2019.03.23 Tao Huidong Views:
EXCLUSIVE: Zhang Wei — Why No One Breaks New Ground for Air-Conditioners?
“We don’t want your money!” “I don’t have time for idiots!” ...Ever since Zhang Wei published a signed article 2019, The End of NEV Powers, he has been under fire these days. The identified NEV (New Energy Vehicle) makers and investors like He Xiaopeng (CEO of Xpeng Motors), Freeman Shen (founder of WM Motor) and Huang Mingming (founder of Future Capital), criticized Zhang Wei for his words.
In this article, which made Zhang Wei an Internet influencer, Zhang Wei pointed out sharply that none of the 100 NEV makers in China was worthy to invest. Most of them would be on the precipice of doom in 2019.
Zhang Wei reacted to these criticisms by saying that CoStone Capital had paid attention to the NEV sector for years and had so far invested over ¥6 billion ($929.065 million), touching upon the parts in the upstream, dealers in the downstream and automotive aftermarket. CoStone Capital made enormous profits from the parts sector. The enterprises it invested, for instance, Huitian Adhesive (300041.SZ), an adhesive supplier, Yodong (002406.SZ), a drive shaft supplier and Soling (002766.SZ), a car networking and CID (Car Informatic Device) supplier, had all successfully IPOed.
Although CoStone Capital has been putting mind to the NEVs makers like NIO (NYSE: NIO) and WM Motor, it has not yet hedged its bets. According to Li Xiaohong, partner of CoStone Capital, car manufacturing could not succeed by innovating business models or marketing a single product. It took time to verify the core competence of an industry.
Zhang Wei’s claim led to this major blowback. He said firmly that no a single NEVs maker in China was worthy to invest. He denied the whole race track which had attracted more than $15 billion from the top VCs and PEs like Sequoia Capital, IDG and Hillhouse Capital, and the Internet giants like Baidu and Tencent.
Zhang Wei was unconvinced about this race track. He thought no one should jump on the bandwagon in such a mature and competitive global market. Taking the air-conditioners as an example, he said, if a start-up claimed to create a great air conditioning enterprise and beat up Gree and Midea, it would never get financed. “It doesn’t mean that it will never succeed. But for venture capitals, it just doesn’t make any sense.” Zhang Wei explained.
The so-called new powers of NEVs, Zhang Wei said, were burning through cash and playing simple tricks to attract more investment. They didn’t possess any unique core technology in a mature and competitive market. They had nothing different from a new air-conditioning enterprise. Taking advantage of new concepts like new energy, self-driving and car networking, they sold themselves as innovation enterprises. Actually, they were not. They innovated as much as creating a “solar air conditioner”, but pretended to have turned zero into one, nothing into something.
He Xiaopeng, founder of Xpeng Motors, said in his WeChat Moments, the new NEV makers were only walking the same path as Geely, WEY and Tesla did in the past which had undertaken more sarcastic comments.
Geely and WEY represented Chinese private automobile makers. Tesla was the pioneer of electric cars. The NEV makers in China owed more than $15 billion investment to these ground breakers, especially Tesla. Chinese NEV makers were trying to duplicate a Chinese Tesla.
Zhang Wei didn’t agree what they said about “walking the same path”. Zhang Wei believed that the Chinese NEV makers were totally different from Tesla. Tesla was turning zero into one, yet the Chinese makers were just upgrading one to two. In other words, they were building “solar air conditioners”.
Like He Xiaopeng, Zhang Wei respected Musk’s spectacular move to establish Tesla. Musk himself invested over $50m to initiate Tesla. Zhang Wei asked, “Who can invest that such in building NEVs?”
Zhang Wei kept repeating that the NEV powers had been late for 10 years, but still used the Tesla thing to get financed. Tesla was an industrial leader after a dozen years and was able to compete with the traditional manufacturers. Now the opportunities had long gone. He believed that Tesla opened the Shanghai plant for mass production, so as to reduce its average cost on one electric car to ¥100,000 ($15,484). The domestic NEV makers would out of its leagues. “Copy to China” mode in the Internet realm could not apply to the automobile industry.
Meanwhile, Zhang Wei didn’t agree that investing NEVs was out of passion and affection. “I respect those entrepreneurs who dream of creating NEVs. However, if they really want to create new cars, they should lay their eyes on Geely, WEY, BYD or Chery QQ 20 years ago, instead of the NEV makers now.” Zhang Wei added.
Above: Excerpt of the special interview with Zhang Wei from China Venture. In the interview, Zhang Wei criticized the fraudulent innovation of Chinese NEVs makers which drew a lot of fire from many investors and NEVs manufacturers. Confronted with a flood of criticism and sarcasm, Zhang Wei insisted that he was the one who uncovered the frauds of NEVs makers. Chinese NEVs makers would soon come to an end. Please refer to the link below to view the interview in full: http://stonevc.com/news_view.aspx?TypeId=5&Id=746&Fid=t2:5:2
Rewritten by: Luo Xinying, Edited by: Du Zhixin, Li Yunzhen
Over the past year, the bull market returned, with technology leading the way.
As I said back in October 2024, the rally that began on September 24 was not merely a rebound, but a reversal. Since then, China's capital markets have undergone a broad revaluation, moving from undervaluation toward fair value.
The Shanghai Composite Index reached its highest level in a decade. The "Yi-Zhong-Tian" trio—Eoptolink, Zhongji Innolight and TFC Communication, three prominent Chinese optical communications stocks—saw their share prices multiply severalfold in a single year. Cambricon's market capitalization briefly exceeded RMB 600 billion. Elsewhere in the technology sector, triple-digit price-to-earnings ratios and valuations exceeding RMB 10 billion became commonplace.
Some investors were greedy; others, fearful. Still others asked me: Are technology stocks in a valuation bubble?
My answer is that what we are witnessing is the hunger and anxiety of an era, reflected in the capital markets. Once you understand this, the current fervor for technology investing is no longer difficult to explain.
Investment has nothing to do with macroeconomics, but everything to do with geopolitics.
China-US relations will shape the investment landscape for decades to come. Geopolitics has played a major role in shaping the hunger and anxiety of our times, fundamentally reshaping the way we invest.
What, then, lies at the heart of China's hunger and anxiety?
The Fourth Industrial Revolution is already underway, yet China has not fully overcome the technological shortcomings left by the Third. There is no time to lose.
This is why some people wonder: Why do Chinese computing chip companies command such high valuations when their technologies still lag so far behind NVIDIA's? Why does NVIDIA trade at just 50 times earnings, while a company hailed as "China's answer to NVIDIA" commands a multiple of 300?
To me, this gets the logic exactly backward.
It is precisely because these companies cannot catch up with NVIDIA in the near term that they command a higher strategic premium. The wider the technological gap, the greater the strategic value.
The further something lies beyond our reach, the stronger our hunger. The harder it is to catch up, the deeper our anxiety. If China were to achieve a complete breakthrough in computing chips one day, valuations might actually come down.
Where can one find China's most spectacular natural landscapes?
Much of the answer, I believe, lies in and around the Hengduan Mountains: the Meili Snow Mountains, Jade Dragon Snow Mountain, Mount Gongga, Mount Siguniang, Jiuzhaigou, and many others. Vast differences in elevation and deep fault lines have given rise to landscapes of extraordinary grandeur.
Hard-tech investing follows a similar logic.
Technological gaps, discontinuities in capabilities, and missing links in industrial systems: a leap in difficulty brings a leap in valuation, and a successful breakthrough can, in turn, bring a leap in returns.
This logic extends well beyond computing chips. It is equally evident in memory semiconductors, commercial spaceflight, and other sectors where China still faces substantial technological gaps with other countries.
It was precisely this conviction that led CoStone Capital, starting in 2016, to decisively focus its investments on three areas: hard tech, emerging industries, and life sciences and healthcare. In this context, "hard tech" refers specifically to important industries in which China faces a technological gap with the United States.
Thanks to this forward-looking strategy, CoStone Capital established an early presence across the full value chains of key sectors, including semiconductors, artificial intelligence, and robotics.
Looking ahead, the frontiers of technological progress and industrial upgrading are boundless. Nor can the gaps in hard technology be closed overnight. The twin windows of opportunity presented by technological innovation and the development of homegrown alternatives to foreign technologies have only just begun to open.
The road ahead is long, but the future holds immense promise.
As an investment firm, CoStone Capital will continue to invest where the hunger and anxiety of each era run deepest, move forward with the tensions that shape our times, and extend our reach toward the most challenging—and most important—frontiers.
Spring 2026