Electric Cars Squeezing Out Conventional Vehicles Making An Equal Policy Playing Field An Imperative (AI Translation)
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文｜财新周刊 翟少辉
By Caixin Weekly's Zhai Shaohui
新能源汽车在中国市场的普及速度远超预期。2024年7月，新能源新车渗透率同比增加11.1个百分点至43.8%，距离拿下市场半壁江山仅有一步之遥。
The adoption rate of new energy vehicles in the Chinese market has exceeded expectations. In July 2024, the penetration rate of new energy vehicles increased by 11.1 percentage points year-on-year to 43.8%, coming close to capturing half of the market share.
乘用车市场进展最为迅速。新能源乘用车在7月单月的零售渗透率首次突破50%，达到51.1%，历史性超过燃油车。中国汽车工业协会和全国乘用车市场信息联席会（下称“乘联会”）分别在8月初发布了上述数据。
The passenger car market has seen the most rapid progress. In July, the monthly retail penetration rate of new energy passenger vehicles surpassed 50% for the first time, reaching 51.1%, historically exceeding that of gasoline vehicles. The China Association of Automobile Manufacturers and the China Passenger Car Association (CPCA) released the above data in early August.
主管部门在2020年定下目标，希望中国新能源汽车销量在2025年达到新车总销量的20%。据中国汽车工业协会统计，新能源汽车提前三年跨过门槛，2022年的渗透率就达到了25.6%。2024年上半年，新能源汽车的市场占有率升至35.2%。
In 2020, the regulatory authorities set a target for China to have new energy vehicles (NEVs) account for 20% of total new car sales by 2025. According to statistics from the China Association of Automobile Manufacturers, NEVs surpassed this threshold three years ahead of schedule, reaching a penetration rate of 25.6% in 2022. By the first half of 2024, the market share of NEVs rose to 35.2%.
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- Chinese new energy vehicle (NEV) market penetration nearly reached 50%, with new energy passenger vehicles surpassing 50% in July 2024.
- Policies favor NEVs, leading to a mixed economic impact, with increased NEV market share but declining tax revenues from traditional vehicles.
- Calls for policy equality between fuel and electric vehicles are intensifying as NEVs disrupt market dynamics, with discussions on the gradual phase-out of tax exemptions and subsidies.
The Chinese market for new energy vehicles (NEVs) has rapidly expanded, surpassing expectations. In July 2024, NEVs achieved a 43.8% market penetration rate, an 11.1 percentage point increase year-on-year. The passenger car sector leads this growth, with NEVs taking a 51.1% monthly retail penetration rate, overtaking gasoline vehicles for the first time [para. 1].
Initially, China set a goal for NEVs to cover 20% of total new car sales by 2025; however, NEVs reached 25.6% by 2022, and 35.2% by the first half of 2024 [para. 3]. This fast adoption has pressured gasoline-powered car sales, leading to varied outcomes for automakers. For example, BYD, focusing on NEVs, has seen significant growth, while traditional automakers lose market share [para. 4].
Analysts forecast that NEVs will cover 80% of the market by 2030, with plug-in hybrids composing 60% [para. 5]. Calls for equal rights for NEVs and gasoline vehicles are growing. In June 2024, Zeng Qinghong, Chairman of GAC Group, suggested regulatory parity when NEVs reach a 50% market share,[para. 6][para. 7]. Currently, NEVs benefit from tax exemptions and unrestricted access in cities, contrasting with traditional fuel vehicles facing purchase limitations and higher taxes [para. 9].
Industry experts argue this economic imbalance contributes to the rapid NEV adoption. The volatility has led traditional manufacturers to express concerns about 'unfair competition' squeezing their sales and profit margins [para. 11]. This rapid NEV growth amid a slowing economy has prompted calls for reviewing these policies [para. 12][para. 13].
Changes in tax revenue reflect these shifts. In the first half of 2024, vehicle purchase tax revenue fell by 5.4% year-over-year, despite overall vehicle sales increasing by 1.4% [para. 14]. Tax revenues tied to fuel and vehicle sales amount to over 1 trillion yuan yearly, representing significant fiscal contributions [para. 15]. With evolving electricity and taxation landscapes, discussions about imposing taxes on NEVs have become salient [para. 53].
Despite the progress, policy exits like reduced financial subsidies for NEVs since 2019 and their planned complete removal by 2027 pose challenges. Debate emerges about whether to accelerate reaching equal rights for both vehicle types [para. 16][para. 19]. Some experts suggest a gradual, cautious approach, allowing NEV companies to stabilize economically without overwhelming the market [para. 26][para. 29].
The core argument for NEVs includes their inherent environmental benefits, contributing to goals like "carbon neutrality" and enhancing energy security [para. 20][para. 21]. However, the shift has broader implications, including for the petrochemical industry. As NEVs reduce gasoline demand, refineries' gasoline yields and profits are shrinking, potentially heralding systemic changes for the petrochemical sector [para. 33][para. 34][para. 35].
China’s NEV market's rapidization mirrors global enhancements. Studies affirm that while NEVs present high initial emissions from production, their lifecycle emissions remain lower, especially as electric grids incorporate more renewable energy [para. 44][para. 45]. This cleaner energy pivot aligns with sustainable development goals, further encouraging NEV proliferation [para. 48].
Former subsidy program changes in 2019 caused an immediate market cooling but ultimately led to stronger industry consolidation and reduced reliance on subsidies [para. 50]. Likewise, upcoming tax policy changes will test NEVs' market-ready robustness, potentially straining weaker companies out of the industry [para. 57][para. 58].
Achieving "equal rights" between gasoline and NEVs remains complex, coupled with market adjustments and policy shifts. Ongoing evaluations regarding NEV profitability and sustainable growth trajectories are imperative as China navigates this sector's promising yet challenging landscape [para. 62][para. 63][para. 73].
- BYD
比亚迪 - BYD, producing only new energy vehicles, is the major beneficiary of the new energy vehicle (NEV) boom in China. It's one of the few automakers among the top ten in passenger car sales in June to achieve positive growth, attributed entirely to its NEV business.
- Geely Automobile
吉利汽车 - Geely Automobile achieved positive growth in June among the top ten passenger car manufacturers in China. Geely's growth was driven by its successful engagement in the new energy vehicle (NEV) market.
- Chery Automobile
奇瑞汽车 - In June, Chery Automobile was one of the three automakers achieving positive growth in passenger car sales, alongside BYD and Geely. Chery's growth benefited from its focus on new energy vehicles.
- Tesla
特斯拉 - Tesla's sales in China's new energy vehicle market declined, placing it among the few companies with negative growth in this segment. Despite strong performance in earlier years, Tesla, along with GAC Aion and Great Wall, saw lower sales figures amidst growing competition.
- GAC Aion
广汽埃安 - GAC Aion is a subsidiary of GAC Group focused on new energy vehicles. In 2023, GAC Aion was the third-largest seller of pure electric vehicles globally. The company's general manager, Gu Huinan, supports the idea of "oil-electric equality" but cautions against excessive reliance on electric vehicles, advocating for balanced development.
- Great Wall Motors
长城汽车 - According to the article, Great Wall Motors is among the top ten manufacturers in the new energy vehicle market. However, it experienced a decline in sales, unlike most other companies in the top ten that achieved growth in the new energy sector.
- SAIC Motor
上汽集团 - In June 2024, SAIC Motor's then-general manager, Jia Jianxu, expressed concern about certain companies exploiting low standards to launch plug-in hybrid models and leveraging cost and scale advantages for market pricing. Recently, he was promoted to president of SAIC Group.
- SAIC Volkswagen
上汽大众 - In April, before the Beijing Auto Show, then-SAIC Volkswagen General Manager Jia Jianxu highlighted the competitive advantages enjoyed by electric vehicles due to various policy incentives. He noted that some companies launch plug-in hybrid models meeting just the basic standards to leverage cost and scale advantages in mainstream market pricing. Jia has recently been promoted to President of SAIC Group.
- Changan Automobile
长安汽车 - In the article, Changan Automobile's chairman, Zhu Huarong, is mentioned for asserting that fierce market competition, termed "car company mutual rolling," helps drive market rationality, favoring competitive companies. He emphasizes that these efforts are not about demonizing price wars but enhancing the industry's quality by driving out weaker players.
- XPeng Motors
小鹏汽车 - XPeng Motors' chairman, He Xiaopeng, predicted that consumers will quickly embrace AI-enhanced cars, similar to their shift from gasoline to electric vehicles. On August 20, XPeng introduced a budget-friendly electric car with high-level intelligent driving capabilities. They aim to dominate the market with models offering advanced driver-assistance features at affordable prices, highlighting their commitment to innovation and accessibility in the EV sector.
- Li Auto
理想汽车 - Li Auto is one of the few globally profitable new energy vehicle companies, alongside Tesla and BYD. Despite concerns over rapid development and competitive pressure on traditional fuel vehicles, Li Auto's growth highlights its market potential. CEO Li Xiang likens the electric vehicle industry's future landscape to that of the concentrated smartphone market.
- 2020：
- Regulatory authorities set a target for China to have NEVs account for 20% of total new car sales by 2025.
- 2022：
- NEVs surpassed the 2025 target three years ahead of schedule, reaching a penetration rate of 25.6%.
- First half of 2024：
- The market share of NEVs rose to 35.2%.
- June 2024：
- Among the top ten passenger car manufacturers in terms of sales, only BYD, Geely, and Chery achieved positive growth; Zeng Qinghong called for equal rights for fuel and electric vehicles to be explored when the market share of NEVs reaches 50%.
- July 2024：
- The penetration rate of new energy vehicles increased by 11.1 percentage points year-on-year to 43.8%; the monthly retail penetration rate of new energy passenger vehicles reached 51.1%, surpassing gasoline vehicles for the first time.
- Early August 2024：
- China Association of Automobile Manufacturers and the CPCA released data confirming the increased penetration rates of NEVs.
- September 1, 2024：
- Fang Haifeng, Chief Expert at China Automotive Technology & Research Center Co., Ltd., stated potential risks in the shift from old to new driving forces in the automotive industry at an industry forum.
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