China’s electric vehicle industry has developed rapidly in recent years, and the number of electric vehicles in the Chinese market has continued to grow, with pure electric vehicles occupying a dominant position. Driven by the rapid development of electric vehicle-related technologies, the penetration rate of electric vehicles is expected to further increase. At the same time, China’s new energy vehicle subsidy policy has further declined, forcing technology upgrades, which will help auto companies to improve their product competitiveness. The electric vehicle industry, which was driven entirely by policies in the past, will gradually return to the Chinese market.
- Panorama of China electric vehicle industry
An electric vehicle refers to a vehicle that is powered by an on-board power supply and driven by a motor to drive wheels, and meets the requirements of road traffic and safety regulations.
Different from the traditional automobile industry chain, the most important component in the middle reaches of the electric automobile industry chain is the power battery. Therefore, mineral resources such as cobalt ore, nickel ore, and lithium ore, as important raw materials for power batteries, constitute the upstream of the electric vehicle industry chain.
From the downstream of the electric car vehicle manufacturing point of view, and the traditional auto industry, electric cars outside the vehicle manufacturers can adopt batteries, electric control, and motor, without like traditional motor vehicle manufacturers need to master the core technology such as engine, chassis and transmission, it greatly reduces the electric car vehicle manufacture of barriers to entry; In the late market of electric vehicles, service providers such as charging piles and electrical changing stations occupy a relatively important position.
Electric vehicles are the largest branch of new energy vehicles and can easily be mistaken for new energy vehicles. In fact, the coverage of the two is different, but there are also overlapping parts.
New energy vehicles refer to vehicles that use other unconventional vehicle fuels other than gasoline and diesel engines as power sources, including pure electric vehicles, extended-range electric vehicles, hybrid vehicles, fuel cell electric vehicles, hydrogen engine vehicles, and others new energy vehicles, etc.
Electric vehicles generally use high-efficiency rechargeable batteries or fuel cells as their power source. According to different power sources, mainstream electric vehicles in China can be divided into three categories: pure electric vehicles (BEV), hybrid electric vehicles (PHEV), and fuel cell vehicles (FCEV). Due to the limitations of technology and supporting facilities, the three major mainstream electric vehicles have their own advantages and disadvantages.
- Energy replacement and environmental pressure provide opportunities for the development of electric vehicles in China
From February 2019 to September 2020, according to the oil import dependence announced by the China Petroleum and Chemical Industry Federation, China’s oil import dependence is on the rise. According to data released by the Institute of Petroleum Economics and Technology, China’s dependence on foreign crude oil exceeded 70% in 2019, far exceeding the international warning line of 50%.
China’s high dependence on foreign oil has seriously affected China’s energy security. The development of alternative energy sources such as electric power and hydrogen energy has reached the height of the national strategy. Faced with the current severe energy environment, China must reduce its dependence on oil, electric vehicles and other new energy sources. The development of the energy industry is crucial.
During the operation of traditional motor vehicles, a large number of carbon monoxide, hydrocarbons, nitrogen oxides, fine particulate matter and sulfur compounds will be discharged, causing air pollution. At the same time, these primary pollutants will also generate photochemical smoke, acid deposition and other secondary pollutants through atmospheric chemical reaction. Automobile exhaust has a series of adverse effects on urban atmospheric environment, human health and ecosystem.
According to statistics from the “China Mobile Source Environmental Management Annual Report 2020”, in 2019, the total emission of four pollutants from motor vehicles nationwide was 16.038 million tons. Among them, there were 7.716 million tons of carbon monoxide (CO), 1.892 million tons of hydrocarbons (HC), 6.356 million tons of nitrogen oxides (NOx), and 74,000 tons of particulate matter (PM).
Compared with the pollution problem of fuel vehicles, electric vehicles do not have exhaust gas generated by internal combustion engine vehicles, and do not produce exhaust pollution. It is very beneficial to environmental protection and clean air, and it is almost “zero pollution”. Even if a hybrid electric vehicle is pollution-free in the pure electric state, there is no denying that there are still emissions when the internal combustion engine is turned on. Therefore, with the increasing emphasis on environmental protection in China, the electric vehicle industry will have a good opportunity for development.
- The technology continues to mature and the performance of electric vehicles continues to improve
The most critical technology in electric vehicles is the “three-electric” system of electric vehicles that replaces the internal combustion engine and transmission of traditional fuel vehicles, that is, the battery, motor and electronic control system of electric vehicles. In recent years, China’s electric vehicle technology has developed rapidly. Its battery technology has entered the world’s first echelon. Technological advancements have promoted the continuous improvement of the performance of electric vehicles. The performance of domestic electric vehicles in China is gradually catching up with foreign electric vehicle brands.
- China’s electric vehicle ownership continues to rise, production and sales to improve in the long term
Through the rapid development in recent years, China’s electric vehicles have moved from the embryonic stage to the growth stage. Driven by China’s adherence to the pure electric drive strategy, China’s pure electric vehicle ownership accounts for a relatively large proportion of electric vehicles, according to an announcement by the Ministry of Public Security of China. According to the statistics, the number of new energy vehicles in China in 2019 was 3.81 million, of which the number of pure electric vehicles reached 3.1 million, accounting for 81.4%. It is forward-looking that the number of new energy vehicles in China will reach 5.1 million in 2020. Among them, the number of pure electric vehicles will reach about 4.1 million.
Affected by the COVID-19 pandemic in 2020, China’s electric vehicle production and sales have fallen sharply in the first half of 2020. According to data released by the China Automobile Association, in the first half of 2020, the total production of electric vehicles in China was 369,000 and the total sales were 371,700. However, it is worth noting that since the pandemic was gradually brought under control in March, the production and sales of electric vehicles in China have begun to gradually recover. In July 2020, the production and sales of electric vehicles in China ushered in the first year-on-year growth since 2020. Due to the government’s support for the consumption of new energy vehicles and the strong measures of enterprises, China’s electric vehicle production and sales was expected to gradually recover in 2020.
- Challenges and opportunities coexist in the development of electric vehicles in the post-subsidy era in China
At present, China’s electric vehicles are in the early stage of development and are greatly affected by policies. In recent years, China has issued a series of policies to guide and promote the development of China’s electric vehicle industry. In November 2020, the State Council of China issued the “New Energy Vehicle Industry Development Plan 2021- 2035”, it is proposed that by 2025 the sales of new energy vehicles will reach about 20% of the total sales of new vehicles, and that by 2035, pure electric vehicles will become the mainstream of new sales of vehicles. Public sector vehicles will be fully electrified and fuel cell vehicles will be commercialized. Highly autonomous vehicles realize large-scale applications, which effectively promotes the improvement of energy conservation and emission reduction levels and the efficiency of social operations. According to the planning requirements, it is expected that China’s new energy automobile industry will usher in rapid development, and at the same time, electric vehicles will have a large room for growth as the main new energy automobile market.
Since its development, China’s electric vehicle industry has gradually transitioned from being completely driven by policies to being jointly promoted by policies and the market. It is worth noting that in recent years, China’s subsidies for electric vehicles have been declining, and the technical requirements for subsidies have continued to increase. This has put forward new requirements for electric vehicle manufacturers, and changes in subsidy policies have guided car companies to a certain extent. Strengthening technology research and development and expanding scale to reduce production costs are conducive to the survival of the fittest in the electric vehicle industry.
- The rapid development of Chinese domestic car brands
From the perspective of new energy vehicle brands, hundreds of major manufacturers are contending, and Tesla of the United States has become the most popular new energy passenger vehicle in the global market.
It is worth noting that China’s electric vehicle brands developed rapidly in 2020. Among them, BYD has gained a good reputation in the high-end electric vehicle market. Since its listing, sales of SAIC-GM-Wuling Hongguang have continued to rise, occupying a dominant position in the economic vehicle market in China. According to the November sales data released by the China Passenger Car Market Information Association, in the new energy vehicle sales-EV sales ranking list in November 2020, the sales of Hongguang MINI EV were 28,246, ranking first.
Model 3 ranked second with 21,604 vehicles sold, and the cumulative sales in 2020 reached 111,645. In November, the sales of ORA Black Cat (or R1) from Great Wall Motors was 9,463, ranking third, and the sales of BYD Han EV and Qin EV ranked fourth and eighth.
The rapid development of electric vehicles has attracted many new car manufacturers. From the perspective of the sales of new car manufacturers, according to the data released by the China Passenger Car Market Information Association, the cumulative sales of Ideal ONE from January to November 2020 are 26,498. The NIO ES6 has accumulated sales of 25,468 vehicles, ranking second, and Weltmeister EX5 has accumulated sales of 19,648 vehicles, ranking third.
- Multi-party capital layout investment decisions become more rational
In recent years, China’s favorable policies for electric vehicles have been frequent, and industry investment has been hot. Whether it is social capital, state-owned capital or Internet giants, all have begun to get involved in electric vehicle industry investment. It is worth noting that the number of industry investments has decreased since 2019, but the investment amount has increased. On the one hand, it indicates that the investment direction of the industry has begun to tend to be more mature and high-quality companies with better growth potential, and companies with weaker competitiveness that lack financial support will gradually be eliminated.
- The era of great development of China’s electric vehicles has arrived
Basically, everything is ready for the large-scale promotion of electric vehicles in China. With the successive introduction of local subsidy policies, the era of large-scale development of electric vehicles in China has come. However, from the market data and reality of the past two years, electric vehicles are experiencing the embarrassment of “big thunder and little rain”. Although the policy is very hot, the market response is very cold. Factors such as poor supporting facilities, consumer concerns about battery life, and the trouble of long-term charging still hinder the further maturity of the Chinese electric vehicle market.
With the continuous improvement of China’s electric vehicle-related supporting facilities, the performance of electric vehicles will continue to improve. The scale of China’s electric vehicle industry is expected to grow rapidly. It is estimated that China’s electric vehicle sales will reach 6.2 million by 2026.