Chinese Tesla

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Ping An lists an ETF for the Tesla bubble

Ping An, China’s largest insurance company, is listing an ETF that looks like it was designed for the Tesla bubble. The Ping An CSI New Energy Automobile Industry ETF (515700) will track an index of Chinese A shares that are helping make electric cars — but aren’t trading on highly optimistic valuations. 

Companies will be included in the fund if the index provider judges them to be making enough revenue in a business that is directly related to electric cars. Companies included will be market weighted, with the biggest companies limited by an 8% cap. 

According to the index factsheet, the biggest companies in the index are battery maker Contemporary Amperex Technology, and car makers SAIC Motor and BYD. BYD is backed by Berkshire Hathaway.

Tesla – a non-prickable bubble?

Steve Eisman, the hero of Michael Lewis’s book The Big Short, said in an interview that some companies are impervious to short selling because they’re cults first and businesses a distant second. Looking at Tesla right now – as its market capitalisation soars above Volkswagen’s while binging on debt – one wonders if of the sort is true here. 

For those unconvinced on Tesla – or just its current valuation – this ETF could be of use. China has provided a lot of support for battery powered cars — on both the sell and buy side. According to McKinsey, China provides something near 45% of the global electric vehicle market. Warren Buffett thought China was a good bet for the future of electric cars, hence he bought into BYD in 2008. Chinese electric car makers have the additional benefit of not trading on super high valuations.