Banking & Finance

In-depth research

Citic and Haitong analysts are dismantling EVs


A Tesla was taken apart in China

In early 2020, Muddy Waters published a research report accusing Luckin Coffee of inflating its 2019 revenue and user numbers. The short-seller claimed that it had hired over 90 full-time and more than 1,400 part-time investigators as they pored over 25,000 Luckin coffee receipts, going through a total of 11,260 hours of video footage at more than 620 Luckin outlets, before coming to that conclusion.

The rest, as the saying goes, is history. After the report came out, Luckin Coffee shares plunged. Months later, the US-listed coffee chain confessed to falsely inflating its sales by over $300 million.

Fast forward to today and in a further effort to add value to their research, two different teams of auto analysts in China have resorted to equally radical methods.

In late June, a team of analysts from Haitong International became the centre of attention after they released an 87-page in-depth research report in which they discussed how they took apart a second-hand BYD Yuan, an electric SUV that came out in 2018.

In the research report the Haitong analysts photographed and detailed all the different components, which took up over 50 pages (some netizens joked that the report was more thorough than BYD’s driver manual). One of the analysts explained that the move was to understand “the transformation and upgrading of China’s manufacturing industry”.

Afraid of being outshone, last week, Citic Securities also came out with its own 94-page research report. This time, the team chose a brand new Tesla Model 3, which has a starting price of Rmb279,000.

“We disassembled the standard range version of the iconic Model 3, providing a detailed and in-depth analysis of Tesla’s E/E architecture, three core electrical systems, thermal management system, bodywork and more,” the report says.

The team claims that by taking apart the vehicle – which took them two months to do – they could better observe EV trends. To prove that they really took the car apart, the report is also filled with images of the Model 3’s body, cockpit, smart driving hardware, motor controller, battery, and thermal management system and other components.

Nevertheless, the report was not particularly insightful on future EV trends. At the end of the study, the analysts recommended around 30 stocks relating to upstream and downstream industries like battery makers and thermal management suppliers.

“Must you tear apart a car to do that?” one netizen asked.

“It seems like Citic really put a lot of money into this. But in the end, they recommended 30 stocks in the supply chain that are already highly publicised,” another wrote dismissively.

Most netizens were not impressed with the researchers’ costly and laborious effort, with many saying that the analysts were less interested in finding out what’s inside the electric car than staging a marketing gimmick to generate buzz for the brokerages.

“The Citic [report] feels like ‘frying cold rice’ [which means doing the same thing without any new result]. There are no bright spots. The supplied parts are all information that can be found if they just asked,” the industry observer added. “And besides, the same auto part may come from different suppliers depending on the batches. There is nothing insightful one can discern just by taking one car apart.”

Chinese brokerages are not the first entities to disassemble electric cars. Back in 2018, a foreign investment bank also took Tesla’s Model 3 apart, prompting netizens to mock that Chinese analysts are “late to the game”.

There have also been no shortage of YouTubers and other influencers that have posted videos of themselves taking a car apart in an effort to grab attention.

“In recent years, many auto social media accounts have used the tactic of ‘dismantling cars’ to gain fans. But the impact is usually not long-lasting. After all, consumers are more concerned about the driving experience of the car, rather than having a deep understanding about the different auto parts,” reckoned Xiaoxiang Morning Herald.

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