➤ The response to COVID-19 means more people are avoiding public transportation and seeking individual mobility alternatives.

➤ Niu Technologies' electric scooters make urban commutes easier, a fact that has caught the eye of investors.

➤ Electric two-wheelers do not enjoy the same government support as cars.

Niu Technologies CEO Yan Li Source: Niu Technologies

While global electric-vehicle makers struggle for profitability despite strong investor interest, one U.S.-listed Chinese EV company regularly has managed to eke out profits, driving a 250% surge in its share price year-to-date. Electric-scooter maker Niu Technologies reported $8 million in profit in the second quarter, with sales of e-scooters accelerating 61.2% year over year to 160,138. In the third quarter, its sales jumped 68%. Niu CEO Yan Li spoke with S&P Global Market Intelligence about the impact of COVID-19, the lack of subsidy support for the sector and the company's international ambition. The following is an edited transcript of the conversation.

S&P Global Market Intelligence: Niu's share price has gained significantly along with the electric vehicles stock rally led by Tesla Inc. Your thoughts?

Yan Li: Even though the first quarter was affected by COVID-19, we started to have a nice rebound with new product lines for both China and international markets. [The performance] reflected in the [U.S. stock] market. Before that there were just not enough people looking into our sector. Traditionally, they were looking at electric cars more diligently. But we do see now that two-wheelers can make urban commutes much easier. That is why we started to get more attention from institutional investors and also individual investors. More investors are looking into [the electric scooter] sector and realizing, "Ah, it's actually a huge sector we are looking at," with 38 million units in China for both electric and petrol, and globally [nearly] 90 million vehicles a year.

You are building a second phase in your plant that will add another 1 million vehicles in capacity. What are the markets that you are bullish on? China or overseas?

I think both. Europe, U.S., Southeast Asia ... the market is wide open for us. In Europe, from a market share perspective, we are the No. 1 brand with over 20,000 units out of 100,000. But it is still a small market. In overseas, 20% of sales are through bike-sharing operators, 80% are still through retail. In China, we are not even in the top 10 if you look at the whole electric scooter market because it was dominated by lead batteries. [The e-scooter market] is becoming more lithium battery-based, which we expect to [double] to up to 6 million units this year.

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What are the challenges in expanding overseas?

Our electric bikes in Europe are assembled with a local partner because the EU has an antidumping policy against Chinese bikes. For Southeast Asia, we have been working with local manufacturers because the tariff for electric motorcycles is about 40% or even higher, which means our products have to be locally manufactured. We are evaluating whether Southeast Asia assembling will be sufficient, or we need to have something in North America because the tariffs used to average around 5% or 6%, but now it has become 15%. So, to some extent, we require a global supply-chain strategy.

Government policies and subsidies have contributed to the Chinese electric-car boom. Are you hoping for any boost from the government?

We do not have any support for electric bikes in China because the electric two-wheeler market has been around since 2000. It was just that everything was based on lead batteries. We were the first lithium battery-based scooter, starting in 2015. There was a regulation in 2019 stating that electric bikes must not weigh more than 55 kilograms. That actually pushed the industry to adopt lithium batteries [rather than the shift in demand] from petrol.

Why do you bank on the "urban mobility" positioning for Niu Technologies rather than the environmental attributes of electric scooters?

Urban mobility has been a phrase that is quite abused. Even [carmakers] have talked about urban mobility. From our end, it's really about the daily commute, a distance of about 10 kilometers to 15 km. For our new scooter, 1 kilowatt-hour of battery power can give you a driving distance of about 50 km [compared to about 6 km in an electric car].

The only more energy-efficient [way] is public transportation, but it does not get you from door to door, and with [the] COVID-19 situation [and] social distancing, a lot of people choose not to take public transportation and started to figure out individual mobility options. This makes electric two-wheelers the most convenient, most time-efficient and energy-efficient ride [for short distances].

The cost of lithium-ion batteries is declining. How does that affect your production?

It is good. To be honest, our growth has been increasing because of the [falling] cost as we are also able to transfer some of the cost savings to consumers [while maintaining] the same margins.

A few of the Chinese EV players count tech giants like Alibaba Group [Holding Ltd.] and Tencent [Holdings Ltd.] as investors. Are you pursuing such partnerships, and are there any further fundraising plans?

I do not know whether they have picked up our stocks in the secondary market, but there is much less capex required in two-wheeler manufacturing. [O]ur cash flow was positive in 2017 and we were not even profitable. Last year was positive, this year for sure would be positive. So we actually do not need funding. I think this is the major difference between us and automobile companies, which allows two-wheeler makers to be more adaptive.