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Chinese electric car makers target Europe as competition heats up

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Nio plans to begin deliveries of its ET7 electric sedan in 2022.

Evelyn Cheng | CNBC

SHANGHAI — After the last year of growth in the world’s largest auto market, China’s electric car start-ups are stepping up plans to take on Europe.

Chinese authorities only began peeling back restrictions on full foreign ownership of local automobile production in the last few years. But more than a decade ago, Beijing began spending the equivalent of billions of dollars on developing its own electric vehicles.

That’s helped local players gain an edge in producing battery-powered cars, which they’re now aiming to sell overseas. Goldman Sachs analysts predict that in four years, new government policies mean electric cars will account for a greater share of auto sales in Europe and the U.S., versus China, although it is the largest market.

U.S.-listed Nio has said it would enter Europe in the second half of this year. And on Monday, co-founder and president Lihong Qin said the company expects to make an official announcement about such an expansion within a month.

He did not name a specific country, while stating that after Europe, Nio still intends to enter the U.S. market.

Amid tensions with the U.S. and attempts to seal an investment deal with Europe, China exported 63,500 pure battery-powered electric vehicles during the first eleven months of last year, according to a January report from the China Chamber of Commerce for Import and Export of Machinery and Electronic Products. While Saudi Arabia and Egypt were the top destinations for Chinese cars overall last year, the report noted significant growth in vehicle exports to the U.K., Belgium and Germany.

U.S.-listed Xpeng is already testing the waters in Norway, where the start-up delivered 100 units of its G3 electric SUV in December.

Later this year, Xpeng hopes to see how customers in northern Europe respond to its P7 electric sedan, said He Xiaopeng, chairman and CEO. He is recruiting new staff and plans to set up a company in the region, before looking at western and eastern Europe.

Another Chinese electric car start-up, Aiways, said it exported more than 1,000 vehicles to Israel and Europe in the first three months of this year.

“It’s no secret now that most of the China EV startups have global ambitions,” said Tu Le, founder of Beijing-based advisory firm Sino Auto Insights. “That’ll continue as these companies chase growth and value and see opportunity due to the lack of viable EVs products in the region.”

He said with enough local research, some of the Chinese companies could succeed in Europe.

However, any growth in Chinese electric car sales to Europe remains a tiny fraction of the market.

China accounted for less than 2% of the EU’s passenger car imports in 2019 and the 865 million euros in value marks 79% growth from the prior year, according to the European Automobile Manufacturers Association.

In contrast, EU-owned automobile manufacturers made almost 6 million passenger cars in China in 2018, for almost a quarter of total Chinese car production, the association said.

Rising competition within China

The Chinese start-ups’ venture overseas comes as the market heats up at home. Nio’s Qin said the entry of tech companies like Apple and Huawei into the industry are creating fierce competition for the car maker.

On the automobile front, Tesla leads the market and is ramping up local production. Its Model 3 was the best-selling electric car in China last year, according to the China Passenger Car Association.

Excluding two mini-electric cars, the association said the next best-selling vehicle in the category was the S model from Aion, a new energy brand spun-off from Chinese state-owned automaker GAC. A more expensive model from Nio ranked ninth, while Xpeng didn’t make the top ten list.

“Chinese consumers understand new energy vehicles more and more,” said Aion’s planning department director Qiu Liangping, according to a CNBC translation of his Mandarin-language remarks. In addition to ease of battery charging, he said Chinese buyers are looking for a better driving experience than that of fossil fuel-powered cars and internet-powered features.

The brand also has its eye on the international market, Qiu said. Before the spin-off, Aion and GAC’s Trumpchi brand were already selling cars in Israel, the Middle East and South America.

As the automobile industry moves further into electric power, traditional U.S. and German car companies are launching their own electric vehicles — many in the Chinese market first.

For example, General Motors’ Cadillac brand unveiled its Lyriq electric car at the Shanghai auto show, with pre-orders in China beginning later this year, according to the company.

Ford also used the show to reveal its locally made version of the Mustang Mach-e electric car, as well as a largely China-developed Evos SUV that will only be available in the country.

Volkswagen revealed in Shanghai a third electric car for China, the ID.6. The German automaker aims that by 2030, at least 70% of its cars sold in Europe in electric, and at least 50% for cars sold in North America and China.

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IPOs are making top investors a fortune — now amateur traders want in

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Coinbase employees spray champagne during the company’s initial public offering (IPO) outside the Nasdaq MarketSite in New York, U.S., on Wednesday, April 14, 2021.

Michael Nagle | Bloomberg | Getty Images

LONDON — Stock market listings are making founders, venture capitalists and large institutional investors a fortune. Now, retail traders are looking to get in on the action by using a slew of new digital investment platforms.

David Middleton, an M&A advisor based in Warrington, England, bought shares of companies that listed recently, like Palantir, Snowflake and Coinbase, on the stock trading app Freetrade.

“For me it was just a case of: I just like the sound of the business,” Middleton told CNBC over the phone.

Middleton, who is a member of London-based financial education website Finimize, says it’s been a “bumpy road” when it comes to his investments, but that he’s in it for the long term. So far, he’s made a gain on his investments.

“I’m not someone that goes into massive amounts of financial details — there are so many other things that affect share prices,” he added. “I don’t really care what happens in the short term. It could go up or it could go down. I sort of just want to be there for the ride.”

Several platforms have emerged over the years that let amateur investors own a small slice of companies in both the public and private markets. In venture capital, equity crowdfunding services like Crowdcube and Seedrs have long allowed start-ups to raise funds from users, the idea being that this bolsters the relationship between customers and brands.

On Thursday, Crowdcube will launch a secondary market called Cubex, which lets existing shareholders offload some of their stakes in privately-held businesses to retail investors. The platform pulls in data from Crunchbase, a site that shows insights on start-ups, to provide users with information about the companies it lists.

“What we’ve done well over the past 10 years is to enable ordinary people be able to invest in exciting companies,” Darren Westlake, Crowdcube’s CEO and co-founder, told CNBC.

“Our marketplace will list thousands of European companies, the idea being retail investors can come into the platform, use powerful search and discovery tools on the platform and customization to be able to find companies that are of interest to them.”

It’s a particularly timely product launch, especially as a flurry of European tech start-ups look set to go public in the coming months. This year has already seen the likes of Deliveroo and Darktrace enter the public markets, and several other firms are mooted to list soon, including Wise, WeTransfer and Klarna.

Investing in IPOs

Novice investors are increasingly looking to buy into companies’ debuts. Deliveroo let its customers and the general public invest in its IPO through a platform called PrimaryBid. However, due to something called conditional trading restrictions, these investors were locked into their positions until a week after Deliveroo’s first day of trading. The food delivery firm’s shares slumped sharply in its debut, becoming one of the worst London IPOs in history.

“Enabling retail investors to get access to the IPO at the same stage as institutional investors is vital to the market,” said Westlake, who invested £1,000 ($1,390) into Deliveroo via PrimaryBid.

In Britain, some investment platforms are lobbying for the government to let retail investors take part in IPOs to help level the playing field between individual and institutional investors.

“As it stands, retail shareholder rights are almost completely ignored when it comes to the vast majority of IPOs, which largely take place between City institutions behind closed doors,” the CEOs of the CEOs of Hargreaves Lansdown, AJ Bell and Interactive Investor wrote in an open letter to City Minister John Glen in February.

The U.K. Treasury department — which is currently looking to reform London’s listings regime — was not immediately available for comment when contacted by CNBC.

Stateside, Robinhood is reportedly developing a platform that would let its users buy into IPOs, including its own, according to Reuters. The company played a key role when retail traders piled into highly-shorted stocks like GameStop and AMC. Robinhood faced criticism from users for restricting trading in such shares due to volatility and regulatory requirements.

Robinhood declined to comment on Reuters’ report.

Avishek Das | LightRocket | Getty Images

Meanwhile, a U.S. firm called Forge provides a marketplace similar to Crowdcube’s that lets users invest in pre-IPO companies. The company recently raised $150 million from investors including Wells Fargo and Temasek.

Making early bets

Some investors want to back companies at the earlier stage of their journey, in the hope of securing sizable gains by the time a firm floats or is acquired.

Equity crowdfunding sites already let consumers buy shares of early-stage companies. But now some venture capitalists are looking at ways of giving individual investors exposure to their start-up bets.

In the U.K., Passion Capital, an early investor in digital bank Monzo, opened up its third fund to the public through Seedrs. The move meant anyone could become an investor in Passion Capital’s new fund — a role usually limited to pension funds and family offices — and would therefore benefit if the fund’s portfolio rises in value.

“We’ve already heard from other venture fund managers who were just as excited about this, and who have told us they’ll also be using Seedrs to do the same in the near future,” Eileen Burbidge, founding partner of Passion Capital, told CNBC.

Burbidge said she saw a link between the Reddit-fueled stock market frenzy and her initiative.

“Clearly one of the guiding themes was to try and diminish some of the impact of ‘faceless’ hedge funds and bring some of that ‘market power’ to the retail investor,” she said. “Access to market impact, exposure and assets that have been historically been preserved for institutions or the ‘wealthy’ for more individuals is a good thing.”

But, she added, individual investors should be informed of the risks involved before making such investment decisions.

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UK recovery gathering pace on Covid vaccine rollout

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A passageway near the Bank of England (BOE) in the City of London, U.K., on Thursday, March 18, 2021.

Hollie Adams | Bloomberg | Getty Images

LONDON — The Bank of England on Thursday said the U.K. economy is on track for a stronger economic recovery than it previously expected, underpinned by the country’s comparatively quick Covid-19 vaccination campaign.

The central bank forecast in February that the world’s fifth-largest economy would grow by 5% this year, following a 10% contraction in 2020 — the worst annual performance in more than three centuries.

The U.K.’s economic slump last year was more severe when compared to most other European economies, partly due to a slower move to implement strict public health measures to curb the spread of the coronavirus.

The BOE has now upgraded its 2021 growth outlook to 7.25%, slightly above analyst expectations.

The brighter economic forecast comes as the country gradually emerges from lockdown and more people are vaccinated against Covid.

The government’s latest data showed more than 50.6 million Covid shots have been given in the U.K. so far, with nearly 35 million first doses and 15.8 million second doses administered.

The BOE’s Monetary Policy Committee on Thursday voted unanimously to hold interest rates steady and maintain its quantitative easing program at current levels as the U.K. looks to recover from the ongoing coronavirus crisis.

It means the central bank’s main lending rate remains at an all-time low of 0.1% and its target stock of asset purchases is left unchanged at £895 billion ($1.2 trillion).

Ahead of the announcement, analysts at Deutsche Bank said they expected it to be “a very close call” on whether the bank decided to pull the trigger on tapering the pace of asset purchases.

Sanjay Raja, senior U.K. economist at Deutsche Bank, said in a research note that a decision on tapering would most likely come at the bank’s June meeting, adding this would “align nicely” with social restrictions lifting on June 21.

Investors were seen to be upbeat on the U.K.’s improving economic outlook. The U.K.’s FTSE 100 gained 1.8% in the previous session to register its best daily performance since mid-February. The share index was last seen trading around 0.1% higher on Thursday.

Sterling was up 0.2% against the dollar following the report’s publication, trading at $1.3931, while the euro gained 0.1% against the pound to trade at 86.40 pence.

Fabrice Montagne, chief U.K. economist at Barclays, told CNBC’s “Street Signs Europe” on Thursday that the BOE was “already one of the most optimistic” central banks even before raising its economic outlook.

The BOE’s February forecast was at the higher end of the consensus range, Montagne said, and an increase to its projections now “runs the risk of sounding excessively hawkish and possibly calling for early hikes.”

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China travel bookings soar during May Labor Day holiday as Covid eases

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Visitors walk along the Badaling section of the Great Wall in Beijing, China, on Tuesday, May 4, 2021.

Yan Cong | Bloomberg | Getty Images

BEIJING — Millions of Chinese rushed to travel during the five-day Labor Day holiday, in yet another sign of gradual recovery in domestic consumption.

May 1 to 5 marked the “hottest” public holiday for leisure travel since the coronavirus pandemic, Chinese travel booking site Trip.com said in a statement Wednesday translated by CNBC. The reemergence of Covid-19 on the outskirts of Beijing earlier this year prompted local authorities to restrict travel during the Spring Festival in February.

Labor Day holiday bookings for hotels, car rentals and other travel more than tripled from the same period a year ago, and rose more than 30% from 2019, Trip.com said, without disclosing dollar amounts. Shanghai Disney Resort was among the top 10 destinations, including for those 21 years old and younger, according to Trip.com.

Chinese consumers also spent 1.67 billion yuan ($260 million) at the movies during the holiday, primarily on domestic films, according to ticketing site Maoyan.

Overall, a record 230 million trips were taken within the country during that period, an increase of nearly 18% from 2019 levels, according to figures from China’s Ministry of Culture and Tourism.

However, total spending of 113.23 billion yuan ($17.48 billion) fell short of 2019’s expenditure by about 4 billion yuan, the data showed.

At that level, spending per capita during the holiday was about 75% of what it was in 2019, said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “Overall the economic trend continues to improve, but part of the service sector (is) not yet back to the pre-Covid level.”

Spending by individual consumers has lagged the recovery in China’s economy since Covid-19 temporarily forced more than half the country to shut down in early 2020. Retail sales fell last year despite overall GDP growth, before surging in the first quarter of 2021.

International travelers turn to Hainan

The rush to travel domestically comes as quarantine requirements and travel bans keep most Chinese from venturing overseas.

Chinese international travel plunged 87% last year and will not likely return to pre-pandemic levels until the second quarter of 2023, consultancy Oliver Wyman said in a report last week.

That means billions of dollars not spent overseas can potentially be spent at home or saved for future purchases, the report said, pointing out that Chinese consumers spent $245 billion abroad in 2019.

The analysis found that nearly 60% of those travelers are turning to the southern tropical island province of Hainan, which has expanded its duty-free shopping centers in the last few years.

For high-end luxury brands, Hainan will become much more attractive to them if in the future they can open their own stores instead of through a duty-free operator.

Imke Wouters

Partner at Oliver Wyman

Duty-free sales in Hainan topped 700 million yuan from May 1 to 4, according to state media, citing the latest available figures from the local customs agency. For comparison, an eight-day holiday in October recorded 1.04 billion yuan in Hainan’s duty-free sales.

“May is seen as the first (moment when) you can really see the true potential of Hainan, without any travel restrictions,” Oliver Wyman partner Imke Wouters said in a phone interview Thursday.

However, she pointed out that right now brands need to work with duty-free centers in Hainan. As a result, profitability could be up to 50% less than it would be through their own stores on the mainland.

“For high-end luxury brands, Hainan will become much more attractive to them if in the future they can open their own stores instead of through a duty-free operator,” Wouters said, noting government policy is moving toward individual store ownership.

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