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Data shows that in July, my country's production and sales of new energy vehicles reached 984,000 and 991,000 respectively, up 22.3% and 27% year-on-year. Among them, the domestic retail penetration rate of new energy passenger vehicles exceeded the 50% mark in July, reaching 51.1%, an increase of 15 percentage points from 36.1% in the same period last year. This is the first time that new energy vehicles have truly exceeded the sales of traditional fuel vehicles in a single month.

It is worth noting that some problems have also emerged under the market share of more than half. Data shows that the overall growth momentum of new energy vehicles has slowed down, and the market structure and product structure are also facing major adjustments. Experts pointed out that in the second half of the year, it is necessary to accelerate the implementation of policies such as old-for-new, continue to boost consumer confidence, and stabilize the automobile market.

Continue to boost consumer confidence

Accelerate the implementation of the old-for-new policy

"New energy vehicle consumption has become a new consumption trend, especially after 'oil and electricity have the same price' and 'electricity is cheaper than oil', driven by the market, more and more consumers are willing to buy new energy vehicles." Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, said that with the advancement of technology and the reduction of costs, new energy vehicle companies in particular have continuously lowered the terminal sales price of new energy vehicles in order to seize market share. The cost-effectiveness of new energy vehicles has been continuously improved, and new energy vehicle consumption has become a new consumption trend. This is the fundamental reason for the continuous increase in the proportion of new energy vehicles.

However, it should be noted that the current consumer market is still weak and consumer confidence is obviously insufficient. A questionnaire survey by Tencent showed that 50.5% of respondents had a decrease or no change in income in the first quarter, and the decrease in income of the middle and low-income groups was relatively obvious, an increase of 11.5 percentage points from the fourth quarter of last year.

Data from the People's Bank of China showed that the resident income confidence index was 47.0 in the first quarter, 6.3 percentage points lower than in 2019, and has been below the boom-bust line for eight consecutive quarters, and the willingness to consume is not high. In 2023, my country's residents' consumption propensity will be 68.3%, 1.8 percentage points lower than in 2019; the People's Bank of China's urban depositor questionnaire survey showed that in the first quarter of this year, the proportion of respondents who tended not to increase or reduce consumption expenditure reached 76.6%. In the first five months of this year, residents' savings increased by 7.1 trillion yuan, and the proportion of time deposits in total deposits increased by 7 percentage points compared with 2019. The combination of factors such as shrinking family wealth and reduced psychological accounts has led to insufficient consumer confidence. In July, domestic automobile sales were 1.793 million units, a month-on-month decrease of 13.3% and a year-on-year decrease of 10.1%; from January to July, domestic automobile sales were 13.048 million units, a year-on-year decrease of 0.3%.

Chen Shihua pointed out that at the policy level, the comprehensive preferential strength of various policies is not small, but because the overall economy is still in a state of recovery, overall consumer confidence is insufficient, which has also affected automobile consumption. Take the old-for-new policy as an example. This is a policy that encourages replacement, but vehicle replacement is often not urgent for consumers, especially when personal and family economic income is affected. Consumers tend to delay vehicle replacement, which makes the policy effect unclear. At the same time, although policies such as old-for-new have been introduced for some time, it takes a certain period of time for the policy to be implemented, especially when it comes to local application procedures and implementation details. Many places often have a long delay in implementation.

Wang Qing, deputy director of the Institute of Market Economy at the Development Research Center of the State Council, also said that the effect of the old-for-new policy will be apparent in the second half of the year. This year, the central and local governments have jointly arranged 16 billion yuan in scrapping and renewal subsidies, which can meet the scrapping and renewal needs of about 1.9 million vehicles, and will support the market in the second half of the year.

To further promote the development of the automobile consumer market, the National Development and Reform Commission and the Ministry of Finance recently issued the "Several Measures on Strengthening Support for Large-Scale Equipment Renewal and Consumer Goods Trade-in", which increased the amount of subsidies for scrapping and updating cars to 20,000 yuan for the purchase of new energy passenger cars and 15,000 yuan for the purchase of fuel passenger cars with a displacement of 2.0 liters or less. Substantially increasing the subsidy standard and further shortening the subsidy issuance period will promote the trade-in policy to better play a role in stimulating automobile consumption.

Wang Qing pointed out that the consumption of new energy vehicles is accelerating, while fuel vehicles are not popular, showing a "ice and fire" situation. If not handled properly, it will not only bring risks to the sustainable development of the automobile industry, but also easily lead to a new round of local economic differentiation and other problems. "It is urgent to speed up policy adjustments, open up the channels for the integration of production capacity and resources of fuel vehicles and new energy vehicles, and achieve the coordinated and mutually promoted development of the two. This is of great significance to consolidate and enhance my country's first-mover advantage in new energy vehicle technology, supply chain supporting advantages, and market innovation planning advantages." Wang Qing judged that this year's automobile sales will increase by about 5%, among which the sales growth of passenger cars will remain at about 3%.

The growth rate of pure electric vehicles continues to slow down

The market share may be surpassed by plug-in hybrid

Data shows that in July, sales of plug-in hybrid (including extended-range) vehicles increased by 80.7% year-on-year, much higher than the 2.6% growth rate of pure electric vehicles, becoming the main driving force for the rapid growth of new energy vehicle sales. In the current new energy vehicle consumption structure, pure electric vehicles account for 53%, plug-in hybrid vehicles 34%, and extended-range vehicles 13%. Compared with 68%, 25%, and 8% in the same period last year, the proportion of plug-in hybrid models has increased significantly. Although pure electric vehicles still account for more than half, according to the current development trend, plug-in hybrid vehicles will soon catch up and become the absolute main force in new energy vehicle sales.

The Passenger Car Market Information Joint Branch of the China Automobile Dealers Association (hereinafter referred to as the "Passenger Car Market Information Joint Branch") believes that Chinese automakers have innovatively developed plug-in hybrid technology, achieved technical breakthroughs in narrow plug-in hybrid and extended-range, enriched the technical lines of new energy vehicles, and achieved a breakthrough advantage in that China's plug-in hybrid accounts for 78% of the world's plug-in hybrid market. Zhang Yongwei, vice chairman and secretary general of the China Electric Vehicle 100 Association, predicted that in 2024, plug-in hybrid vehicles in my country will contribute 1/3 of (new energy vehicle) sales.

Regarding the development of plug-in hybrid models, the debate inside and outside the industry has never stopped. However, with the withdrawal of subsidies and the complete transformation of new energy vehicles to a market-oriented development model, plug-in hybrids, which are "oil-electric" and "no mileage anxiety", are more popular with consumers, and their competitive advantages on the sales side are constantly emerging. In terms of price, plug-in hybrids are about 5,000 to 10,000 yuan cheaper than pure electric models of the same model, and the extended-range version of some models is even cheaper. Especially after the plug-in hybrid's driving range easily exceeded 1,000 kilometers and even moved towards 2,000 kilometers, pure electric vehicles with a driving range of 500 to 600 kilometers are more "unwelcome", and plug-in hybrid vehicles are naturally more popular in the consumer market.

The vigorous promotion of automakers is a major boost to the rapid growth of plug-in hybrid vehicle sales. With the opening of the plug-in hybrid vehicle consumer market, more and more automakers have joined the market promotion camp. For the same new energy vehicle, automakers often launch two versions: plug-in hybrid and pure electric. Except for a few automakers such as Weilai, almost all new energy automakers are vigorously promoting the marketization of plug-in hybrid models. The great variety of models and the advantage of terminal prices have further increased the market share of plug-in hybrid models.

What is more critical is the progress of technology. Companies continue to increase their investment in plug-in hybrid research and development, which has greatly promoted the progress of technology. Plug-in hybrid is no longer a "transitional technology", but an important way for automakers to improve the comprehensive energy consumption level of vehicles. In the process of developing plug-in hybrid technology, the thermal efficiency of traditional fuel engines has been further improved. In terms of driving experience, plug-in hybrid vehicles are not inferior to pure electric vehicles at all.

It is worth noting that, as the main technical route for new energy vehicles, the development of pure electric vehicles has been impacted by plug-in hybrid vehicles. However, with the continuous improvement of power battery technology and the reduction of costs, as well as the advancement of fast charging technology, the continuous improvement of infrastructure and the increasing maturity of business models, its market development has further accelerated. In the future market process, which technical route will ultimately win remains to be tested by the market.

The high-end track is heating up

300,000 yuan configuration 200,000 yuan price

Data shows that from January to July, the sales volume of domestically produced high-end brand passenger cars reached 2.671 million units, a year-on-year increase of 9%. High-end brands have been playing a role in boosting consumption in the current weak passenger car consumer market. However, with the entry of more and more new brands, this market is full of vitality, but also presents a trend of fierce competition.

Consumption upgrade is the main feature of my country's passenger car market in the past two years, which truly reflects the travel needs of the people after the improvement of their living standards. Wang Qing said that the proportion of commodity consumption in consumer expenditure has been decreasing, while the demand and proportion of service consumption have been increasing; consumption has tended to be personalized, green, and experiential, the market has been continuously segmented and rapidly iterated, from product orientation to service orientation, from economies of scale to niche economies, and both production methods and circulation methods will change, which are the main characteristics of residents' consumption upgrade. The consumption upgrade in the automotive field also well explains these two characteristics.

Specifically, from January to July, among new energy passenger vehicles, A-class and B-class cars were the main force in the market, especially B-class cars, whose sales reached 1.83 million units, basically the same as A-class cars (1.853 million units); D-class cars had the highest increase, which fully demonstrates the current strong demand in the high-end new energy vehicle market.

Seeing this demand in the high-end market, domestic brands have taken the lead in achieving breakthroughs in the field of new energy vehicles. New car-making forces represented by "Wei Xiaoli" have taken the lead in the high-end new energy market by virtue of their advantages in intelligence and personalization, and have won a place in the competition with traditional high-end brands such as BBA. Li Bin, founder, chairman and CEO of Weilai Automobile, frankly admitted that Weilai's competitors are BBA (Mercedes-Benz, BMW, Audi), and many Weilai owners were originally BBA users. The average selling price of Weilai's models has exceeded 400,000 yuan. Today, the breakthrough of domestic brands in the high-end market has taken shape. Almost all domestic brand car companies have launched new high-end new energy brands, and most of them have achieved certain market results. It can be said that domestic brands have formed a climate in the high-end new energy vehicle market and have a certain competitiveness as a whole.

It cannot be ignored that the high-end market, with its increasing sales share, has provided development opportunities for more companies and brands. However, as more and more brands join in, this track will become more and more crowded, and will gradually fall into a red ocean state. The first is the pressure from the price end. In the "price war" of the past two years, high-end brands have not been spared. The "300,000 yuan configuration and 200,000 yuan price" has put high-end brands under tremendous operating pressure. Although in the current "price war", traditional high-end brands represented by BBA took the lead in "withdrawing from the circle", most high-end brands are still deeply trapped in it and struggling. Even BBA, which has officially announced its withdrawal from the "price war", cannot completely survive on its own and has to take other measures to grab the market. Other high-end brands, such as "Wei, Xiao, and Li", have also had to lower their posture and take more measures to benefit consumers to increase sales.

Business conditions are not optimistic

Joint venture brands face greater crisis

"Whoever wins the new energy will win the world." This judgment made by the automotive industry a few years ago has now become a reality. In the process of rapid development of new energy vehicles, automakers that failed to complete the electrification transformation in time are now facing bleak operating conditions, and some joint ventures have even been eliminated.

Data released by the China Passenger Car Association show that in July, the retail sales of mainstream joint venture brands were 440,000 vehicles, down 25% year-on-year and 8% month-on-month. The low sales share of new energy vehicles is the main reason for the decline in sales of joint venture brands. At the same time, the penetration rate of new energy vehicles of domestic brands was as high as 73.9% during the same period, while the penetration rate of new energy vehicles of mainstream joint venture brands was only 8.3%.

As the sales share of new energy vehicles continues to increase, the market share of traditional fuel vehicles has further shrunk. Joint venture brands that still rely on traditional fuel vehicles as their main sales force are generally having a hard time, with declining sales, reductions in production capacity in China, layoffs and production stoppages, bankruptcy and liquidation... Joint ventures are constantly exposed to various operational problems.

In order to remain competitive in the Chinese market, developing new energy vehicles has become the only way for these joint venture brands. Therefore, joint venture brands have also begun to vigorously promote the transformation of new energy vehicles. Some companies have accelerated the transformation of new energy vehicles by strengthening cooperation with independent brands that have gained first-mover advantages in the field of new energy vehicles, hoping to reverse the downward trend and continue to remain competitive in the Chinese market.

Lu Yong, deputy general manager of SAIC Passenger Vehicle Company, executive vice president of SAIC Innovation Research and Development Institute, and executive deputy director of the Technology Center, revealed that in the future, SAIC's lower body platform, plug-in hybrid system, smart driving and smart cabin technologies will be cooperated with external parties, and some joint venture brands will be supplied. According to the plan, SAIC will export DMH super hybrid technology to German automakers. Toyota, which is the world leader in ordinary hybrid power, is also planning to introduce plug-in hybrid technology, and the partners are likely to be Chinese brand automakers.

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