Electric Drive Systems

What it is

An electric drive system turns battery power into wheel torque. It comprises the traction motor, the controller or inverter that drives it, and a reducer, increasingly integrated into one "three-in-one" or "multi-in-one" unit, with an on-board charger and DC converter added in the larger assemblies. The motors depend on rare-earth magnets, and the inverter's switching chips are covered under power semiconductors.

Where China stands

China's new-energy vehicle output and sales were 7.438 million and 7.446 million in the first half of 2026, up 6.7% and 7.3% (BYD 2026 interim report, p. 12). Two independent suppliers show opposite fortunes, and one carmaker integrates the whole system:

• Inovance (汇川技术, 300124.SZ) delivered about 500,000 drive assemblies, and its EV powertrain revenue was about ¥9.4bn, up about 4%, at a 12.82% gross margin that was down 4.02 points. Citing industry data from NE Era, it says that in the first half of 2026 it held 8.4% of passenger car electronic controllers, 9.0% of motor stators and 7.5% of drive assemblies, in each case first among third-party suppliers and second or third overall. It reports 17 new domestic passenger car designations and 9 overseas designations, and says plants in Hungary and Thailand are delivering in batches (2026 interim report, pp. 13, 24, 28).
• Jing-Jin Electric (精进电动, 688280.SH) had revenue of ¥707.1m, down 30.8%, and a net loss of ¥179.1m, which it blames on a core passenger car customer's vehicle refresh. It is moving three-in-one production from North America back to China (2026 interim report, pp. 11, 12).
• BYD (比亚迪, 002594.SZ) describes its approach as vertical integration across power batteries, storage and power chips, so its drive systems go to its own vehicles rather than to the market (BYD pp. 14, 15).

Cost pressure

Inovance says higher prices for enamelled wire, die castings, magnetic steel and power semiconductors weighed heavily on the profitability of its EV business, and that it is working with customers on price pass-through (Inovance pp. 23, 24). Its EV drive margin fell to 12.82% while revenue was almost flat.

Our view: independent drive suppliers are in a squeeze. Their customers are a limited number of carmakers, and the largest of them makes its own. Inovance's margin is falling on flat revenue while Jing-Jin's single-customer exposure produced a loss. The larger and more diversified company is coping, but even it earns 12.8%.

What to watch

• Customer concentration. Jing-Jin's loss came from one customer; Inovance's 17 domestic and 9 overseas designations are the offsetting evidence.
• Overseas plants. Inovance's Hungary and Thailand plants and Jing-Jin's North American retrenchment point in different directions.
• Materials. Magnet, copper and chip costs set margins; see rare-earth magnets.