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CHINA REPORT

The development trend for the new energy vehicle (EVs) market remained positive through 2022. In November, retail sales of new energy passenger vehicles reached 598,000 units, with a year-on-year growth of 58.2%. From January to November, the domestic retail sales of new energy passenger vehicles were 5.03 million units, with a year-on-year growth of 100.1%.

As for December, the Passenger Transport Federation believes that the subsidy for new energy vehicles will decline by 12,600 RMB this year, which is much more than the decline of 5000 RMB in the previous two years. In addition, some vehicle enterprises have announced a price increase for next year, which may promote strong pre-buying of new energy vehicles at the end of the year and boost sales.

This year, the new energy vehicle market is expected to achieve the annual sales of 6.5 million vehicles.

Although the subsidy for new energy vehicles will be withdrawn at the end of this year, the exemption for the new energy vehicle purchase tax will continue next year.

At the same time, the new energy vehicle market is still good under the effect of non-financial means, including the right of way. Cui Dongshu predicted that the sales volume of new energy vehicles in China would reach 8.4 million in 2023, with a year-on-year growth of more than 30%. “With a high penetration rate of 36% in November this year, the new energy vehicle market has entered a supermarket driven stage.

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PSR Analysis: At present, new energy vehicles have entered the stage of accelerated growth, and the process of replacing fuel vehicles has been accelerated. Due to the expanded sales of new energy vehicles, unit costs also have been gradually reduced. At the same time, China has gradually canceled epidemic prevention and control measures, which has injected confidence into the car market again and is expected to boost sales.

Presently, exports of Chinese independent brands to European and American markets and developing countries is accelerating. Sales of international brands to China’s base is increasingly, and this growth rate will remain strong for new energy vehicles.

Car ownership in China has reached 315 million units and 223 units per 1000 people. Compared with 600 units per 1000 people in developed countries, China’s car market still has a lot of room for growth. The annual sales volume is expected to reach 40 to 50 million units in the future.

Given the government’s dual carbon strategy, the trend of automobile market electrification seems to be irreversible, and new energy vehicles will gradually replace the stock of fuel vehicles.

Second, maturity of the supply chain system of new energy vehicles will lead to a decline in the cost of new energy vehicles.

Third, with the progress of electrification technology and intelligent technology, the product strength of new energy vehicles will be further improved, the energy supplement facilities will be gradually improved, and the appeal to consumers will be further enhanced. The market penetration rate of domestic new energy passenger vehicles will further increase, and it is expected to reach 46% and 54% in 2025 and 2029, respectively.   PSR

Jack Hao Is Senior Research Manager-China, for Power Systems Research