May’s New Energy Vehicle Market Exceeds Expectations

• Author: Lingfang Wang
• Editor: Kaijun Qiu

In May, the wholesale sales of new energy passenger cars reached 421,000 units, an increase of 111.5% year-on-year and 49.8% month-on-month. The new retail sales reached 360,000 units, an increase of 91.2% year-on-year and 26.9% month-on-month.

From January to May, the domestic retail sales of new energy passenger cars exceeded 1.7 million units, an increase of 119.5% year-on-year. In the first five months, the wholesale and retail markets of new energy vehicles have formed a “W-shaped” trend.

Tesla’s production and sales have also rebounded significantly, with over 40,000 vehicles produced after resuming work. In May, Tesla exported 22,340 vehicles. From January to May, the cumulative delivery of Tesla exceeded 215,851 units, an increase of more than 50% year-on-year.

Significant Increase in Production and Wholesale Volume

In May, China’s wholesale sales of pure electric vehicles reached 324,000 units, an increase of 96.3% year-on-year and 51.1% month-on-month. The sales of plug-in hybrid vehicles reached 98,000 units, an increase of 184.4% year-on-year and 45.8% month-on-month.

Plug-in hybrid models have maintained a high growth trend. Cui Dongshu, Secretary-General of the China Passenger Car Association, believes that this partly verifies some manufacturers’ market predictions that “plug-in hybrids are the first step in the transformation of gasoline vehicles into potential customers.”

In terms of penetration rate, the wholesale penetration rate of new energy vehicle manufacturers in May was 26.5%, an increase of 14 percentage points compared with the same period last year, which was 12.4%, but a decrease from 4.1% for mainstream joint venture brands in April. In May, the penetration rate of new energy vehicles in independent brands was 45%, 19% in luxury cars, and only 4.1% in mainstream joint venture brands.

In terms of retail sales, the domestic retail penetration rate of new energy vehicles in May was 26.6%, an increase of 15 percentage points compared with the same period last year, which was 11.6%. In May, the penetration rate of new energy vehicles in independent brands was 51.8%, 9.2% in luxury cars, and only 4.0% in mainstream joint venture brands.From the perspective of vehicle classification, the “dumbbell-shaped” structure of the pure electric market continues to improve. A00-level wholesale sales volume is 106,000 units, an increase of 37% compared to the previous month, accounting for 33% of the pure electric share; A0-level wholesale sales volume is 50,000 units, accounting for 16% of pure electric share; A-level electric vehicles account for 26% of pure electric share. In May, B-level electric vehicle sales increased by 48% year-on-year and 137% month-on-month, accounting for 23% of pure electric share.

Traditional Car Companies Perform Well

Independent brands have achieved significant growth in the new energy market, and leading companies such as BYD Auto, Geely Auto, Changan Auto, and Chery Auto have significantly increased their market share. SAIC Motor and FAW Red Flag both increased their growth rate by more than 260%, indicating the outstanding effect of overall stable recovery.

Among mainstream joint venture brands, both South and North Volkswagen were severely affected by the epidemic, but they have now returned to the battlefield. New energy vehicle wholesale sales reached 13,825 units, accounting for 63% of the mainstream joint venture market share. Cui Dongshu believes that Volkswagen’s firm electric transformation strategy has shown initial results, but other joint ventures and luxury brands still need to exert more effort.

As for new forces, in May, new energy vehicle companies such as Li Auto, NIO, XPeng P7, Leapmotor, and WM Motor have performed well; NIO, Leapmotor, and other second-tier competitors have shown strong performance.

Specifically, there are 13 companies with wholesale sales volumes of more than 10,000 units, accounting for 80% of the total new energy passenger vehicle sales. Among them: BYD Auto has sold 114,183 units, SAIC-GM-Wuling has sold 37,313 units, Tesla China has sold 32,165 units, Chery Auto has sold 21,772 units, GAC Aion has sold 21,056 units, SAIC Motor has sold 20,693 units, Geely Auto has sold 19,270 units, Changan Auto has sold 11,922 units, Great Wall Motor has sold 11,637 units, Li Auto has sold 11,496 units, NIO has sold 11,009 units, XPeng P7 has sold 10,125 units, and Leapmotor has sold 10,069 units.

Cui Dongshu also mentioned the issue of marketing models. He believes that in the long run, direct sales and dealership models will continue to exist together. As new energy vehicles gradually enter the scale sales and flat sales stage, the drawbacks of a simple direct sales model will also be revealed.

Direct sales models require a strong brand and product strength. When the market shows a supply-demand imbalance, the cost of direct sales can remain optimal; when supply exceeds demand, a large number of direct sales channels will become a heavy burden, especially in the sinking market, the channel layout still needs to refer to the experience of industries such as mobile phones. The dealership model, after integrating a powerful online and offline system, will still have a certain space for survival.

Impressive Export PerformanceIn May, 39,000 new energy vehicles were exported, with SAIC Passenger Vehicle exporting 8,212 new energy vehicles, Tesla China exporting 22,340, Dongfeng Yixingte exporting 3,937, Geely Automotive exporting 1,786, Chery New Energy exporting 670, Great Wall New Energy Automotive exporting 506, BYD exporting 415, while other automakers also began to increase their exports of new energy vehicles.

Since 2021, the export performance of new energy vehicles has been outstanding, with Europe and South Asia becoming the main incremental markets. In 2021, exports of new energy vehicles reached 310,000 units, a year-on-year increase of 304.6%.

Nowadays, the growth momentum of new energy vehicle exports remains strong. New energy vehicles accounted for 21.2% of the total export volume in May. Self-owned brand exports reached 141,000 units, an increase of 77% year-on-year, while joint venture and luxury brand exports reached 42,000 units, an increase of 76% year-on-year.

Regarding the recent outstanding performance of new energy vehicle exports, Cui Dongshu believes that there are two main reasons. First, China’s product competitiveness has improved, and the recognition of Chinese new energy vehicle products has subsequently improved.

Second, the global chip and resource shortage has led to a sharp reduction in automobile production in countries such as Europe, the United States, and Japan, resulting in a shortage of market supply. Cui Dongshu said that this situation can also be seen from the high prices of second-hand cars. The supply of Chinese products has filled this gap.

Purchase discounts have little impact on new energy vehicles

In Cui Dongshu’s view, the 60 billion yuan fuel vehicle purchase tax preferential policy has little impact on the sales of new energy vehicles, and the annual sales scale is still expected to reach 5.5 million units.

Cui Dongshu gave six reasons for this.

First, the consumer groups are different. The price range of fuel vehicles and new energy vehicles is distinct, and the characteristics of high and low ends of new energy vehicles are evident. Many families choose new energy vehicles as their second cars, especially among women drivers who prefer new energy vehicles. Due to different purposes, they will not switch back to fuel vehicles.

Second, the technology of electric vehicles is also improving. Although pure electric vehicles have been overly enthusiastic about the development of lithium iron phosphate in recent years, resulting in slow improvement in the energy density of batteries, some automakers are still striving to promote the advancement of battery technology, which is faster than the technological improvement of traditional fuel vehicles.

Third, new energy vehicles have established advantages in certain sub-markets, and users will not choose to go back. Electric vehicles have an absolute advantage in the ride-sharing market. The use of electric vehicles for ride-sharing was policy-driven in the early stage and cost-driven after the recent rise in oil prices. Many taxi drivers are reluctant to switch back to fuel vehicles.

Fourth, plug-in hybrids have a strong cost-performance advantage. Some new energy vehicle companies such as BYD have tens of thousands of undelivered orders, with a long delivery cycle. Even if customers cancel their orders and opt for a fuel vehicle, electric vehicle companies can still complete the annual quota by shortening the delivery cycle.- Fifth, the constraints of double credits. If the sales volume of gasoline-powered vehicles increases, the pressure of double credits on automakers may also rise. Therefore, automakers will strive to produce some new energy vehicles to meet the requirements of fuel consumption regulations.

• Sixth, some local governments have introduced special subsidies for new energy vehicles, and relevant ministries have also launched activities to promote new energy vehicles in rural areas, increasing the promotion of new energy vehicles in county and township markets.

For the domestic market, Cui Dongshu is full of confidence. He believes that with the rebound of Chinese concept stocks and the decline of layoffs in the Internet industry, the issuance of special bonds in advance and the sustained efforts in newly-built fields, income expectations and consumer confidence are expected to recover. The high-end new energy vehicle market still has strong vitality, but the leader is still economical electric vehicles, and the market potential of A00 and A0 level electric vehicles is huge.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.