The electric vehicle (EV) market in China has seen a rapid increase in the third quarter of 2020 with more and more EV carmakers beating monthly delivery expectations despite the volatile global economy. China has become a leader in EV production as companies take advantage of the country's scale to produce cars at competitive prices, as well as the rising domestic demand. Investors believe that Chinese EV car manufacturers will be able to create electric cars that can compete on price with traditional cars. Additionally, global environmental concerns will be the fundamental factor in the expansion of these brands into international markets.

Profitable EV makers and suppliers have seen their market performance booming. For example, the stock of BYD, a Hong Kong-listed company that produces both electric vehicles and traditional cars, has a P/E ratio of around 130. In comparison, the average P/E ratio of the Hang Seng Index is 13.26. CATL, a battery manufacturer for electric vehicles, has a P/E ratio of 117.5, which is much higher than the average for the Shenzhen Stock Exchange on which it is listed.

What’s the reason for such rapid expansion of China’s EV market? China, as the most populous country globally, has the highest demand for transportation in both urban and rural areas. Considering the national mandate to fight pollution, the country has turned toward new energy vehicles. They include battery energy vehicles, fuel cell electric vehicles, and hybrid electric vehicles. Moreover, the Government has been subsidizing EV purchases. The incentives have been extended from 2020 to 2022 and assume tax exemptions on EV purchases for two years applicable for passenger cars priced at less than RMB 300,000, as well as encouraging EVs with swappable batteries.

The global energy market which was once focused on oil, has seen huge transformations and the demand of both public infrastructure and retail buyers for EVs, self-driving cars, and other ecologically friendly means of transportations has visibly risen. Chinese EV manufacturers and firms across the EV supply chain are expected to aggressively expand overseas over the next five years. As the costs of raw materials are lower in China than abroad, this advantage, coupled with the sheer size of the domestic EV industry, is expected to provide a competitive edge to Chinese EV firms on the path to global growth.