Understanding the New Energy Market Here
Author: Yang Haiyan
Introduction: Here, you can understand the new energy market.
What is the biggest pain point in the electric vehicle industry? It must be the safety issue, as it is a fact that the electric motor that drives a car may self-ignite, and consumers generally have range anxiety. Discovering and solving problems, on August 30th of this year, the Chinese brand GAC Aion brought the ultra-fast battery technology and A480 supercharging pile, which achieved comprehensive improvements in transfer rate, embedding speed, and conductivity technology, greatly accelerating the lithium ion migration process, thus achieving ultra-fast charging. It can perfectly achieve what was previously unimaginable, charging for five minutes and driving 200 kilometers. We have to say that this is a black technology that benefits everyone!
From the initial development to the current booming period, the momentum of electric vehicles has reached a new level, and China is now in the era of new energy. 40 years ago, people may have found it hard to imagine seeing new-energy vehicles everywhere on the streets and being able to buy them. At that time, the annual production of Chinese sedans and SUVs was only 5,000 units, and it couldn’t even compete with the daily production capacity of foreign auto giants. However, with the process of reform and opening up, China gradually became the world’s largest auto market, and also the leader in the field of new energy, especially pure electric vehicles.
From Early Research to Industrialization, Policies Become the Biggest Boost for New Energy Vehicle Development
As we all know, 2015 was the year when China began to become the largest new energy vehicle market in the world. In 1949, the year of the founding of the People’s Republic of China, the first automobile manufacturing plant was established, and 100 years later, transportation tools that had already appeared in Western countries during the second industrial revolution finally appeared on the land of China. With the reform and opening up, under the leadership of Chief Designer Deng Xiaoping, foreign investment and new technologies were introduced, and the joint venture era was successfully entered.
After decades of development, in 2000, the scale of China’s automobile industry had gradually expanded, and electric vehicles were listed as one of the 12 major projects in the “863” plan. Starting in 2001, the “863” project invested a total of 2 billion yuan in research and development funds, forming an electric vehicle research and development pattern with three technical routes, pure electric, hybrid, and fuel cell, and three common technologies, power storage batteries, drive motors, and powertrain control systems. The chief scientist of new energy vehicles believes that the development of new energy vehicles is an opportunity for China’s automotive industry to rise, and China can surpass Western countries in this field and lead the Chinese automotive industry to take the lead in the advanced path of zero-emission technology.## Development of New Energy Vehicles in China
In 2004, the “Automobile Industry Development Policy” issued by the Chinese government explicitly encouraged the development of energy-saving and environmentally friendly electric and hybrid vehicle technologies. In 2005, the National Development and Reform Commission (NDRC) included electric buses in the “Announcement of Vehicle Production Enterprises and Products” and introduced relevant national standards. In November 2007, the “New Energy Vehicles Production Admission Management Regulations” officially came into effect, defining new energy vehicles and establishing rules for the production qualifications and product management of enterprises. First of all, new energy vehicles refer to vehicles that use unconventional fuel sources as power sources, and incorporate advanced technology for power control and driving, with advanced technological principles and new structures. Secondly, new energy vehicles include pure electric vehicles, extended-range electric vehicles, hybrid electric vehicles, fuel cell electric vehicles, hydrogen engine vehicles, and other new energy vehicles. This policy file has also been regarded by the industry as the beginning of the national encouragement for the commercialization of new energy vehicles.
In 2008, new energy vehicles in China presented a comprehensive attack trend. The sales growth of new energy vehicles from January to December 2008 was mainly in passenger cars, with sales of 899 new energy passenger cars, a year-on-year increase of 117%, while new energy commercial vehicles sold a total of 1,536, a year-on-year decline of 17%. It is worth noting that this was a year when the global financial crisis broke out and international oil prices skyrocketed, which seriously affected energy security in various countries. The aforementioned data shows that China’s strategy was undoubtedly correct and also signifies that the development of new energy vehicles is closely linked to national energy security.
In 2009, the State Council issued the “Automobile Industry Adjustment and Revitalization Plan”, which for the first time proposed the goal of developing new energy vehicles on a large scale. That same year, China launched the “Ten Cities, Ten Thousand Vehicles” program, which mainly involves public transportation, government vehicles, municipal vehicles, postal vehicles, taxi services, and other areas. Over a period of three years, ten cities would be selected each year, and each would introduce 1,000 new energy vehicles. This program also marked China’s domestic leading position in promoting new energy vehicle industrialization.
The Three Segments in Flux
Chinese automakers, new entrants, and foreign automakers are all stirring up the market.Starting from 2011, the new energy city buses, hybrid cars, and small electric vehicles have entered the stage of industrialization and are being promoted across society. In May of 2012, in order to accelerate the development of new energy vehicles, the new energy vehicle project will receive 1 to 2 billion yuan of annual funding support from the government. By the end of 2012, due to the lack of technological progress and backward charging infrastructure, among other reasons, only 7 of the originally planned “Ten Cities, One Thousand Vehicles” project were successfully implemented. Drawing lessons and summarizing experiences, China timely adjusted the development direction of new energy vehicles in the same year, especially in terms of technological improvement. The State Council issued the “Energy Conservation and New Energy Vehicle Industry Development Plan (2012-2020)” with a strategic focus on pure electric drive, focusing on promoting pure electric vehicles and plug-in hybrid vehicles, while traditional hybrid vehicles are no longer the focus of development and have been excluded.
In 2013, the Ministry of Environmental Protection issued the “Notice on Doing a Good Job in Air Heavy Pollution Monitoring, Early Warning and Information Release and Reporting.” Beijing first granted new energy vehicle license plate preferential treatment without traffic control. The willingness of consumers to buy new energy vehicles was greatly increased due to a series of promotion measures such as high subsidies and exemption from purchase tax. This also marked the turning point of new energy vehicles from the operation end to the consumer end.
In 2014, the National Development and Reform Commission issued the “Notice on Some Issues Related to Electric Vehicle Electricity Prices,” which required that the local financial subsidies should not exceed 50% of the central financial single vehicle subsidy amount. The central and local subsidies for all types of vehicle models, except for fuel cell vehicles, will gradually decrease from 2019 to 2020 by 20% compared to the current standard. In the same year, China produced a total of 78,499 new energy vehicles, an increase of nearly 3.5 times compared to the previous year, and sold about 74,763, an increase of nearly 3.2 times.
In November of the same year, Li Bin, founder of Yiche.com, and Li Xiang, founder of Autohome.com, initiated the establishment of NIO, which is a representative event of internet companies entering the new energy vehicle industry. After its establishment, NIO adopted the method of factory outsourcing and reached cooperation agreements with several traditional automakers such as Guangzhou Automobile Group and Changan in terms of automobile research and development, production and sales. BYD’s new energy vehicles have won the sales championship of electric vehicles for three consecutive years, but there are also problems that make car companies headache. In fact, vehicle models have become a headache for NIO, which is a common problem for car companies that lack experience in car-making and adopt outsourced production methods.From March 2016 to the present, more than 14 new pure electric passenger car construction projects have been approved by the National Development and Reform Commission in just over a year. Despite the seemingly positive development of new energy vehicles, a publication exposed a “hidden rule” widely present in the industry, the fraudulent subsidy for new energy vehicles, in an investigation report titled “Disappearing New Energy Vehicles and the Huge Fraudulent Subsidy Industry Chain”. It pointed out that behind the abnormal surge in new energy vehicle sales data lies a vicious crisis in which a large number of speculators used various means to illegally obtain financial subsidies and become suddenly rich overnight.
These unscrupulous speculators have seized the funds meant to support emerging industries, making an eye-opening amount of 100 million yuan a year, which is truly shocking and heartbreaking. As this event continues to ferment, the industry has expressed its concerns, including some experts and industry insiders such as Ouyang Minggao, Executive Vice Chairman of the China Electric Vehicle Hundred People Association, and Xu Changming, Director of the Resource Development Department of the National Information Center. The capital market also seems to be worried about the prospects of new energy vehicles, which has resulted in a significant drop in the valuation of the industry chain.
The government’s subsidy policy is powerful, but it has led to malicious people adopting improper means to obtain this money. After this event, the government carried out a thorough overhaul of the subsidy policy. A more stringent regulatory system has been put in place for the entire industry’s fraudulent subsidy industry chain. Subsidies are more targeted towards cars with higher range and lower energy consumption to promote progress in technology, while financial subsidies decrease year by year. China has also introduced innovative policies, such as the dual credit system, which requires automakers to meet traditional fuel consumption standards while also producing new energy vehicles. After the storm, a very gradual process of implementing a compliant “de-subsidization” strategy for new energy vehicles has begun. At the same time, the government has launched the “Guideline for the Development of Electric Vehicle Charging Technology Facilities” and the “Guidance on Accelerating the Construction of Electric Vehicle Infrastructure,” which accelerate the construction of charging stations and provide consumers with access to new energy vehicles.
In 2017, with the implementation of policies such as subsidy cuts and the dual credit system, the new energy vehicle industry ecology and the competitive landscape face restructuring, with a focus on developing towards low-carbon, electrification, and intelligence. Another area worthy of attention is the development of batteries. At the turn of the century, battery technology has made breakthroughs, and many countries have begun to mass-produce electric vehicles. By this time, there were already more than 200 new energy vehicle companies in China.At this stage, battery density has also been improved, resulting in longer range for electric vehicles. The engine’s power performance is also not inferior to some low-displacement fuel vehicles. In 2018, China announced the lifting of restrictions on foreign investment in the automobile manufacturing industry, particularly in the field of new energy manufacturing. This means that foreign companies producing electric vehicles no longer need to establish joint ventures with Chinese counterparts, and can directly build factories in China. One month after this regulation was announced, Tesla announced the construction of a super factory in the Shanghai Lingang Free Trade Zone. It is worth noting that when new energy vehicles were still not a national strategy, many Chinese automobile companies adopted a joint venture with foreign companies in the hope of absorbing their advanced technology. However, most core technologies of these companies are still controlled by foreign companies, which has led to many enterprises choosing to separate. “They don’t want to share their technology with us, so many joint ventures can only separate,” said Lei Hongjun, chief engineer of Yangtze River Automobile. It is precisely because of this that China needs to vigorously develop new energy vehicles. Lei Hongjun believes that in the field of new energy vehicles, especially electric vehicles, we are at the same level as developed countries.
At the same time, Volkswagen also plans to produce half of its global production of 4 million in China by 2028. As foreign new energy vehicles enter the domestic market, it will inevitably produce a sharpening effect, which can not only sharpen the traditional automobile companies and new car-making forces, but also drive the positive development of the entire new energy vehicle industry chain. In 2018, NIO, China’s first electric vehicle company, was listed on the New York Stock Exchange, and it can be seen that China’s electric vehicle start-ups have started to flourish.
The first wave of new energy vehicle production is coming, and the era dividend brought by the industry is also coming. At present, three Chinese car companies rank among the top ten in the global automobile market value, namely BYD, NIO, and XPeng, ranking fourth, fifth, and tenth, respectively. At this time, China is also vigorously promoting the technological development and product landing of new energy vehicles. It should not be ignored that China has become the country with the highest production and output of new energy vehicles in the world.
Charging piles pay more attention to both quality and quantity, and user experience is upgraded
On August 30, Guangqi Aion held an online launch event, officially announcing the ultra-fast battery technology that can achieve “charging for 5 minutes and driving for 200 kilometers” and the A480 super charging pile with the highest global charging power, which has been certified by the World Record Certification Agency (WRCA). It can be said that it has largely solved the problems of battery charging technology in the past. At present, Guangqi Aion is also accelerating the construction of the A480 super charging pile, which will penetrate into prefecture-level cities and achieve full coverage. It can be said that we will no longer worry about the range problem in the future.# The Great Changes in the Automobile Industry
The world is undergoing great changes in the automobile industry. According to the latest statistics released by the China Association of Automobile Manufacturers, domestic new energy vehicle sales reached 1.478 million units in the first seven months of 2021, a year-on-year increase of double. The sales volume of new energy vehicles from January to July has exceeded the sales volume for the entire year of 2020, and has more than doubled compared to 2019 before the pandemic. At the same time, from January to July this year, new energy vehicles accounted for 10% of the total sales of domestic new cars. Although state subsidies are decreasing, it can be seen from the above data that consumers’ recognition of new energy vehicles and their purchasing power are constantly deepening, and more and more individuals are becoming the main buyers.
At the same time, the proportion of new energy cars purchased in non-restricted cities is also increasing. In 2020, it had already reached 60%, and the proportion this year will only be higher. Currently, the domestic new energy vehicle market can be said to have a good and positive competitive situation, covering different market segments ranging from passenger cars, commercial vehicles, SUVs, sedans, luxury brands, mass-market brands, domestic brands, or joint ventures.
On March 30th, 2021, Xiaomi Group announced the establishment of an automobile company, and its founder Lei Jun is the CEO of the automobile company. There are reports that Xiaomi’s car ambitions are grand, planning to launch one new car every year for the next three years after the launch of the first car in 2024, “and the total sales volume over these three years shall reach 900,000 vehicles”. Regarding this information, Xiaomi Group responded to the media with “no comment”. Speaking of Lei Jun, let’s take a look again at Dong Mingzhu’s car-making dream. As early as the shareholder meeting in October 2016, Dong Mingzhu officially proposed to enter the new energy vehicle industry, but Lei Jun was more cautious. Now, after a five-year, CNY 2 billion bet between the two, eight years have passed, and the competition of dreams has brought them both to the same arena once again.
To sum up, it is predictable that various emerging automakers will join the new energy vehicle race with full efforts and enter the new field, regardless of whether they’re producing luxury brands, mass-market brands, or domestic brands. However, this also means that it will cost money and it is still unknown whether or not it will succeed. But the path of new energy vehicles is becoming increasingly wide, and it has been gradually accepted by the public. Consumers’ willingness to purchase new energy cars leads to the fact that they are developing well in terms of product development strategies and innovation capabilities.
Remaining Issues## Development of New Energy Vehicles
In 2020, both China and the world were hit by the COVID-19 crisis, causing a great impact on the Chinese automotive market. However, sales have gradually rebounded and it is expected that the market share of new energy vehicles will exceed 10% in China by 2022. The main issues with new energy vehicles include their small market share and the limited presence of Chinese-made vehicles in the new energy automotive market.
Although the domestic valuation of new energy vehicles in China has been impressive, their delivery volume still needs improvement. In Europe, there were nearly 1.4 million registrations of BEVs and PHEVs in 2020, an increase of 137% compared to 2019. Despite the overall decrease in the automotive market by 20%, it is estimated that electric vehicle sales in Europe will exceed 2 million units in 2021.
The true boom of electric vehicles in Europe began in mid-2020 and reached its peak in December of the same year, with almost 285,000 units sold, representing a 260% year-on-year increase and a market share of 20%. It is worth noting that, based on nationality, Germany surpassed the United States to become the second largest market for new energy vehicle sales, second only to China.
However, the competitiveness of Chinese automotive brands remains to be improved. Only with strong technology and a comfortable driving experience, combined with a unique brand influence, can consumers be willing to choose to buy their products. Pain points are a reality that must be solved one by one. Guangzhou Automobile Group (GAC) has made a breakthrough in technology, which undoubtedly promotes the development of new energy and takes the industry to a higher level.
This will solve yet another pain point in the electric vehicle industry and pave the way for further development.
In conclusion, the rapid development of new energy vehicles is not only in line with the environmental requirements of energy conservation and emission reduction, but also the current development situation of China. It represents a great opportunity to break free from the after-effects of the economic crisis and promote industrial upgrading, thus becoming a leading automotive powerhouse. The development of new energy vehicles is an inevitable trend. It is necessary to strengthen talent training and research and development investment, promote communication and breakthroughs between enterprises, improve corresponding service mechanisms, and enhance core competitiveness to break the existing pattern of the automotive market as soon as possible.
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.