China’s NEV market (BEV + PHEV) set remarkable records during Jun-Aug, reaching 531k, 486k, and 529k sales, respectively. These three consecutive monthly figures not only took the top three places for single-month NEV sales in China but also established the enormous market scale of over 500k monthly sales, way above every single market worldwide. Moreover, China’s “leading indicator” automakers’ wholesale to dealers have also reached 570k, 564k, and 632k monthly units and would push to higher sales records in the Chinese car market’s two most important months: September and October. In the current Chinese market, there’s one NEV per four new passenger car registrations, of which BEV and PHEV sales each consist of 3:1. From a global perspective, the estimated passenger vehicle market size this year would be 65.3 million, 2% behind last year’s record and lagging 13% behind 2019’s pre-covid number according to global research units, indicating the car market still hasn’t recovered from the pandemic. However, China’s car market performance in the previous eight months has overcome the massive setback due to city lockdowns in April and achieves 0.1% higher than last year’s figure. As a result of the thriving Chinese NEV market this year, the total registration number over the previous eight months had a 119.7% increase over last year’s figure. We will see a global EV (BEV, PHEV) boom this year, and the prime factor will be the Chinese car market which dominates over half of the total sales.
According to the figures above, EVs have become the driving force behind the post-covid resurrection of the global car market for the next few years, and China’s NEV industry and market development are paragons for every country to study and pursue. Firstly, the Chinese government has already included NEVs in its national development policies and has been actively pushing supporting measures, legislation, and timetable. Additionally, China has set comprehensive objectives regarding energy consumption adjustments (China imports over 70% of its crude oil consumption), progress on environmental goals (currently, China is the biggest CO2 emitter worldwide), and its car industry’s chance of rapid advancements (China’s ICE car tech is vastly behind Germany and Japan). From an industrial and market perspective, China’s outstanding performance is no coincidence:
- A sizable domestic market with various sized cities enables vehicles of different technical levels to co-exist.
- An abundance of raw materials for battery manufacturing.
- A rapid progression of the semiconductor industry that satisfies the high demand for EVs (as opposed to Europe and the US’s production that was affected by the chip shortage, China received a lighter impact).
- A complete self-distribution supply chain system.
- China is now open to international brands taking hold of EV manufacturing (in the era of ICE cars, joint ventures were the norm, with Chinese businesses claiming over half of the share), adding more competitive pressure on self-owned brands.
- Self-owned brands started to venture into overseas markets and expand their business to lower their amortization of development costs.
- A highly-developed AI industry opened up many opportunities for the EV market with autonomous technologies (performance-wise, autonomous technologies are more suitable for EVs than ICE cars).
As China’s EV industry and market stand, their development is ahead of Europe and the US for about two to three years. Another industry giant -Japan- was just turning its attention to EVs last year with Toyota’s hybrid and PHEV tech, falling further behind China’s recent progress. Of course, traditional automakers from these regions and countries would not permanently lose their dominance in the future car industry; aside from their inherent brand identity and loyal customer base, tactics and strategies are getting into shape:
- Multinational technology alliances. Similar to VW-Ford and GM-Honda, worldwide automakers have initiated large-scale cooperation plans.
- Group mergers and acquisitions for resource integration. Last year, FCA and PSA signed a 50-50 merger and combined their subsidiaries to face transitions in the future car industry.
- Double down on their investment in the Chinese market. Whether it’s JV’s production expansion (ex. Porsche will establish an assembly factory in Changchun to commence local manufacturing) or combining the R&D and production departments to form a new plant (ex. Volkswagen Anhui R&D and manufacturing center -owned 75% by VW Group- will fully concentrate on developing EVs for the Chinese market and utilize its German parent company’s modular BEV platform SSP for rapid technological advancement in the next few years), these endeavors all flock to the competitive Chinese market for the ultimate showdown.
- A war for international talent recruitment. Whether it’s VW’s automotive software company CARIAD, Hyundai’s various technical department managerial levels, or Toyota Woven City’s ambitious internet-based project, they’re all heavy investments or product transformation that require worldwide talent to go further.
- Invest in or cooperate with tech companies. With news like this already saturating the market, automotive giants have been ditching their decades-long vertical integration for supply chains and searching for horizontal tech alliances, even directly investing in local Chinese startups to grasp its market’s tech pulse. For example, GM acquired a majority ownership stake of Cruise, Mercedes partnered up with Nvidia, Ford and VW backed up Argo.ai, and Hyundai and Aptiv -a tier-one supplier giant- founded Motional, an autonomous driving tech company.
At the moment of the Chinese NEV market’s 500k sales breakthrough, most overseas traditional automakers are coveting this immense market. However, JV international brands only account for a total of 6% of the Chinese NEV market, while Tesla’s breakthrough among Chinese self-owned brands set an impressive 6.5% market share (that’s right, Tesla eclipses all other international brands’ total NEV sales). From an analysis of the Chinese car market, we could surely identify the shifts in the global car market in five years.