has been at the company since 2010. Finally there’s Gu Bin, 60, who has been the company’s CFO since 2007 – something you rarely see in many tech companies where the top financial person frequently changes.

The company is the world’s top maker of electrolyte material used in lithium-ion batteries with 35.7% of the market, ahead of electric vehicle (EV) giant BYD (1211.HK; 002594.SZ) with 15.6% of the market. Number three is Shenzhen Capchem (300037.SZ), which has 13.8% of the market and in January also applied to list in Hong Kong to complement its current Shenzhen listing.

Big fundraising

This particular IPO looks like it should be relatively large, almost certain to raise more than $1 billion. The first big hints come from its list of underwriters, which include global giant JPMorgan and Chinese leader Citic Securities, indicating the share sale is likely to attract big institutional investors from both China and globally.

Shenzhen Capchem is probably the best peer for comparison purposes, as it also engages mostly in making battery materials. Capchem’s Shenzhen-listed shares currently trade at a price-to-sales (P/S) ratio of about 5, and a similar ratio would value Tinci at about 83 billion yuan ($12 billion), based on its 2025 sales. But we suspect Tinci could get a premium over Capchem due to its market-leading position, meaning it could get valued at around 116 billion yuan if it can command a P/S ratio of around 7.

Next, we’ll take a closer look at Tinci’s financials, which show the big hit it took in 2024 and some of the steps it’s taking to try to diversify beyond selling lithium battery electrolyte materials to Chinese customers.

The company’s revenue fell 19% in 2024 to 12.5 billion yuan, as its average selling price for lithium battery electrolyte tumbled 45% that year from 2023 levels. Average electrolyte prices continued to fall another 5.6% last year, though increases in some other areas helped the company record an increase of 4.3% in average selling price for its overall lithium ion battery materials that year.

As prices stabilized, Tinci returned to revenue growth, as the figure rose 33% to 16.6 billion yuan last year. The big majority of its revenue, 96.2%, came from customers in China last year. Tinci is aiming to expand its geographical footprint beyond its home market, and last year signed separate agreements to set up two new production bases, one in Morocco working with the government, and the other in the U.S. working with a local joint venture partner.

The company says it is also trying to ramp up its daily chemicals business, though that segment has remained at a relatively low level of around 8% of its revenue over the last three years and capacity utilization is low. Tinci also recognizes that leading battery makers like CATL are looking at alternative technologies like sodium-ion batteries, and is taking steps to develop related electrolyte products. It said it began producing sodium-ion battery electrolyte in 2024, and its products in that area have been certified by several leading battery makers.

One slightly worrisome area for Tinci is its inventory, which has been steadily trending upward in the last year. The level rose 19% to 1.62 billion yuan by the end of last year, and then suddenly spiked another 36% in the first two months of 2026 to reach 2.21 billion yuan by the end of February. But the buildup appears related to growing demand, rather than lack of it, reflected by the fact that the company’s average inventory days have been trending steadily downward over the last three years.

On its bottom line, Tinci’s profit fell by more than two-thirds in 2024 to 478 million yuan as electrolyte prices plunged. But it bounced back to 1.34 billion yuan last year as prices stabilized.

Overall, things look relatively positive for the company’s IPO. Its market-leading position and early steps to diversify geographically and into new emerging areas like sodium-ion batteries should help it command a valuation premium over its peers. At the same time, its stabilizing business should ease investor concerns about future price pressures.

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The specialist in N-type cells aims to list in Hong Kong, boasting status as the world's third-largest producer of N-type TOPCon technology

Key Takeaways:

• Yingfa Ruineng has filed for a Hong Kong IPO, reporting it turned profitable last year, as its overseas gross margins far exceeded domestic levels
• The maker of N-type solar cells’ backers include China’s National Green Fund

By Bai Xin Rui

The Middle Eastern conflict that’s sent energy prices soaring, combined with reports that Tesla plans to start procuring photovoltaic equipment from China, is breathing some much-needed new life into the industry’s embattled supply chain. That momentum could be a factor behind solar cell maker Sichuan Yingfa Ruineng Technology Co. Ltd.’s new Hong Kong listing application, aiming to tap not only a nascent industry rebound but also one of the city’s hottest IPO markets in years.

Yingfa Ruineng is a relative newcomer to China’s solar field, founded in 2016 by Zhang Fayu, who began in electronic component manufacturing. The company began commercial production of P-type PERC cells in 2016. Following multiple financing rounds to support its growth, it became the world's first PV cell manufacturer to commercialize N-type xBC cells in August 2025. It also ranks as the world's third-largest producer of N-type TOPCon cells. Zhang’s family currently holds 49.1% of the company, while China’s prestigious National Green Fund, supported by the Ministry of Finance, holds a 7.86% stake.

Involution clampdown beneficiary

Rapid growth in demand for electricity from data centers, artificial intelligence, and electric vehicles, has led to a surge in concurrent demand for solar cells, since many such applications are powered by on-site sources, often from solar arrays. As that has happened, solar cell shipments have surged from 208.2 GW in 2021 to 694.8 GW in 2025, with about 85% of the world's photovoltaic manufacturing capacity based in China.

Demand has been especially strong in China as well, as Beijing promotes its “dual carbon” reduction goals of reaching peak carbon emissions by 2030 and carbon neutrality by 2060. That has led to a wave of solar farm building by mostly state-owned entities to help meet those goals. Such aggressive building, both inside and also outside China, was once a major enticement for new investment as companies spent aggressively to gain first-mover advantage. But the wave of expansion over the last three years has created a current situation of massive overcapacity, characterized by a flood of products that largely look and perform similarly. That’s resulted in cutthroat competition and declining product prices, sending most companies sharply into the red.

Last year, Beijing introduced policies to try to curb the overheated competition, supporting more advanced enterprises while shutting down ones using older technology. That’s helped to stabilize photovoltaic prices and is producing some early signs of recovery. Older companies have historically produced P-type cells, while ones with funds to invest are making newer, higher-efficiency N-type cells. The measures designed to curb competition have seen many makers of lower-efficiency P-type cells shut down, benefiting N-type cell makers.

Yingfa Ruineng has been a major beneficiary of that shift due to its recent embrace of N-type cells. According to its listing document, P-type cells accounted for more than 90% of its revenue as recently as 2023, providing 9.65 billion yuan ($14 billion) in revenue that year, while N-type cells represented only 7.1%. But by 2025, this situation had reversed. P-type cells contributed just 3.6% of revenue that year, amounting to just 310 million yuan, while N-type cells surged to 88.1%, worth 7.68 billion yuan. N-type production capacity reached 32.8 GW, many times higher than 1.4 GW for P-type capacity.

N-type cells also commanded higher gross margins than their P-type counterparts, at 17.9% versus 15.4% last year, respectively. Those improved margins helped the company to return to the black in 2025 with a net profit of 857 million yuan, reversing an 864 million yuan loss in 2024. The company’s revenue also doubled last year to 8.71 billion yuan, after plunging by more than half in 2024 at the height of the overheated competition.

Yingfa Ruineng has also gotten a boost by accelerating its drive into overseas markets, where prices are generally higher and competition is less intense. In 2023, the vast majority of its revenue – some 96.7% – came from its home China market, with only 3.3% from overseas. But the company has been aggressively expanding its international channels, causing China sales to drop to just 59.5% of revenue last year, while overseas markets surged to 40.5%.

That shift has helped the company’s profitability, since overseas markets typically deliver significantly higher gross margins. For example, overseas sales for N-type products commanded a gross margin of 27.8% in 2025, exceeding domestic margins by 17.2 percentage points. The U.S. market was especially strong, with margins of 36.7%. Revenue from the U.S. reached 1.24 billion yuan last year, representing an 11-fold year-on-year increase and accounting for 14.3% of the company’s total. Yingfa Ruineng attributed the strong U.S. growth to increased local adoption of photovoltaic products, coupled with orders from U.S. module manufacturers.

Climbing inventory days

While many of its trends are positive, one that could warrant attention is Yingfa Ruineng's steadily rising inventory. That’s caused inventory turnover days to rapidly climb from just 10 in 2023 to 47 days in 2024 and rise higher still to 69 days last year. The company attributed the increase to higher raw material stockpiles, heightened competition among downstream manufacturers causing finished goods inventory to accumulate, and the expansion of overseas sales operations that require longer delivery cycles compared to domestic sales.

We should also note that Yingfa Ruineng's revenue is subject to seasonal fluctuations. Its factories often shut down during the Chinese Lunar New Year in January or February, leading to lower production in the first quarter. Meanwhile, overseas sales may slow in Europe and the U.S. during holiday periods like summer breaks and Christmas. Then there are other factors, such as rushes to meet deadlines, often at the end of the year, to be eligible for state subsidies. Yingfa Ruineng says sales are typically strongest in the first and fourth quarters, while the second and third are softer due to seasonal project delays and reduced activity.

From the broadest perspective, China’s measures to cool the overheated competition could mean the solar industry has reached the bottom of its latest cyclical trough. Yingfa Ruineng not only stands to benefit as prices firm, but could also boost its margins by expanding overseas.

U.S.-listed First Solar (FSLR.US) currently trades at a forward price-to-earnings (P/E) ratio of approximately 12 times, though Yingfa Ruineng may need to seek a lower multiple to attract investors due to its size and the tentativeness of the market’s turnaround. Accordingly, a pricing at around 10 times its earnings or less could attract investors to the listing.

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The electric vehicle maker impressed investors by reporting its deliveries doubled last year, as it achieved its first-ever annual profit

Key Takeaways:

• Leapmotor recorded an annual net profit of 540 million yuan last year, as its revenue doubled and its other key metrics performed strongly
• The electric vehicle maker led the field among China's new energy vehicle startups last year

Lau Chi Hang

The innovation road has never been easy to travel, despite Beijing’s constant refrain calling on companies to innovate. But after a decade on a road stained with copious red ink, electric vehicle (EV) maker Zhejiang Leapmotor Technology Co. Ltd. (9863.HK), which once had trouble simply meeting its payroll, has finally crossed into the rare lane of profitability – something only a handful of its peers have done.

The company's 2025 results, released last week, contained multiple milestones. At the top of that list, Leapmotor achieved its first annual net profit of 540 million yuan ($78 million). Its full-year vehicle deliveries totaled 596,555 units, up more than 100%, making it the leader among China's new energy vehicle startups in terms of sales volume. What’s more, the company was the only startup to achieve monthly deliveries exceeding 70,000 units.

All of Leapmotor’s key metrics showed significant growth. Its revenue doubled year-on-year to 647.3 billion yuan, while its gross margin hit a record 14.5%, up 6.1 percentage points compared with 2024. The company's net operating cash flow reached 126.2 billion yuan, up by nearly 50% year-on-year.

Winning through affordability

Leapmotor's ability to outperform peers like Nio (9866.HK, NIO.US) and XPeng (9868.HK, XPEV.US), and to rapidly close the gap with Li Auto (2015.HK, LI.US), largely owes to its strategy of achieving big sales through competitive pricing. The company's main models are priced between 60,000 yuan and 200,000 yuan each, with an average price of around 150,000 yuan, or about $21,700. That approach helped Leapmotor, once considered a dark horse in a weak Chinese economy plagued with intense competition, to come from behind and sprint to the lead of the pack in terms of units sold.

Concurrently, Leapmotor achieved breakthroughs in its approach to technology. Using a “full domain in-house R&D + vertical integration” strategy and its self-developed Leap 3.5 architecture, the company managed to compress costs while still delivering enhanced efficiency and convenience to users.

Overseas growth also played a crucial role, as support from partner and shareholder Stellantis (STLA.US; STLAM.MI) paved the way for Leapmotor to make significant progress in Europe. As of February, the company’s cumulative overseas sales reached 100,000 units. Last year, its battery EV sales ranked it third among Chinese passenger car brands across 29 European countries. And notably, it ranked second in the fourth quarter.

The latest financial report produced a groundswell of support for the company and its prospects. CICC said Leapmotor’s steady stream of new model launches, upgrades to product specifications, and overseas expansion will help to boost the company’s sales going forward. It rated the company an “outperform” with a target price of HK$60.80. CLSA was even more bullish, estimating that overseas carbon credit sales and technology licensing will allow Leapmotor to further boost its gross margin. It also rated Leapmotor as an “outperform,” with an even higher target price of HK$80.

Profitability reliant on financial income

But beneath the veneer of strong results, Leapmotor still has some noteworthy issues under its hood. A further examination of last year's results shows the company’s inaugural profit in no small part owed to 294 million yuan in finance income. Excluding that, the company’s operating profit would have totaled just 1.77 billion yuan. When compared to its revenue of nearly 650 billion yuan, such performance hardly looks like cause for big celebration.

The company's inventory last year also surged to 4.55 billion yuan, representing a sharp 127.5% increase from 2024. Its trade receivables and notes receivable were even more alarming, skyrocketing by 163% year-on-year to reach 5.21 billion yuan.

In the debt department, Leapmotor’s long-term liabilities surged by 108% to 2.3 billion yuan. Its short-term debt, trade and other payables, accrued expenses, and similar items combined totaled 40.83 billion yuan, up 81% year-on-year. The sole positive note was the company’s cash, which totaled nearly 11 billion yuan at the end of last year, up by 72% year-on-year. But given the company's substantial spending — R&D alone consumed 4.3 billion yuan last year — that cash position doesn’t look like a secure buffer.

Earning just 300 yuan per vehicle?

The low-pricing strategy behind Leapmotor's success last year doesn’t seem to constitute a robust moat that others can’t replicate either. The significant test lies in sustaining such low prices over the longer term. That could be hard as numerous automakers increasingly target the low-price segment with more entry-level models, posing a direct challenge to Leapmotor.

Delivering strong value-for-price necessitates increased R&D investment. Yet, Leapmotor's in-house R&D model requires continuous, substantial spending to maintain technological leadership. Sustaining low selling prices is also dependent on controlling raw material costs. In this case, a major factor is the cost of lithium batteries, whose core lithium price is notoriously volatile. Lithium carbonate prices reached a high of 180,000 yuan per ton earlier this year and, despite retreating to around 150,000 yuan, remain elevated compared to previous levels near 100,000 yuan. That’s continuing to pressure automakers, especially ones focused on the lower end of the market.

Using low prices to generate profits via scale is inherently challenging. While Leapmotor has moved beyond losing money on every vehicle sold last year, its net profit margin was only 0.83%. Based on its full-year delivery volume, that equates to a profit of just 905 yuan per vehicle. And excluding its finance income, the profit per vehicle falls to less than 300 yuan. Any slight increase in costs could instantly wipe out such thin margins.

That said, the company could still boost its profits if it can continue to expand its scale. As founder Zhu Jiangming stated in an interview last year: “Over the long-term, I believe an annual sales volume of 1 million vehicles is the survival threshold; to move forward, achieving at least 2 million in annual sales is necessary; and to become a global automaker, annual sales must reach 4 million vehicles.”

Leapmotor sold fewer than 600,000 electric vehicles last year. Its target this year is 1.05 million units, though whether it can achieve that goal remains far from certain. Reaching 2 million units appears aspirational but hard to attain, to say nothing of the 4 million target that looks out of reach for quite some time.

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China’s fourth largest e-scooter maker forecast revenue growth of 40% to 60% this year, as its move into electric motorcycles and expanded store network gain traction

Key Takeaways:

• Niu Technology reported its revenue fell 17.4% in the fourth quarter, as it fell into the red with the implementation of tougher standards for e-bikes in China
• The company forecast a return to strong growth this year, following an overhaul including a shift towards higher-end models and a big expansion of its retail network

By Doug Young

You know things might not be so rosy when a company’s chief refers to its most recent year as a time of “continued strategic transformation,” which was how CEO Li Yan described 2025 for e-scooter maker Niu Technologies (NIU.US) on its latest quarterly earnings call. Truth be told, the fourth quarter of 2025 was the most punishing for Niu, which, like its peers, suffered sharp sales declines in China as the country implemented tough new standards for e-bikes.

The fourth-quarter sales plunge, which saw Niu’s revenue fall 17.4% year-on-year to 676.2 million yuan ($98.2 million) in the final three months of the year, resulted in an 88.1 million yuan loss for the period, according to its fourth-quarter report. That wiped out Niu’s 48.7 million yuan profit in the first nine months of the year, leaving it with a 39.4 million yuan loss for the whole year.

But Li was quick to note that implementation of the new rules led to a buying bulge in the third quarter ahead of the changes. He said a better indicator was the entire second half of the year, when the company’s China deliveries rose 38% year-on-year. What’s more, the company gave a very rosy outlook for 2026, including 30% to 50% year-on-year revenue growth for the first quarter, and even stronger 40% to 60% growth for the full year.

But investors weren’t interested in all those positive stories, and seemed to focus on the big fourth-quarter declines, which included not only a 15.7% drop in Niu’s China revenue, but a much larger 58.3% plunge in its international revenue. The stock tumbled 8.2% the day of the report’s release. It had previously rallied 36% this year, probably on hopes for a better fourth-quarter report. But it has tanked around 30% from a March 11 peak, wiping out all of this year’s gains and more.

“We see 2026 as a year defined by strategic acceleration across our entire diversified portfolio,” said Li. “Our groundwork in 2025 has set the stage for significant scale in both our domestic and international operations.”

The “groundwork” Li referred to covers a number of steps, including the company’s recent move to add electric motorcycles as it tries to diversify beyond its older focus on e-bikes, which travel at slower speeds. The company rolled out its FX Windstorm line of electric motorcycles last year, with speeds of up to 80 kph, and the product quickly gained traction to account for 23% of the company’s annual sales.

In addition, Niu is shifting its marketing to focus more on younger buyers, particularly from Gen Z, away from the older demographics that are more typical buyers of e-bikes in China. It has also boosted its network of franchised stores in China, which finished the year at 4,540, up 22% from the 3,753 at the end of 2024.

Last but not least, the company is also overhauling its international business model to move away from distributors to more direct relationships with retail partners. Niu blamed that shift for the big decline in its international sales in the fourth quarter. But truth be told, Niu and its peers have always had a difficult time in the international market, and we’ll need to see some improving numbers before we believe that part of its business can make a meaningful contribution. With fourth-quarter revenue of just 36.3 million yuan, international sales accounted for just 5.4% of Niu’s total for the period.

Crowded market

Niu and its peers are generally thriving in a Chinese e-scooter market whose overall sales rose 29.5% year-on-year in the first half of 2025 to 32.3 million units, according to market consultancy Equal Ocean. Niu is the market’s fourth largest player with about 7.1% of the market, behind leader Yadea (1585.HK) with 28.4%, AIMA (603529.SH) with 15.1%, and TAILG, which applied for a Hong Kong IPO earlier this year, at 12.9%.

Despite their big growth potential, none of the stocks trades at very high price-to-sales (P/S) multiples, reflecting the stiff competition at home and inability of any of the big players to gain much traction outside China. Leaders Yadea and AIMA trade highest with ratios of 0.91 and 1, while Niu lags that pair by quite a distance with a ratio of just 0.37.

The new e-bike standards that caused sales to plummet took effect last Sept. 1, with the sale of non-compliant models officially banned starting on Dec. 1. The new rules were aimed at boosting safety, especially reducing hazards from batteries that catch fire and have resulted in some high-profile building blazes. They strictly limit the use of plastic components, and require stronger fire-resistance for non-metallic materials, as well as tighter controls on the proportion of plastic parts.

While Niu forecast 30% to 50% year-on-year revenue growth in the first quarter, the broader market wasn’t doing too well in February, with domestic e-bike sales down 38% for that month, according to financial media Caixin. But here, we should point out that the Lunar New Year fell in mid-February this year, depressing sales for the entire month, compared with a late January date for the holiday in 2024.

Despite tumbling sales and a drop into the red, one bright spot for Niu in the fourth quarter was its gross margin, which rose nearly 3 percentage points to 15.3% from 12.4% a year earlier. Niu credited that gain on its gradual migration to higher-cost products, including electric motorcycles, which are a less competitive segment of the market and thus tend to carry higher margins. Reflecting that, the company’s revenues per unit sold rose 4% in the fourth quarter.

In our view, Niu’s stock seems to be heavily discounted compared to its larger peers, perhaps because of its smaller size and recent setback in the global market. Unlike its two listed peers, which trade in Shanghai and Hong Kong, Niu trades in the U.S., which hasn’t been the friendliest place for China-listed companies lately. Still, there seems to be some upside potential for the stock after the recent selloff, especially if Niu can post the kind of strong growth it has forecast for 2026.

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The maiden annual earnings report from the world’s top EV battery maker since its Hong Kong IPO last year showed its profit significantly beat investor expectations

Key Takeaways:

• CATL reported its revenue rose 17% last year to 423.7 billion yuan
• The leading electric vehicle battery maker’s profit for the year surged 42% to 72.2 billion yuan

By Lau Chi Hang

Irrational competition in China’s domestic car sector has turned a former blue-ocean electric vehicle (EV) market into a bloody sea of red ink. But while automakers lick their wounds and struggle to stay in business, one of their key suppliers, leading EV battery maker Contemporary Amperex Technology Co. Ltd. (3750.HK; 300750.SH), or CATL, delivered an outstanding financial report this month, including fast-rising profits that easily beat market expectations.

The annual report, the first since CATL’s $4.6 billion Hong Kong listing last year, lit a fire under the company’s stock, sending it 23% higher over four trading sessions to pass the HK$600 mark. That lifted its market capitalization by nearly HK$540 billion ($69 billion) to over HK$2.8 trillion, overtaking Alibaba and HSBC to become China’s second-largest publicly traded company by market value, trailing only Tencent.

Cost controls, efficiency enhancements

So, how exactly did CATL pull off such an upside surprise? The report shows its revenue rose 17% last year to 423.7 billion yuan, while its profit grew at more than double that rate to 72.2 billion yuan, up 42% from 2024. Investors were particularly encouraged by CATL’s fourth-quarter performance, including 37% year-on-year revenue growth to 141 billion yuan ($20.4 billion). Its profit growth continued to outpace revenue gains for that period, up 57% year-on-year to 23.17 billion yuan.

Notably, the company’s selling expenses increased by only 4.84% year-on-year to 3.74 billion yuan in 2025, substantially below the revenue growth rate, reflecting CATL’s cost discipline.

Concurrently, the company also boosted its efficiency with better utilization of its capacity. Of its 772 GWh in total capacity last year, CATL’s actual output reached 748 GWh, translating to a utilization rate of 96.9%. That represented a 20-percentage-point improvement from 76.3% in 2024, showing the company’s operational efficiency was improving as it boosted its market share and gained from growing global demand.

Unstoppable battery demand

Having thrived last year when many EV makers were struggling, a big question now is whether CATL can sustain its momentum. We’ll examine that more closely by first examining the macro environment. Demand for EVs is likely to remain strong this year, driven by a global megatrend for reduced carbon emissions. Adding to that, recent U.S. and Israeli attacks on Iran have pushed oil prices to new recent highs, drawing even more attention to electric-powered vehicles and need for energy storage at solar and wind farms. As the leading maker of both power and energy storage batteries, CATL looks well positioned to benefit from rising demand for electric power both at the vehicle- and power station-levels.

In the power battery space, the adoption of new energy vehicles (NEVs) is showing no signs of slowing. Global NEV sales grew 21.5% to 21.47 million units last year, according to SNE Research, with China sales up 17.7% year-on-year to 13.88 million units, according to the China Association of Automobile Manufacturers. These figures show how NEVs continue to take demand from traditional gas-powered cars, which should sustain demand for power batteries this year.

Concurrently, a recent trend towards pure EVs featuring standard long-range configurations is also driving up demand with requirements for more battery capacity per vehicle. Last but not least, the adoption of new energy commercial vehicles is also rising steadily, with sales surging 63.7% year-on-year last year and penetration reaching 26.9%. Higher energy capacity batteries required for these commercial vehicles also plays to CATL’s strengths.

In the energy storage battery arena, newly grid-connected wind and photovoltaic (PV) installed capacity in China reached 438 GW in 2025, up 22.3% year-on-year. That boosted cumulative installed capacity for PV and wind power past coal-fired power capacity for the first time, raising demand for energy storage batteries as well. The ongoing rise of AI, with its big appetite for power, often produced and stored locally for use in data centers, will also play to CATL’s strong position in energy storage batteries.

The company’s overseas expansion is also forming another distinctive growth curve. CATL’s overseas revenue grew 17.5% last year to 129.6 billion yuan, lifting its contribution from 17.5% of total revenue in 2024 to 30.6% last year. Its gross profit from overseas operations rose 25% year-on-year to 40.76 billion yuan, raising the gross margin for CATL’s overseas business to 31.44% –much higher than the domestic gross margin of 24%.

Undeterred by lithium price volatility

A significant challenge for CATL right now is lithium carbonate, a key battery component whose price has been anything but stable over the last three years. After plummeting to around 40,000 yuan per metric ton in 2023, prices gradually rebounded, and surged as high as 180,000 yuan at the start of this year. Prices have fallen since then to around 150,000 yuan, but that still represents a substantial increase in raw material costs for battery manufacturers.

Despite that, CATL has managed to control cost pressures relatively well thus far. Beyond possessing significant pricing power that allows it to pass on costs to customers, the company, drawing on past experience with volatile prices, has become better at upstream resource integration and hedging to lower the risks of price volatility. It also expedited the approval process for resuming production at its Yichun lithium mine in China. Such measures have helped to mitigate cost pressures.

The company has also begun exploring contingencies by developing sodium-ion batteries, which are far cheaper to make and provide superior low-temperature performance, and don’t require lithium. In that direction, it has begun working with Changan Automobile to introduce vehicles powered by sodium-ion batteries. But sodium technology is still in an early phase, and will require more time to reach large-scale commercialization. CATL emphasizes that application scenarios and market penetration for sodium-ion batteries could get a rapid boost if lithium carbonate prices continue to rise and stay high.

CATL is fond of saying: “It’s one thing to make a battery, but quite another to make a good one,” reflecting confidence stemming from its position as a global leader in the space. That said, while we harbor no immediate concerns about the company over the next year or two, the never-ending pace of change and renewal in the tech world means that no fortress is impregnable for long.

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The company booked a paper profit by offloading its money-losing soccer club, but its cash-burning new energy commercial vehicle business is in an equally difficult league

Key Takeaways:

• ZO Future was profitable in the first half of its fiscal year to December, but only thanks to gains from offloading its debt-laden Birmingham City Football Club
• The company's ambitious pivot to new energy vehicles also faces a steep uphill climb given its recent arrival to the field

By Warren Yang

ZO Future Group (2309.HK), formerly owner of the Birmingham City Football Club, is following a classic playbook by Chinese companies making foreign acquisitions: take over a high-profile dud asset, rack up years of losses and then pivot to the next big thing. In ZO’s case, the foreign asset was a prominent British soccer club, and the next big thing is green vehicles. But as some sports fans may say, you can't just change the game and expect to win the league.

Last Friday, ZO Future, previously known as Birmingham Sports Holdings, released midyear results that featured a headline-grabbing return to profitability that suggested a major turnaround after years of losses. For the six months to last December, the first half of ZO Future’s fiscal year, the company scored a net profit of HK$179.8 million ($23 million), reversing a loss of HK$117 million for the same period a year earlier.

But a closer look quickly casts doubt on the turnaround story. ZO Future’s profit for its fiscal first half was entirely due to the disposal of its perennially loss-making Birmingham City Football Club last November. The company pocketed gross proceeds of just 5 million pounds ($6.7 million) in cash from the sale of its 52% stake in the team. When ZO Future bought a majority stake of the club in 2016, the team, then under receivership, was worth 12.3 million pounds. So, the team has lost value since then, which isn’t surprising given its financial troubles.

In addition to acquiring ZO Future’s equity in the Birmingham City club, the buyer, a subsidiary of an investment firm founded by hedge fund manager Wagner in New York in 2008, will also settle 19.2 pounds million of debt owed by the team to ZO Future. The new owner of the Birmingham City Football Club, Shelby Cos. Ltd., already bought part of ZO Future’s stake in 2023. 

After eliminating losses and debt related to the club, ZO Future booked a HK$229.1 million net profit from the discontinuation of the business. ZO Future’s continuing operations, now almost entirely comprised of a fledgling new energy vehicle (NEV) business, made a net loss of HK$49.3 million in the first half of its current fiscal year, more than double the HK$20.4 million it lost a year earlier.

Revenue from the company’s continuing operations during the six-month period did double to HK$56.6 million. But even that was only a tad larger than its administrative and selling expenses totaling HK$52 million. What’s more, the company booked a HK$16.1 million loss from an equity-accounted investment.

ZO Future’s transformation into an NEV brand marks a certain denouement of an exuberant chapter in outbound investment by Chinese firms. As recently as a decade ago, flush with cash and cheered on by the government, Chinese companies went on a shopping spree for overseas soccer clubs, spending an estimated $2.3 billion on teams from Birmingham City Football Club to Inter Milan to Aston Villa Football Club. The logic behind the purchases was often murky — a mix of soft power projection, personal passion, and occasionally, a convenient conduit for moving money out of China.

The results, however, were predictable. Most of these assets proved to be money pits that required constant new funding, with operating costs far outstripping the modest revenue they generated. ZO Future's journey with Birmingham City was typical of this story, resulting in annual losses and the need for frequent capital injections.

Big bet on NEVs

ZO Future is now betting big on NEVs — specifically, commercial trucks under the ZO Motors brand – which at least takes it out of the higher-profile but extremely overheated sector for passenger vehicles. That said, the company’s NEV sales aren’t anything to get too excited about, amounting to a little over HK$30 million in its fiscal first half. The company’s NEV strategy is twofold. In China, it’s looking to go asset-light. To that end, it inked an exclusive manufacturing partnership in 2024 with Weichai New Energy, which eliminates the need for ZO Future to spend the big money necessary to build its own factory.  

But the company has its own manufacturing bases overseas, with plants in California and Cambodia. The U.S. facility, in the city of Fontana, serves as a local assembly hub designed to signal its long-term commitment, while also catering to "buy American" sentiment and pre-emptively helping it to navigate local regulations. Its Cambodia factory can help it gain a first-mover advantage in that emerging market, while allow it to avoid import tariffs on finished vehicles and build a local ecosystem, including charging infrastructure.

On paper, ZO Future’s NEV ambition looks laudable. The commercial NEV segment is poised for growth as logistics companies and local governments seek to decarbonize their fleets. And seeking a niche in that space avoids a passenger electric vehicle market that has become brutally competitive, both in and outside China, crowded with both traditional automakers like BYD (1211.HK; 002594.SZ) and well-funded startups like Nio (NIO.US; 9866.HK).

ZO Future’s NEV business will need to make significant investment to gain traction. But its balance sheet is fragile, with only HK$43.7 in cash at the end of December, as it continues to grapple with negative cash flows. In fact, in its midyear report, the company admitted that its solvency may be in danger after it was hit by a net cash outflow of about HK$200 million from operations in the first half of its fiscal year.

“This condition indicates the existence of a material uncertainty which may cast significant doubt on the group’s ability to continue as a going concern,” ZO Future said.

At the moment, financial support from the company’s major shareholders is enough to supply it with sufficient working capital. That shareholder group is led by a man named Vong Pech, a former Chinese national previously named Wang Dong, who is now a naturalized Cambodian and owns about 30% of the company. But there’s no guarantee that this lifeline will always be there. 

ZO Future shares have slipped about 2% through Tuesday since the release of its midyear report, which suggests that the headline net profit didn’t really fool investors. They trade at a price-to-sales ratio of 4.2, higher than 1.3 for BYD, even though ZO Future’s revenue base is tiny compared to the NEV titan.

At this point, whether ZO Future will be any better off as an NEV maker than as a soccer club owner is doubtful. The company may end up looking for another business in the latest hot area if it fails to score a big win in the NEV game – a relatively common approach in a landscape of similar publicly traded Chinese “chameleon companies.” But that would only erode investor confidence in its ability to chart a path to sustainable growth.  

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One of China’s earliest tech giants has agreed to take over the North America and European sales operations for the Japanese brand

Key Takeaways:

• Skyworth will take over Panasonic’s North American and European sales operations, and could eventually also take over manufacturing for the brand’s European business
• The company is trying to privatize its Hong Kong shares, and would re-list its fast-growing new energy unit that helps homes and businesses set up solar arrays on their premises

By Doug Young

Skyworth Group Ltd. (0751.HK; 000810.SZ), a pioneer on China’s tech scene as a leading TV maker in the 1990s, has become a company with many moving pieces lately. It was one of the first from its class when it listed in Hong Kong in 2000, and looks set to end that run with a de-listing plan announced last month.

But that’s hardly the end of its story. Over the years its founder, the colorful Huang Hongsheng, found himself in jail for three years for embezzlement, and has launched an electric vehicle (EV) company since his release in 2009. He left the original Skyworth some time back, and handed it over to his son, Lin Jin, who became chairman in 2022.

Now, Lin may be putting his own stamp on the company with not only the privatization plan, but also another plan revealed last week to take over a big chunk of the global sales business for Japan’s Panasonic (6752.T) TV brand. The plan comes just a month after Chinese rival TCL Electronics (1070.HK) did a similar deal to take over the TV and home audio business of consumer electronics giant Sony through the establishment of a joint venture.

The sale of major TV brands has been going on for quite some time now, with names like U.S.-based Zenith sold to a Korean buyer in 1995, and TCL buying France’s Thomson TV brand in 2003. But Sony and Panasonic, along with South Korea’s Samsung and LG, have been some of the few holdouts as Chinese brands have come to dominate the market.

Under the latest deal announced by Skyworth, Panasonic will transfer its TV sales operation for North America and Europe to Skyworth for an undisclosed sum. Panasonic will continue to oversee sales in its home Japan market. The Japan and European markets currently account for 80% to 90% of the brand’s TV sales, split roughly evenly between the two. North America accounts for a relatively small portion.

Panasonic will continue to oversee manufacturing for its TVs for now, but also appears likely to transfer a portion of that to Skyworth for its TVs sold in Europe in the future, according to Nikkei Asia.

The move could provide a boost for Skyworth’s TV sales, which currently account for more than half of the Hong Kong-listed company’s revenue under its smart household appliances segment. The TV business hasn’t been providing much lift to Skyworth’s top line lately, growing by around 2% year-on-year in the first half of 2025, split roughly evenly between China and international markets.

The company’s other revenue comes from several sources, including a “smart systems technology” business that covers broadband equipment; and a “modern services business” that covers maintenance, repairs and logistics for home appliances. But the most promising of its other units is its new energy division, which helps enterprise and residential customers set up solar arrays on their premises, known in the industry as distributed power. Such systems are growing in popularity, especially with help from government subsidies, as they allow users to lower their electricity costs and sell excess power they generate back to the grid.

Privatization and re-listing

While the TV business could get a lift from the Panasonic deal, that boost could be irrelevant to holders of Skyworth’s current Hong Kong-listed shares if the company succeeds in a privatization bid announced in January. Under that deal, Skyworth would buy back all of its Hong Kong stock through a combination of cash and shares in its new energy business. The new energy unit would then be separately listed through a process called “listing by introduction” that doesn’t raise any new cash.

The privatization deal would see each current shareholder receive the equivalent of HK$10.16 in cash and shares of the new company – roughly double the HK$5.18 price where the stock was trading before a suspension pending the January announcement. The stock has rallied somewhat since then. But its latest price of around HK$7 is still well below the buyout offer value, indicating there’s quite a bit of skepticism that the privatization will succeed.

Among the early field of TV makers that were arguably China’s earliest tech leaders, TCL is the clear leader, and Skyworth may come second. TCL has succeeded partly by investing heavily in big-screen manufacturing technology, giving it better control of its production. TCL currently boasts the highest gross margin among its peers, at about 15.4%, compared with 12.3% for Skyworth in the first half of last year and just 4.5% for the smaller Konka (200016.SZ).

As we’ve already pointed out, Skyworth’s TV business is growing very slowly, if at all. That sluggishness has dragged down the company’s overall revenue, which fell 6% in 2024. But the company returned to strong growth in the first half of last year, as its revenue rose 20% thanks to 53% growth for its new energy unit that generated 13.8 billion yuan ($2 billion), making up 38% of total revenue. Given that strong growth, it’s no surprise Skyworth wants to separate the new energy business from the slow-growth TV segment for its own new listing.

You have to credit Lin Jin, whose family still controls 66% of Skyworth’s shares, with trying to take the company in a new direction nearly four decades after his father first set up the firm in 1988. The aging Huang Hongsheng hasn’t exactly been sitting idle these days either, making headlines in 2024 after claiming that driving models from his current EV venture could help lower blood pressure and improve immunity.

The bottom line is that Skyworth’s TV business is rapidly aging after its successful run in its first 30 years. Anyone who purchased the shares for the HK$2.07 IPO price in 2000 listing would be making a decent return, increasing their investment by a factor of five if the company’s buyout offer succeeds.

It’s also possible the company could later re-list its TV business in Hong Kong if it gets a big enough boost from the Panasonic deal and finds other ways to revive the Skyworth brand. But any such move would probably be at least several years away, and a better bet for now could be Skyworth’s new energy arm if it succeeds in separately listing that unit.

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The solar materials company reported a second consecutive quarter of revenue growth in the final three months of 2025, ending two years of steep declines

Key Takeaways:

• Daqo New Energy’s revenue rose 14% in the fourth quarter, as it raised its utilization rate to 55% by year end from 33% at the start of 2025
• Beijing has taken steps to ease irrational competition in the polysilicon sector, but Daqo and its peers are hoping to see more formal measures at the upcoming ‘Two Sessions’

By Doug Young

China’s annual political season that kicks off next week has always been a closely watched event for people trying to determine where national priorities will lie in the year ahead. The country’s solar manufacturing sector is one group that will be watching the event, known as the “Two Sessions,” with special attention, looking for signs of how Beijing plans to further support the sector mired in cutthroat competition that has resulted in a sea of red ink.

Adding to the anticipation this year is the expected unveiling of China’s 15^th Five Year Plan, which will run from 2026 to 2030, and is expected to include specific discussion on how Beijing will tackle the solar sector’s overheated competition. The anticipation – and resulting current uncertainty surrounding a nascent rebound for the sector – were present throughout the latest earnings report released on Thursday by Daqo New Energy Corp. (DQ.US; 688303.SH), a leading solar materials supplier.

The company’s report for the final quarter of 2025 showed the sector that manufactures polysilicon, a key ingredient in solar cells, continued to stabilize at the end of last year after showing signs of bottoming out in the third quarter. Reflecting that, Daqo reported a second consecutive quarter of year-on-year revenue growth, ending a difficult period of 10 straight quarters of sharp contraction.

But it’s far from clear the industry has truly reached bottom just yet. Underscoring that, Daqo said repeatedly that the sector will be looking for more specifics at the Two Sessions and in the 15^th Five Year Plan on how Beijing will tackle the problem and keep such irrational competition, known locally as “involution,” from occurring again.

The irrational competition now plaguing the sector didn’t evolve overnight, and is the result of a confluence of factors. Chief among those is a huge buildup in China’s polysilicon sector over the last four years, fueled by booming demand for solar panels and generous policy support as Beijing identified the industry as an important development priority.

The resulting buildup has left China with capacity to produce more than 3 million MT of polysilicon annually, or more than double actual global demand. To tackle that huge mismatch, China plans to remove roughly half of the industry’s capacity by retiring older facilities with less advanced technology.

It took a big step in that direction last December by leading the establishment of a joint venture, Beijing Guanghe Qiancheng Technology, invested by most of the largest polysilicon manufacturers, including Daqo. The venture will presumably buy up much of the less advanced capacity and then quietly retire it, though its actual role hasn’t been specified just yet.

“It's not an easy task, with lots of back and forth within the participants and also with the government entities,” Daqo’s deputy CEO Anita Zhu said on the earnings call. “But I want to say that discussions are actively ongoing with a strong emphasis on maintaining a more market-oriented approach to ensure that we meet the competition and we are abiding by the guidelines, the regulatory guidelines.”

No selling below costs

The regulatory guidelines Zhu referred to cover a number of areas rolled out by Beijing in patchwork fashion last year to address the overcapacity and resulting involution. One of the most important is a mandate that no company should sell its products at prices below costs, which would presumably be determined by an industry benchmark. Another rule would set standards only allowing production of polysilicon above a certain quality level, forcing users of older technology to halt production.

Daqo executives said they expect to see many of those changes reflected in updated versions of China’s anti-unfair competition and price laws that could be announced at the Two Sessions and discussed in more detail in the new Five Year Plan.

“Looking ahead, we expect anti-involution initiatives will remain a central theme for the solar PV industry, supporting a more balanced supply and demand dynamic and driving higher-quality growth through 2026," said Zhu. “For the anti-involution initiative, (we expect) it would extend over a number of years given that … the excess problem is very deep rooted.”

Zhu and other company executives provided their outlook as Daqo reported its revenue rose 14% year-on-year in the fourth quarter to $222 million from $195 million a year earlier. While any increase is generally a good thing, we should also point out the growth rate marked a slowdown from the 23% revenue rise in the third quarter – the first time Daqo reported positive year-on-year revenue growth in more than two years.

The company’s other major metrics all told a similar story, namely, that the industry was stabilizing after two difficult years. The company produced 42,181 MT of polysilicon during the quarter, up from 30,650 MT in the third quarter, and said it was producing at 55% capacity by year-end compared with 33% at the start of last year. It sold its polysilicon for an average of $5.83 per kilogram in the latest quarter, up slightly from $5.80 in the third quarter and well above the $4.62 per kilogram it was selling for a year earlier.

As China enforces the new rule banning sales below production costs, Zhu said Daqo expects industry prices to be at least 53 yuan to 54 yuan per kilogram, or about $7.82, in the next few quarters, which could provide stability to the market.

But such measures require everyone to play by the same rule book, which isn’t always easy to enforce – especially among smaller players that may desperately need money and thus be willing to sell at less than cost. There’s also the element of foreign competition, since foreign companies aren’t subject to China’s anti-involution rules. But most of those have been put out of business by now – a frequent complaint among foreign countries who say their local firms are being undermined by China’s strong state support.

In another positive sign, Daqo reported it returned to positive cash flow last year, after recording a massive outflow of $435 million in 2024. Its net loss also narrowed sharply to $7.3 million in last year’s fourth quarter from a $180 million loss a year earlier.

Investors were underwhelmed by the latest results, with Daqo’s shares falling 4.6% on Thursday in New York after the results announcement. The stock has gotten off to a rocky start in 2026, down about 20% since the start of the year, and has lost about three-quarters of its value over the last five years.

Discussion of the industry at the upcoming Two Sessions and its inclusion in the new Five Year Plan could provide some lift for both the polysilicon makers and their stocks. But it will be difficult for investors to get too excited about this group again anytime soon due to its heavy reliance on government intervention to operate profitably.

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The positioning technology specialist rang up its first quarterly profit after years in the red, turbocharged by torrid growth across products like sensors for robots

Key Takeaways:

• Robosense logged a profit of 60 million yuan or more in the fourth quarter of last year, marking its first-ever quarter in the black
• Sales for the company’s 3D light detection and ranging (LiDAR) units for robotic applications rose by a factor of 12 last year

Lee Shih Ta

The Year of the Horse is known for speed and breakthroughs — themes that are already resonating for Robosense Technology Co. Ltd. (2498.HK), a maker of light detection and ranging (LiDAR) technology used in autonomous driving and a growing number of other mobile applications. The company rang in the Lunar New Year by crossing the finish line in its steeplechase toward profitability, as its sales soared in 2025.

On Feb. 19, the third day of the Lunar New Year, Robosense delighted investors by announcing its net loss for 2025 narrowed by more than half to 180 million yuan ($26 million) or less, from 482 million yuan in 2024. Even more encouraging, it reported logging its first-ever quarterly profit of 60 million yuan or higher in the final three months of the year. The company’s stock surged the next day as shareholders celebrated the milestone after a decade of losses.

Robosense isn’t the first to achieve profitability in a LiDAR sector where many companies continue to bleed cash. Competitor Hesai (HSAI.US; 2525.HK) beat it to the finish line by achieving its first full-year profit in 2024. Hesai went on to record a record quarterly profit of 256 million yuan in the third quarter of 2025, achieving its annual profit target one quarter early. But another rival, the recently listed Seyond (2665.HK), is still in the red.

Like many emerging sectors, achieving profitability in LiDAR isn’t easy. The real-time mobility technology requires long R&D cycles and big upfront investment in optical systems, transmitters and receiver modules, and specialized chips and algorithms. Moreover, the automotive-grade certification process is lengthy, so companies often accumulate substantial costs before they can start to scale up revenue. At the same time, the price war in China’s new energy vehicle (NEV) market – a major LiDAR customer – is intensifying, leading automakers to push for lower prices. That confluence of factors has weighed on LiDAR unit prices in the last few years, making it that much more difficult to become profitable, even with strong growth in shipment volumes.

As the first among peers to become profitable, Hesai benefited from rapidly scaling up its shipments and support from major clients. It entered the robotaxi and overseas high-end vehicle markets early, and has gradually expanded into supplying LiDAR for industrial mobility applications such as logistics robots and unmanned delivery vehicles. While unit prices for those products are lower than for high-end automotive LiDAR, substantial demand is helping suppliers to quickly ramp up the scale of their sales.

Robosense's road to profitability was similar. In our previous analysis, we noted that profits could be on the horizon after the company shifted gears from pursuing market share to focus on improving gross margins and cost control. Robosense strengthened its in-house R&D for core components, gradually replacing high-cost solutions purchased from other suppliers with its own system-on-chips (SoC). It also improved its supply chain and product mix to reduce the proportion of sales from low-margin products.

Robotics business surges

Robosense's overall gross margin was stuck in the single-digit zone for a long time. But with the cost reductions and greater focus on higher-margin products, the figure gradually rose to about 17%, then climbed to over 20%, and even exceeded 25% in some quarters. As fixed costs become a lower percentage of overall revenue, the breakeven point naturally approached.

Robosense's latest performance data, disclosed in January, showed the company sold about 912,000 LiDAR units in all of 2025, up 67.6% from 544,200 units in 2024. An important contributor was the company’s robotics business. In 2025, Robosense shipped about 303,000 robotic application LiDAR units, more than 12 times its shipments the previous year. Such applications include products like smart lawn mowers, cleaning robots, logistics mobile platforms and humanoid robots.

Although unit prices are lower than those for higher-end automotive LiDAR, gross margins for robotic LiDAR are relatively stable and demand is large. Such a dual-curve structure with automotive as its main pillar and incremental business from robotics makes Robosense more resilient in profitability terms.

Robotaxis are also making a growing contribution to the company's sales. Robosense has established partnerships with companies such as the autonomous driving arm of DiDi Global, as well as robotaxi operators Pony.ai and WeRide. Some of their vehicle models are equipped with as many as four to six LiDAR units each. While the overall scale of China's robotaxi fleet is still limited, the high number of units per vehicle and relatively high unit prices and gross margins mean such sales have a disproportionate impact on Robosense’s profits and brand validation.

All those pluses aside, a major industry concern is diverging trends in smart driving perception solutions. Some automakers, emphasizing cost and faster popularization, are trying to replace expensive hardware like LiDAR with autonomous driving vision and algorithm-based solutions. BYD's “intelligent driving equity” strategy represents this approach.

Robosense's stock jumped 8.9% after its surprise profit announcement last week. But it’s still down about 20% over the past 52 weeks, showing the market is watching to see if its profits are sustainable. Hesai's Hong Kong stock currently trades at a trailing price-to-earnings (P/E) ratio of about 60 times, as investors have begun to assign a premium to companies with established profit records. The real test for Robosense will lie in whether it can turn its “automotive plus robotics” dual-curve revenue structure into stable cash flow, while maintaining gross margins as it faces pricing pressure.

For now, at least, we should congratulate Robosense for its galloping start to the Year of the Horse with its sprint past the breakeven finish line. But a much longer race to maintain and boost its profits has just begun.

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The hydrogen fuel technology maker said it won a small contract to supply a national-level project working on experimental nuclear fusion

Key Takeaways:

• Guofu Hydrogen will supply 3.2 million yuan worth of cryogenic technology to a national-level project working on the development of nuclear fusion
• The hydrogen fuel technology company is making the move as its revenue began to contract in 2024, and continued to drop 19% in the first half of last year

By Doug Young

What do you do when your core business in the hydrogen-powered vehicle sector isn’t going anywhere fast? You try your hand in another related industry with bigger potential, in this case the equally experimental market for power derived from nuclear fusion.

That appears to be the approach from Jiangsu Guofu Hydrogen Energy Equipment Co. Ltd. (2582.HK), which on Monday announced a winning bid for a nuclear fusion-related project. Nuclear fusion and the green energy vehicle technologies that are Guofu’s main business line both share the common element of being powered by hydrogen. Both technologies also require the ability to cool hydrogen down to super low temperatures when it becomes a liquid instead of a gas.

We’re not scientists, so we can’t really comment on whether being a specialist in hydrogen-powered vehicles qualifies you to pursue hydrogen technology for fusion. China and other countries are pumping huge amounts of money into hydrogen fusion technology, which has the potential to create massive amounts of electricity using the huge energy released through the fusing of two hydrogen atoms to create helium.

China is also trying to develop hydrogen for clean-energy vehicles, though most of the rest of the world has largely abandoned such technology due to practical issues. Most notably, the hydrogen used to power vehicles is very expensive to produce. It’s also quite costly to transport and store due to the need for super-cold temperatures.

Guofu’s core business selling hydrogen supply systems for vehicles and hydrogen refueling station equipment has basically stalled over the last two years as the industry fails to gain much traction – a sharp contrast with the explosion of electric-powered vehicles. Given that reality, Guofu is trying to bring some excitement back to its stock with its latest announcement of a move into nuclear fusion.

According to its announcement, the company won the bid for an 80k cold box procurement project at the Institute of Plasma Physics at the Hefei Institutes of Physical Science. The revenue opportunity from this project is quite small, with Guofu’s bid amount at just 3.2 million yuan ($463,000). Instead, Guofu is hyping this win for giving it a chance to work on the “critical cryogenic systems of a national-level fusion research platform.”

“The successful bid of the project indicates that the company’s cryogenic engineering capabilities have further expanded from the hydrogen energy sector to key components and system integration of nuclear fusion at low temperature, promoting a new revenue growth point to the group and unlocking synergies between hydrogen energy and nuclear fusion — two future energy technologies,” Guofu said.

Shareholders weren’t impressed by the news. Guofu’s stock rose slightly at the open on Tuesday, but then quickly gave back the gains and was down 2.5% in late morning trade. The shares have lost about one-third of their value since Guofu made its IPO in November 2024 just as Hong Kong’s current stock rally was beginning. In a slightly encouraging sign, the stock has rallied 60% since the start of this year, following two other recent business updates. One of those involved a preliminary purchase agreement from an Australian company, and the other a relatively large sale to a demonstration project in Guangdong province.

Anemic market

You can’t really blame Guofu for its slow progress. The reality is that carmakers haven’t embraced hydrogen technology for the reasons we’ve already stated, despite Beijing’s efforts to promote the sector. Sales of hydrogen vehicles in China totaled just 5,405 in 2024, down from an equally small 5,800 in 2023, according to industry data. The downward trend accelerated in the first half of last year, with sales plunging 47% year-on-year as just 1,373 hydrogen-powered vehicles were sold in the six-month period.

China’s entire national fleet of hydrogen-powered vehicles numbered just 30,000 at the end of last year, well short of the 50,000 the country was targeting, according to data from China’s Hydrogen Fuel Cell Vehicle Industrialization Development Report cited by Fuel Cell Works.

The industry’s failure to take off has taken a toll on Guofu, causing its sales to slip into reverse starting in 2024. After rising 45% in 2023, its revenue fell 12% year-on-year to 459 million yuan in 2024. It slid another 19% in the first half of last year to 109 million yuan, compared with 135 million yuan in the year-ago period.

The company’s two main revenue sources are vehicle-mounted high-pressure hydrogen supply systems used in hydrogen-powered vehicles; and equipment for hydrogen refueling stations. Sales of the former rose 27% in the first half of last year, indicating stable demand from vehicle makers. But hydrogen refueling station equipment sales tumbled 78% during the six-month period, indicating lack of construction of the refueling infrastructure that will be necessary if the industry hopes to ever take off.

The most revealing figure from its balance sheet is Guofu’s inventory, which rose 23% in just six months to 159 million yuan at the end of last June from 129 million at the end of 2024. That shows demand is rapidly fading, leading the company to accumulate big stockpiles of unsold equipment that may eventually have to be written off.

As it continues to lose money, including an 89 million yuan loss in the first half of last year, Guofu has been scrambling to raise new cash to keep funding its operations. It has raised a total of HK$510 million ($65 million) through four share placements since its IPO, which raised another HK$340 million. But its cash was down to 288 million yuan midway through last year from 336 million yuan at the end of 2024 as it continues to lose money.

The company admitted in its midyear report that things aren’t progressing very quickly in China and said it is looking for overseas opportunities to try and jumpstart its growth. In that direction, it said it had identified several promising projects abroad, without providing specifics. The Australia agreement announced in January was probably one of those, though no figures were given for the potential revenue opportunity.

Given the many challenges it faces, you have to credit Guofu for taking creative steps to try to boost its business. The latest move into nuclear fusion looks rather small and is also in another highly experimental area without any big immediate revenue opportunity. Still, if that initiative makes better progress than its core hydrogen vehicle business, then perhaps the stock could be worth a fresh look.

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The company has quadrupled the size of its listing plan to comply with new Nasdaq rules requiring a minimum of $25 million in fundraising

Key Takeaways:

• AoChuang Holdings has sharply boosted the size of its listing plan, aiming to raise about $30 million through a Nasdaq IPO
• The EV dealership operator has solid financials, but the aggressive valuation it’s seeking could quickly pressure its shares if it completes the listing

By Doug Young

An electric vehicle (EV) dealership operator is one of the first major Chinese applicants for a U.S. IPO in the Year of the Horse, looking to raise up to $36 million. But AoChuang Holdings Inc.’s plan could face some major headwinds, most notably because it’s seeking quite a rich valuation in a climate where such Chinese companies are coming under growing regulatory scrutiny.

Many of the Chinese companies seeking Nasdaq IPOs these days have sought similarly aggressive valuations, with the result that shares of most to complete their listings plunged within months or even days after their trading debuts. The Nasdaq stepped in last year with strict new rules to stem the flow of such listings that often left less sophisticated investors with big losses.

AoChuang is aware of those changes, which is why its latest filing last week saw it supersize its fundraising target to as much as $36 million from a previous $9 million in its first IPO filing in September 2024. The new Nasdaq rules will require all Chinese companies to raise a minimum of $25 million. They also require those companies to maintain a minimum float of $15 million, and a drop of the float below $5 million would trigger an accelerated share suspension and delisting process.

AoChuang plans to sell 6 million shares for $4 to $6 apiece, which would raise $30 million at the midpoint. That means a stock price drop of more than half post-listing would quickly drop the company’s float below the $15 million minimum threshold set by the Nasdaq. That could make the company’s listing quite short-lived, if it makes it to market.

The bigger picture behind all of this is that listings by major Chinese companies in the U.S. have come to a virtual halt due to uncertainties on both sides of the Pacific. From the U.S. side, many companies worry about repeated threats of forced de-listings by U.S. politicians, and an increasingly hostile attitude in general towards Chinese companies on Wall Street. From the Chinese side, Beijing worries that listings by Chinese companies in New York could make their sensitive user data and other information accessible to the U.S. government.

That’s left mostly smaller names like AoChuang as the only Chinese companies still seeking U.S. listings. Their IPO underwriters are usually small names as well, and AoChuang’s is one such minor player, D. Boral Capital, formerly known as E.F. Hutton.

All that said, AoChuang actually looks like a relatively interesting company that might be worth a look from investors if it wasn’t pricing its stock so aggressively. The company operates four new energy vehicle (NEV) dealerships on South China’s Hainan Island, which is known for its preferential government policies designed to build up its tourism industry. More recently Beijing is also trying to build up Hainan as a major trade hub, which could also work to AoChuang’s advantage.

Aggressive pricing

AoChuang’s proposed price range would give it a market value of about $200 million and a price-to-sales ratio (P/S) of 2.8, based on the company’s sales for its fiscal year through last September. While that kind of ratio would look normal for a moderately growing tech company, it’s quite high for the relatively mature auto dealership sector.

By comparison, top U.S. operators Penske (PAG.US) and AutoNation (AN.US) trade at ratios of about 0.35. Chinese dealership operator MeiDong (1268.HK) trades even lower at a miniscule 0.09, reflecting the difficult situation for many auto dealerships in China due to huge oversupply and weak consumer demand in the nation’s car market.

That huge valuation gap shows why AoChuang’s shares could come under immediate pressure if the company completes its listing. China’s securities regulator is aware of what’s happening, and has also stepped up its scrutiny of these smaller companies. A check of the latest offshore IPO applicants on the China Securities Regulatory Commission’s (CSRC) website shows that AoChuang’s name is on the list, but has yet to get the necessary approval.

Having covered the many hurdles AoChuang faces, we’ll take a closer look at its actual business, which, as we previously noted, looks relatively healthy. The company opened its first dealership in 2016, and currently offers NEV models from many of the nation’s top domestic brands, including Geely, Chery, GAC, AITO and Leapmotor. It says it also recently started selling models from foreign brands, including Volkswagen, Volvo and Kia.

The company’s revenue rose 34% to $71.6 million for its fiscal year through last September from $53.6 million in the previous year. Its unit car sales rose by a higher 56% in the latest year to 4,767 from 3,048 a year earlier, far outpacing the 28% growth for unit EV sales in China last year.

AoChuang’s average vehicle sold for about $13,400 in the latest 12-month period, down from $16,300 a year earlier, reflecting a price war resulting from huge oversupply in the sector. But while many dealers have fallen deeply into the red, AoChuang seems to be maintaining and even improving its profit margins. Its gross margin for car sales has held steady at about 4% over the last two years, and its overall gross margin actually rose to 8% from 7% over that time as the proportion of revenue from higher-margin after-sales services and spare parts increased.

Those generally improving trends helped AoChuang record its first positive net income from operations in the year to last September, and to pare its net loss to $122,000 in the latest 12-month period from a $1.05 million loss a year earlier. That means the company could quite possibly become profitable in its current fiscal year, and could use its sizable cash reserves of $23 million plus any IPO proceeds to expand its operations.

The bottom line is that AoChuang’s IPO plan has quite a few moving parts. Its financials look relatively strong, and its lack of legacy gas-powered car dealership operations could position it well as NEVs come to rapidly dominate the Chinese car market. But China’s overall car market also looks quite weak right now. And, most importantly, the aggressive valuation the company is pursuing is almost certain to attract strong scrutiny from both the Nasdaq, as well as U.S. and Chinese securities regulators.

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As China’s waste disposal firms face a growing fight for domestic market share, Hunan Junxin Environmental is looking for sustained growth overseas

Key takeaways:

• The waste-to-energy operator has filed for a Hong Kong listing to raise funds to develop its facilities after securing two major contracts in Kyrgyzstan
• The company’s profits surged in the first three quarters of last year, surpassing its full-year 2024 earnings

By Lee Shih Ta

Turning trash into cash has become a big business in China, where nearly 720,000 tons of municipal waste are produced every day.

The heat from incinerating that mountain of waste has increasingly been converted into electricity, turning urban trash into an energy resource.

One of the big regional operators in the waste management business, Hunan Junxin Environmental Protection Co. Ltd. (301109.SZ), has now filed for a listing in Hong Kong as it seeks to expand its reach into central Asia.

The company operates across the waste-to-energy cycle, building and operating incineration plants, collecting treatment fees from local governments and selling electricity to the grid. This is a capital-intensive business, with big upfront investment needs and long payback periods, but it can over time generate a relatively predictable income stream.

Junxin makes around 60% of its money from waste disposal fees and up to 40% from sales of electricity. The company’s approach differs from a common waste industry model that relies more heavily on one-off projects for designing and building plants or on equipment sales. Junxin operates more like a provider of public infrastructure, smoothing out cyclical risk through long-term contracts.

In 2024, the company’s revenue jumped 31% to about 2.41 billion yuan ($350 million), while annual profit rose around 5% to 686 million yuan. But the pace picked up in 2025, as revenue rose 21.5% in the first three quarters to nearly 2.12 billion yuan, while net profit surged almost 62% to 825 million yuan, surpassing the full-year earnings from the previous year. Operating profit grew even faster, at a rate of nearly 55%, driving the improvement in margins.

Scramble for trash

During the first three quarters of 2025, Junxin generated net operating cash flow of nearly 1.16 billion yuan, a year-on-year rise of around 60%. The amount of incinerated household waste rose 7.89% over the same period to 2.7 million tons, while the electricity generated increased 17.53% to approximately 1.29 billion kWh.  Electricity generated per ton of waste rose 4.72% to 479.10 kWh, helping to boost gross margin to 57.1%, 15.6 percentage points higher than at the end of 2024.

But over the last two years, China’s waste incineration sector has overheated. The nation’s incineration capacity exceeds 1.15 million tons per day, far above the waste collection volume of around 720,000 tons, leaving roughly 40% of incinerators idle or running at low utilization rates. In some eastern coastal regions, incineration plants have even begun bidding aggressively for trash at elevated prices just to keep their facilities running. With overcapacity at home, Junxin has been looking overseas for waste to burn.

Central Asia opportunity

Guided by China’s Belt and Road infrastructure scheme, Junxin’s ambitions have focused on Central Asian countries such as Kyrgyzstan and Kazakhstan, which have been grappling with a dual problem of limited capacity for waste treatment and tight power supplies. Their structural challenges align directly with the Junxin’s waste-to-energy business model.

In a flagship project, Junxin brought the region’s first modern waste-to-energy incineration project online in the Kyrgyz capital, Bishkek, in December last year, easing local disposal pressures and power shortages. Then in January the company secured a project in Kyrgyzstan’s Osh City, with potential capacity of 2,000 tons per day and a 35-year concession term. The company has also signed up for an investment project in the Issyk-Kul region. Meanwhile, Junxin has invested in similar projects in Almaty, Kazakhstan, making inroads across Central Asia.

The company’s executive team have backgrounds in the military and infrastructure projects. Chairman Dai Daoguo served as an artillery officer and was on the frontlines of a conflict between China and Vietnam in the 1970s. After leaving the army, he worked in the local tax system before moving into road and bridge construction in the 2000s and eventually pivoting into waste and green energy.

Leng Chaoqiang is also a former artillery officer who rose up the Junxin company ranks from project manager to executive director and general manager. After he led the rollout of incineration projects in Liuyang and Pingjiang, Leng’s gross annual remuneration in 2023 reached 14.91 million yuan, the biggest pay packet among executives at Hunan’s listed companies that year.

Despite the army antecedents, Junxin is neither military-affiliated nor state-owned, but it has enjoyed access to government projects through its early push into waste management and strong ties with local authorities.

Hong Kong’s environmental protection sector has rebounded on equity markets this year. Shares of China Everbright Environment (0257.HK) are up 56% and Dynagreen Environmental Protection (1330.HK) has leapt 65% over the past 52 weeks. Both now trade at price-to-earnings multiples of roughly 9 to 10 times, below the 12 to 15 times that are typical for infrastructure or utility stocks.

If Junxin can continue to make headway overseas, its stable cash flow and domestic utility status could make an appealing proposition for investors.

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The Shanghai-based company is second only to Eacon Group in autonomous mining solutions and first in self-driving electric mining trucks

Key Takeaways:

• Boonray has filed for a Hong Kong IPO, setting up a race to market with larger rival Eacon
• The company raised $165 million in a recent pre-IPO funding round from investors including BYD, the world’s largest EV maker

By Edith Terry

Self-driving passenger vehicles get plenty of attention from media and investors, but far less goes to autonomous trucks that are used for everything from hauling materials at construction sites to mining. That’s quickly changing, however, as a growing group of startups in that niche start tapping capital markets to fuel their growth.

The latest to drive into that queue is Shanghai Boonray Intelligent Technology Co. Ltd., whose listing application at the end of last January came just a month after the HK$1.42 billion ($182 million) IPO by rival CiDi Inc. (3881.HK) in December. Meanwhile, market leader Eacon Group also revived its listing application at the end of last year, meaning investors could soon have plenty of choices in this fast-emerging sector.

Both Boonray and Eacon have big-name backers, reflecting the big potential for their autonomous trucks. Boonray attracted leading electric vehicle (EV) and battery maker BYD in its latest 1.14 billion yuan ($165 million) funding round just days before it filed its listing application. Meanwhile, Eacon’s backers include leading EV battery maker CATL.

Eacon, Boonray and CiDi are China’s top three autonomous mining truck makers, in that order, in an industry that generated an estimated of 3.9 billion yuan last year. The sector is set to experience explosive growth in the next five years, expanding 64.2% annually through 2030 to 28.1 billion yuan, according to third-party research in Boonray’s listing document.

Such trucks are not only attractive to mine operators for their precision, but also because they eliminate the need for humans in an industry that’s prone to accidents that can result in injuries or even deaths. According to Chinese data, mining workers make up only 1% of the national workforce, but they account for 8% of workplace accidents.

China already has the world’s largest fleet of autonomous surface mining trucks, with 2,090 last July, according to Mining Technology magazine. Deep mining is the next frontier, which is more complex because it involves underground activities requiring more sophisticated navigation and higher risk of accidents. Komatsu (6301.T) and Caterpillar (CAT.US) are the global market leaders, having sold close to 900 and 700 autonomous haulage systems, respectively.

But China’s autonomous mining specialists are catching up quickly. Eacon has delivered about 1,000 autonomous mining trucks to date, both electric and hybrid, while Boonray has delivered 584, according to its prospectus. As of June 30 last year, CiDi had delivered 304 autonomous mining trucks and 290 standalone autonomous truck systems.

Each of the three companies occupies a slightly different niche, but all are growing quickly, albeit off small bases. Boonray’s revenue grew by 145.6% in 2024, and exploded more than ninefold year-on-year in the first nine months of 2025 to 315.2 million yuan. Eacon also posted triple-digit revenue growth in the last two years, while CiDi’s growth slowed from triple-digit in 2024 to just 58% in the first half of last year.

Money losers

Boonray’s gross margin was 15.1% in the first nine months of 2025, more than double Eacon’s 7.1% in the same period, though trailing CiDi’s 17.1% in the first six months of 2025. All three companies are losing money, which is typical of capital-intensive startups. Boonray lost 58.6 million yuan in the first nine months of 2025, far less than Eacon’s 441.6 million yuan loss in the same period, and CiDi’s 455 million yuan in the first half of 2025.

A major attraction of autonomous trucks for investors is the relative lack of cutthroat competition in the sector. That contrasts sharply with China’s passenger EV industry whose overcapacity has kept most companies squarely in the red despite selling millions of vehicles.

Autonomous truck supporters like to point out that traditional mining trucks aren’t exactly cheap, costing between 1.2 million yuan to 2.6 million yuan each. And such trucks have high operating costs. A mining truck working around-the-clock requires two to three drivers with annual salaries typically between 200,000 yuan and 300,000 yuan. Traditional trucks also have higher fuel costs since most run on traditional fossil fuels.

Boonray delivered 259 of its trucks in the first nine months of last year, up sharply from 188 deliveries for all of 2024, generating revenue of 291.2 million yuan, or 92% of its total. The company says it’s the world’s largest provider of electric autonomous mining trucks in terms of shipment volume. It says it’s also the largest provider in terms of the number of mines using its products, at 30 active mines.

According to the prospectus, Boonray is the only one of its peers that provides dual charging and battery swapping mining trucks, and its Boonray Electric Bull model 145 truck is the world’s largest in its class. The battery swapping ability is important, as it reduces downtime for battery recharging and allows Boonray’s vehicles to function with uptime rates of over 90%.

Boonray’s other two business segments, smart mining and smart transportation, are relatively small in terms of revenue contribution, providing 3.1% and 4.5% of its total in the first nine months of 2025. Smart mining is a customized turnkey business, serving mining companies and mine owners, while Boonray’s smart transportation business, begun in 2022, provides unmanned haulage services to mines.

In addition to BYD, Boonray’s other backers include state-run majors BOC International Investment and Citic, as well as China’s State Power Investment Corp. and Shaanxi Tonly Heavy, a manufacturer of off-road mining trucks and Boonray OEM partner.

Boonray’s history dates back to 2015 with its launch of a system for intelligent patrol inspection of photovoltaic power stations. Boonray’s earlier partners in that business included leading drone maker DJI. Boonray developed a dedicated app for DJI for controlling drone flight and identifying photovoltaic defects in solar arrays.

In 2018, founder Hu Xinyi, an engineer who later earned an MBA, got the idea to extend Boonray’s services to mining, using drones to scan entire mining areas to create high precision maps. That eventually led it into a collaboration with a molybdenum and tungsten miner in the Central China city of Luoyang, involving 30 driverless trucks moving 500,000 tons of ore monthly.

While their industry has plenty of potential, CiDi’s early post-IPO performance shows the trio of autonomous mining truck makers could face some uphill road in convincing investors to buy their shares. CiDi’s stock fell 14% on its first trading day in December, and is still 11% below its listing price.

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After losing a court battle in the South American nation, the lithium miner has announced plans to offload part of its local holdings ahead of the metal’s next market cycle

Key Takeaways:

• Tianqi tried in court, but failed, to challenge recent nationalization measures that undercut SQM, its partly-owned miner of the world's largest lithium salt flat
• The company concurrently announced an equity placement and convertible note offering to raise about HK$5.8 billion

By Lee Shih Ta

Rewind to 2018, when industry watchers saw Tianqi Lithium Corp.'s (9696.HK; 002466.SZ) $4.1 billion acquisition of nearly 24% of Chile's Sociedad Química y Minera (SQM) as a masterstroke in the miner’s ambitions to carve out a dominant spot in the global lithium supply chain.

Chile is the world's second-largest producer of lithium, supplying 30% of global output for the critical element in batteries used to power everything from smartphones to electric vehicles (EVs). SQM accounts for over 20% of the global lithium chemicals market. One in five EVs runs on SQM-sourced lithium carbonate from SQM’s crown jewel: the 820-square-kilometer Salar de Atacama complex, the largest lithium-bearing flat on Earth.

SQM represented a critical supply chain stronghold for Tianqi. More than a simple financial move, Tianqi saw its mammoth investment as a decisive bid to control a vital mineral resource as global demand for lithium batteries was soaring.

Crumbling calculus

But just five years after its coup, that calculus crumbled in April 2023. That’s when Chilean President Gabriel Boric Font unveiled Chile’s “National Lithium Strategy,” laying out a framework for future lithium development through joint ventures led by state entities working with private companies. State copper colossus Codelco was later tasked with restructuring industry assets, culminating in a deal that will forfeit SQM’s control of the Salar de Atacama complex by 2031.

Tianqi didn’t take the major policy change lightly, and its Chilean venture challenged it in court. But the Supreme Court's final dismissal of its challenge on Jan. 27 left Tianqi without a voice in the matter. In effect, the company’s massive multibillion-dollar investment became a rapidly hollowing shell.

A week later, on Feb. 4, Tianqi proposed selling up to about 3.57 million of its SQM Class A shares, representing about 1.25% of SQM’s equity, triggering a one-day trading halt for the stock before a resumption the next day. No buyers were announced for the stake being sold, signaling most likely that none had been found.

The stake’s value is pegged at around $206 million, hinting at a slight decline from the $216 million that Tianqi paid for the equivalent shares in its original investment. Management framed the sale as strategically freeing up capital for use elsewhere.

New fundraising

Concurrent with its SQM sell-down, Tianqi also unveiled a separate fundraising initiative from a major share placement and convertible bond offer. The company said it planned to place about 65 million new Hong Kong-traded H-shares at a 9% discount, while also issuing 2.6 billion yuan ($376 million) worth of convertible bonds. The two moves will raise about HK$5.8 billion ($836 million). The company said it will use the funds for lithium resource acquisitions, capacity-building investments, and to replenish its increasingly tight working capital.

Combined with the anticipated $206 million from the SQM stake sale, the company should raise roughly $1.04 billion in fresh funds.

Tianqi’s finances are hardly in dire straits. Its third-quarter 2025 report showed it had about 6.49 billion yuan in cash at the end of last September, up slightly year-over-year. Adding another 1.53 billion yuan worth of financial assets held for trading on its balance sheet brings the company’s total liquid resources to around 8 billion yuan, indicating it isn’t facing any immediate liquidity crisis.

That said, Tianqi’s net cash flow from operating activities plunged nearly 50% year-over-year to 2.19 billion yuan in the first nine months of last year, signaling a significant weakening in its ability to generate cash for internal use. Concurrently, its non-current liabilities rose by over 3.6 billion yuan from a year earlier, reaching 18.09 billion yuan. Meanwhile, construction-in-progress costs surged roughly 56% annually to 8.04 billion yuan, reflecting accelerating investment in mine development and lithium hydroxide production lines.

At the end of last September, the company’s total assets stood at 73.96 billion yuan, against total liabilities of 22.56 billion yuan, yielding a debt-to-asset ratio of 30.5%. This is notably low for the capital-intensive lithium mining sector, which typically requires heavy asset investment.

Tianqi Lithium has pursued a strategy of pursuing lithium mining assets globally. Its wholly owned Talison Lithium subsidiary holds the Greenbushes lithium spodumene mine in Australia. Combined with its interests in SQM and the Zabuye salt lake mine in the Shigatse area of Tibet, the company has a portfolio of high-quality domestic and international lithium brine resources to keep it well supplied with lithium raw materials.

But Tianqi also operates in an area hit by recent wild price swings, resulting in a massive 7.91 billion yuan net loss for the company in 2024, the largest it has ever reported. As its situation deteriorated with crashing lithium prices, its Hong Kong shares plummeted nearly 80% from a 2022 peak of HK$88.05 to a low of HK$18.64. Conditions improved as prices stabilized and began to rebound last year. The company forecast its full-year profit for 2025 would range between 369 million and 553 million yuan, and its stock price has rallied about 89% over the past 12 months.

This new series of fundraising steps suggests that Tianqi aims to proactively restructure its capital base and resource allocation during its rebound, positioning itself for the next industry cycle. By accelerating its investments in mine development and lithium hydroxide production lines, it is seeking to convert its difficult experience from the past two years into a valuable advantage it can use to lessen the impact from similar future downturns.

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The fast-growing TAILG hopes to make Vietnam its hub for international expansion, though global sales are still just a tiny fraction of its total

Key Takeaways:

• Hong Kong IPO candidate TAILG’s strong top- and bottom-line growth and $1.3 billion valuation could attract investors despite its operation in a crowded e-scooter market
• The company derives the big majority of its sales from China, which could pose a challenge as the country rolls out tough new e-bike standards

By Edith Terry

In 2003, Shenzhen announced a ban on motorcycles to stop a crime wave of motorcycle-riding bandits. Three brothers, Sun Muqian, Sun Muchu, and Sun Muchai, together with partner Yao Li, were running a motorcycle repair shop in their hometown of Chaoshan at that time and saw an opportunity. They rented a small factory in Longgang, in the northeastern part of Shenzhen, and started making electric bicycles by hand, exploiting a loophole in the motorcycle ban.

Fast forward to the present, and the business they started, TAILG Technology Co. Ltd., is now China’s third largest electric micromobility vehicle maker. It moved its headquarters from Shenzhen to Wuxi, about an hour by train from Shanghai, between 2007 and 2009, to better position itself geographically to build a national footprint.

Now, TAILG is about to take its show on the road one more time, this time to Hong Kong for a planned IPO, according to its listing application filed last week. The listing would make TAILG China’s fourth e-scooter maker to go public, after Yadea (1585.HK), AIMA Technology (603529.SH) and Niu Technologies (NIU.US). Yadea was the leader with 26.8% of the domestic market in 2024, while AIMA was second with 17.9%. TAILG’s 12.7% made it China’s third largest brand, followed by Niu at 7.1%, according to TAILG’s prospectus. Ninebot (689009.SH), owner of the Segway brand, is also a competitor.

TAILG’s listing is being charged up by some big names, including Citic Securities and China Merchants Securities as its underwriters. Its investors include car giant SAIC, and a somewhat unlikely backer in luxury leader LVMH, whose participation comes through its L Catterton Asia Advisors joint venture. While scooters are hardly a luxury item, LVMH has a little experience in the space through a 2020 collaboration by its Dior brand with Italy’s Piaggio (PIA.MI) to create a limited-edition Vespa 946 Christian Dior scooter.

Companies like TAILG have transformed China into both the world’s largest producer and consumer of micromobility vehicles, or e-scooters, with sales of 32.3 million units in the first half of 2025, up 29.5% year over year, according to market consultancy Equal Ocean.

Its most recent fundraising, which came just last month, valued TAILG at 9.46 billion yuan ($1.36 billion), meaning a sale of a quarter of its shares could raise as much as $340 million.

In terms of sales and profits, TAILG’s growth has been accelerating over the last two years. After rising 14.5% in 2024, its revenue growth rate more than doubled to 38.6% in the first nine months of 2025 to reach 14.84 billion yuan. Its unit sales growth sped up from 8% in 2024 to 28% in the first nine months of 2025, when the figure reached 7.8 million units.

Its overall gross margin stood at 14.6% in the first nine months of last year, trailing Niu’s 19% and 16.5% for Yadea. TAILG’s figure is dragged down by extremely low margins for batteries that account for about a fifth of its sales. Excluding batteries, its margins are closer to its rivals. Like its revenue, TAILG’s profit growth also accelerated from 65% in 2024 to 122% in the first nine months of last year, when it reached 823 million yuan.

Overseas drive

In a saturated domestic market where one in every four people owns an electric two-wheeler, the motivation for TAILG and its peers to go global is obvious. Adding to the pressure, especially for smaller players with less resources, are new national safety standards for electric bicycles that took effect last December.

The new rules include stronger fire-resistance requirements for non-metallic materials, tighter controls on the proportion of plastic parts, better braking systems, anti-tampering measures to prevent illegal modifications, and a higher weight limit for lead-acid battery models.

The regulatory change could be punishing for TAILG, since electric bicycles accounted for 56.3% of its revenues in the first nine months of 2025. Electric motorcycles made up 19.6%, while batteries made up about 20%. The company’s product line includes 50 electric bicycles and 38 electric motorcycles, sold via 5,597 distributors and over 27,000 retail stores.

Like its competitors, TAILG is looking abroad for future growth. Its only overseas factory is currently in Vietnam, with annual capacity of 100,000 units, though current production is less than half of that at 40,000 units. But it has big hopes for the global market, with plans to build another factory nearby with annual capacity of 900,000 units.

The company also uses third-party manufacturers in Indonesia “as a supplement to our manufacturing capacity, allowing us to enjoy quick response to demands from relevant overseas markets for our products in a cost-efficient way,” according to the prospectus. TAILG’s website says it exports to over 90 countries and regions, and the prospectus says it sells overseas through 412 distributors and over 300 outlets.

But its revenue from overseas markets is still quite small, accounting for just 2.7% of its total in the first nine months of last year. That puts the company well behind market leader Yadea, which opened factories in Thailand and Mexico in 2025 and was set to open a new factory in Vietnam last month.

By the end of 2025, Yadea had over 1,000 branded stores internationally, according to its website. But even Yadea’s progress overseas is limited, with its latest financial report showing it still gets more than 90% of its sales from China. Niu’s situation is similar despite efforts to build up its overseas business. That shows that going global may be easier said than done for electric scooter makers, probably due to different regulations in each market and challenges of building up local sales and after-sales networks.

TAILG’s forecast profit for last year and its most recent valuation would give it a price-to-earnings (P/E) ratio of 8.6, trailing the 15.6 for Yadea, the 10.9 for AIMA and also well behind the 16.5 for Piaggio, owner of the Vespa brand. Its lower margins could be partly to blame for holding it back, but it seems likely to get a higher multiple if and when it rides on to the Hong Kong Stock Exchange.

TAILG may also have some tricks up its sleeves in terms of product innovation. Much of co-founder and chief R&D engineer Sun Muchu’s focus has been on product design and software, including a “Tai-Link” intelligent rider management platform connecting users, vehicles and data. If the IPO goes well, Sun and his brothers could use their IPO proceeds on more similar innovations to soup up a company that, like Microsoft and Apple, began in a garage.

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Wuxi Lead Intelligent could become the first blockbuster Hong Kong IPO of 2026, after its approval last week by China’s securities regulator

Key Takeaways:

• Hong Kong IPO candidate Wuxi Lead Intelligent commands 15.5% of the global market for lithium battery manufacturing equipment, benefiting from China's EV dominance
• Solid-state battery equipment offers major growth potential for the company, but the industry’s highly cyclical nature requires careful capital management

By Hugh Chen

Everyone knows that China dominates battery manufacturing, home to global leader CATL as well as smaller players like CALB and Gotion High Tech (002074.SZ). But far less visible is China’s equally commanding position in the upstream manufacturing equipment segment behind the finished product.

The leader in that space is Wuxi Lead Intelligent Equipment Co. Ltd. (300450.SZ), whose plan for a second listing in Hong Kong, complementing its current listing in Shenzhen, made a key advance last week after receiving approval from China's securities regulator.

As the leader in its class, the company is hoping to follow in the footsteps of CATL, one of its top customers, whose shares have nearly doubled since its own second listing last May that was Hong Kong’s largest for the year, raising more than $4.6 billion.

The China Securities Regulatory Commission’s (CSRC) approval is the latest advance in a rocky overseas listing journey for Wuxi Lead Equipment, which terminated plans for a Switzerland listing in early 2025. It then pivoted to Hong Kong with its submission of an IPO prospectus, but that filing lapsed, and the company had to submit an updated version in August last year.

Wuxi Lead Equipment filed an updated prospectus on Sunday after the CSRC approval, suggesting the listing is likely to move forward quickly after clearing the key regulator advance.

The company, which has been listed in Shenzhen since 2015, didn't announce how much it would raise. But its selection of A-listed underwriters JPMorgan and Citic Securities suggests the offering size should be substantial, attracting both Asian and global investors.

Those investors are likely eying the company's leading position in battery equipment, similar to CATL’s position for finished batteries. Its investments in emerging solid-state battery equipment technology and diversification into photovoltaic manufacturing equipment could serve as additional attractions. However, investors also need to consider certain risks, including the cyclical nature of both the battery and photovoltaic industries.

We'll examine these risks in greater detail shortly, but first we’ll begin with a review of the company's core business and development story.

Wuxi Lead Intelligent was founded in 2002 by Wang Yanqing, 58, who got his start as an engineer making radio components. The company began by manufacturing equipment to make the capacitors that are energy storage components used in various electronic devices, including mobile phones and home appliances. It became a major player in this space and secured contracts to supply machinery to electronics giants including Japan's Panasonic.

Over that time, Wang observed that lithium battery manufacturing shared fundamental processes with capacitor production, leading him to establish a lithium battery equipment division in 2008. The timing proved fortuitous, coinciding with the lithium battery industry's rise driven by surging smartphone demand.

Riding EV growth

The company's big break came after it identified opportunities in electric vehicle (EV) batteries, which the Chinese government designated as a strategic industry around 2010. Wuxi Lead Intelligent was among the earliest to capitalize on the resulting boom in battery equipment demand. It secured key backing from CATL, with the battery giant naming Wuxi Lead Intelligent as a core supplier in 2014.

CATL's orders helped the company record more than 70% revenue growth the following year. As EV sales in China took off, battery companies like CATL expanded rapidly, lifting battery equipment providers as well. Wuxi Lead Intelligent emerged as a major beneficiary thanks to its strong technical expertise, and quickly expanded its customer base beyond CATL to major domestic and international players including Sony, Panasonic, LG, Tesla and BYD.

According to third-party research cited in its prospectus, the company was the world's largest lithium-ion battery intelligent equipment provider in 2024, commanding 15.5% of the global market. Its dominance is even more pronounced in China, where it holds a 19% market share.

The company's growth momentum has slowed considerably in recent years due to oversupply in the battery market after a massive buildup. Its revenue rose just 19% in 2023 before contracting 29% in 2024. Profitability trended similarly, with net profit plunging from 1.8 billion yuan ($258 million) in 2023 to just 268 million yuan in 2024.

This underscores the cyclical nature of the battery industry. Since the second half of 2023, the lithium battery supply chain has entered an adjustment period, with downstream players slowing capacity expansion amid a brutal price war in the EV sector.

Things began to pick up last year. Revenue resumed growth in the first three quarters of 2025, rising 15% year-on-year to 10.4 billion yuan, while the company’s net profit nearly doubled to 1.2 billion yuan.

Wuxi Lead Intelligent is now emphasizing the opportunity presented by solid-state battery equipment. Compared to traditional liquid-based lithium-ion batteries, solid-state batteries offer advantages in safety and energy density, and carmakers are increasingly shifting toward them. Solid-state batteries have already begun contributing to revenue, though they are still at an early stage. Solid-state battery equipment generated between 400 million yuan and 500 million yuan in the first half of 2025, according to an October research note from Citi.

Nomura said in a November report that it expects Wuxi Lead Intelligent's order book momentum to continue into 2026, driven largely by demand from solid-state battery commercialization as well as capacity expansion for energy storage systems associated with solar and wind power plants — another area the company has identified for growth.

Wuxi Lead Intelligent has also recently ramped up efforts to expand into other equipment types, most notably photovoltaic equipment, an area it first entered in 2009. However, despite years of development, photovoltaic equipment revenue remains modest, contributing just 9% of the company’s total in the first three quarters of 2025, while battery intelligent equipment accounted for the majority at 67%.

Its difficulty breaking into the photovoltaic equipment market partly reflects the challenges of adapting battery manufacturing technology to a different sector, and also underscores the intensely competitive nature of the photovoltaic industry.

In the battery equipment space, Wuxi Lead Intelligent faces competition from the three largest players: Shenzhen Yinghe Technology (300457.SZ), Zhejiang Hangke Technology (688006.SS) and Guangdong Lyric Robot Automation (688499.SS). In the photovoltaic equipment space, it faces much larger rivals such as Naura (002371.SZ) and Shenzhen S.C New Energy Technology (300724.SZ). Wuxi Lead Intelligent acknowledges in its prospectus that its position in the photovoltaic equipment market is negligible.

At the end of the day, solid-state batteries offer the biggest growth opportunity for the company right now, and its secondary IPO comes at an opportune time to raise additional capital for continued technology investment. Given the cyclical nature of both the battery and photovoltaic industries, the company will need to carefully manage its capital allocation and maintain financial flexibility to weather industry downturns while positioning itself to capture growth when demand recovers.

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“Once companies start resorting to special accounting and financial tricks, you have to wonder, is there something else that we haven't seen yet.”

Key takeaways:

• Beijing’s decision to scrap or lower export tax rebates for solar and battery makers is likely a move to boost government revenue and force industry consolidation
• BYD has surpassed Tesla in unit sales volume but faces scrutiny over high debt ratios disguised by complex financial instruments

By Doug Young and Rene Vanguestaine

In the fast-moving world of China’s new energy sector, two major narratives have collided this month: a significant pullback in state support for some exporters and a changing of the guard at the top of the global sales charts for new energy vehicles (NEVs). On the policy front, Beijing has announced major tweaks to its value-added tax refunds for exports, specifically targeting solar products and electric vehicle (EV) batteries. Simultaneously, domestic giant BYD(1211.HK) has officially overtaken Tesla (TSLA.US) to become the world’s top NEV seller. Both stories signal maturing markets where government guardrails are shifting, and financial transparency is becoming paramount.

We begin with the policy reversal, which has dominated headlines. China has completely scrapped export tax rebates for solar energy products and lowered the rate for EV batteries to 6% from the previous 9%. The State Council cited a desire to "restore rational pricing" and reduce trade frictions. However, we believe one must read between the lines when decoding government communication.

Historically, China has not been particularly concerned with the impact of its manufacturers on foreign markets, where cheap prices have often eliminated competition in sectors ranging from solar panels to EVs. We suspect the primary motivation here is domestic. The Chinese government is seeking to boost tax revenues — or at least reduce expenses — by cutting off incentives that are no longer necessary. With Chinese companies manufacturing roughly 80% of the world's solar panels, the industry is robust enough to survive without this specific lifeline.

Furthermore, this move appears to be an effort to end the "irrational price competition" that has plagued the sector. For months, manufacturers have engaged in cutthroat price wars, often selling products at a loss. By removing these rebates, Beijing may be forcing companies to raise prices and return to profitability, thereby stabilizing employment and tax revenue. While this might conveniently address some complaints from Europe and the U.S. regarding unfair competition, we remain skeptical that it will fully appease Western governments, as other local and provincial subsidies still likely remain in place.

A volume victory with accounting caveats

Turning to the corporate battlefield, BYD reached a historic milestone in 2025, selling 2.26 million NEVs to beat Tesla’s 1.6 million. This victory was driven by a staggering 145% growth in overseas sales for BYD, while Tesla saw an 8.6% overall sales decline. However, we think investors should look past the headline numbers to understand the nuance of this achievement.

BYD’s success is built squarely on the lower end of the market, offering price points — such as $8,000 vehicles — that Western competitors can’t match due to production costs. This is a different business strategy compared to Tesla’s focus on the mid- to upper-end of the market. But of greater concern to us is the financial engineering underpinning BYD’s rise.

While the company reports being profitable, it has relied on an internal "IOU system" to delay payments to suppliers, sometimes for up to eight or nine months. If these financial instruments are factored in, BYD’s debt ratio balloons to nearly 100%, significantly higher than the reported 71%. We note that Warren Buffett’s Berkshire Hathaway, a long-time backer, sold its remaining stake last year. Given Buffett’s penchant for scrutinizing financial filings, his exit suggests he may have spotted these risks early.

It is telling that the Chinese government has ordered BYD to dismantle this IOU system, granting it a two-year window to clean up the mess — a timeline that suggests fears of what a sudden correction might trigger. This brings us back to the core concern: when companies create their own financial instruments to manage their balance sheets too aggressively, it destroys investor trust.

History offers grim precedents, from Enron and Wirecard to the more recent collapse of Evergrande. In all these cases, the initial lack of transparency was a precursor to deeper structural failures. If BYD is indeed hiding the true state of its financial health behind these payment delays, the risk to investors is substantial. For those who do not have an appetite for such uncertainty, we believe the prudent move is to stay away and wait to see how this accounting drama plays out.

China’s EV giant overtook Tesla in unit sales last year, but margin pressure, overseas risks and a controversial financing model raise questions on whether it can still deliver shareholder value

Key Takeaways:

• BYD’s global sales surge has not translated into higher profitability, as the company faces pressures from an ongoing price war at home and falling profits per vehicle
• The unwinding of the leading EV maker’s supplier‑financing scheme and rising overseas challenges threaten to lift its debt ratio and dampen its expansion

By Xia Fei

Chinese electric carmaker BYD Co. Ltd. (1211.HK; 002594.SZ), whose name stands for “Build Your Dreams,” may have just achieved one such vision: overtaking Elon Musk’s Tesla (TSLA.US) as the world’s biggest seller of electric vehicles (EVs). But that vision may be coming at a cost, quite literally, as BYD’s dream puts its profitability on a dangerously downward trajectory that sometimes comes with such aggressive expansion.

The Shenzhen-based company basked in the global spotlight earlier this month when it revealed that it sold 2.26 million EVs globally in 2025, driven by 145% year-on-year growth abroad. By comparison, Tesla’s battery-powered car deliveries fell 8.6% to 1.6 million last year, the largest annual drop in its history.

That resounding trading of places looks like a sweeping victory for BYD. Within China, where domestic brands already reign, Tesla’s sales fell for the first time by more than 5% to around 620,000 vehicles — the first decline since its Shanghai gigafactory opened in 2020. BYD also outpaced Tesla in sales both in Britain and Germany, a sign that Chinese brands are starting to make headway into more affluent markets.

Such stark contrast marks a powerful riposte for Wang Chuanfu, a low-profile chemist who founded BYD as a battery maker in 1995, against Musk, who mocked the Chinese company as a rival more than a decade ago. Beyond car making, BYD has also invested heavily in energy storage and smart driving systems, moves that could help offset margin pressure amid a worsening price war that began in China and is rapidly being exported abroad by Chinese EV brands.

BYD’s triumph owes in no small part to its heavy presence at the lower end of the market. Its Seagull models start at around just $8,000, and already include the company’s own “God’s Eye” self-driving system. That’s miles ahead of Tesla, whose entry-level Model 3 starts at $35,000 and has only gained partial approval to operate assisted driving in China.

But investors should think twice before jumping on the BYD bandwagon. Despite its triumph in scaling up rapidly, a much tougher battle for BYD is just starting: how to translate its huge volumes into higher profits.

In last year’s third quarter, BYD reported its net profit slumped by 32.6% to 7.8 billion yuan ($1.1 billion), representing its steepest fall in over four years. Revenue also fell for the first time in over five years to 195 billion yuan, a sharp reversal from its strong double-digit growth in 2023 and 2024.

By some measures, BYD’s profitability is still competitive with Tesla. Its gross margin was 17.9% in last year’s third quarter, roughly equal to Tesla’s 18%. But a Morgan Stanley report showed BYD’s per-vehicle profit fell to just 4,800 yuan in last year’s second quarter, down from 8,000 yuan the previous quarter — a fraction of Tesla’s roughly $6,000 per vehicle in 2024.

Challenge of staying profitable

Cutthroat competition in China, where rivals race to sell cars on thin margins, and profits remain elusive for most companies, threatens to further compress BYD’s profitability. Higher vehicle purchase taxes, reduced government subsidies for lower-end EVs and ongoing competition will likely mean a more brutal year for BYD and other Chinese car brands ahead.

At the same time, China’s EV market is showing signs of slowing sharply after several years of rapid growth. Analysts at S&P Global predict China’s car sales – roughly half of which now come from new energy vehicles (NEVs) – will fall in China in 2026, leaving BYD and its peers little choice but to subsidize consumers further, squeezing margins again.

As pressures mount at home, BYD is racing to localize production on a mass scale in Southeast Asia, Latin America and Europe, partly to sidestep tariffs and quicken delivery cycles. But building plants overseas is now a far more complex undertaking, especially as governments in countries from Brazil to Mexico scrutinize BYD’s plans to build local factories, and China itself worries about transferring cutting-edge technologies to those markets.

Another overlooked uncertainty for the world’s new EV king comes from government pressure that has forced the company to quietly dismantle a supply chain financing scheme that long helped to power its relentless expansion.

Dubbed Dilian, BYD pioneered the shadow financing system by issuing electronic IOUs to its vast web of suppliers in lieu of more immediate payments. That system ballooned to more than 400 billion yuan ($57.3 billion) in such IOU debt as of May 2023, according to the latest data released by the company.

This instrument allowed BYD to stretch the payment cycle for its suppliers to 127 days on average, above the industry average of 108 days, according to a Reuters report in November. Data compiled by Bloomberg showed BYD took an average of 275 days to pay its suppliers in 2023. In many cases, suppliers used their Dilian notes as collateral to borrow more money from small banks or private lenders to keep funding their operations, creating a complex web of financing that has largely escaped official scrutiny.

Under regulatory pressure to abandon the tool and take pressure off its suppliers, BYD last summer pledged to shorten bill payment cycles to suppliers to 60 days.

Exiting Dilian is no simple task. BYD’s debt ratio stood at around 71% as of the third quarter of 2025, according to its latest disclosure. If the outstanding 223 billion yuan the company owed in trade payables at the end of last September is included, BYD’s actual debt ratio would soar to almost 96%, according to calculations using company data.

Despite the increasing headwinds it faces, the investment community still sees BYD as undervalued. Among 28 analysts polled by Marketscreener, 23 gave the company a “buy” or “outperform” rating, while only one recommended a “sell.” Analysts polled by Yahoo Finance expect the company to return to both revenue and profit growth this year.

Billionaire investor Charlie Munger, Warren Buffett’s longtime business partner, said in 2023 BYD was so far ahead of Tesla in China that it was “almost ridiculous,” and later praised founder Wang Chuanfu as better at “actually making things” than Elon Musk. Yet after a highly lucrative 17‑year run, Munger and Buffett’s Berkshire Hathaway, which made headlines when it acquired 10% of BYD in 2008, quietly disposed of its remaining stake last September. That lone vote of no confidence could speak far more loudly than all the other bullish analysts combined.

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