China's NEV sector achieves fruitful results in 2022 with higher-level electrification and intelligence

Visitors and press take photos of a car of BYD, China's new energy vehicle (NEV) manufacturer, at the Chengdu Motor Show 2022 in Chengdu, capital of southwest China's Sichuan Province, Aug. 26, 2022. (Xinhua/Shen Bohan)

Driven by electrification and intelligence, China's market landscape of new energy vehicles (NEVs) and its consumer perception evolved at an unprecedented speed in 2022. It is undoubtedly a harvest year with fruitful results in the history of China's automobile industry, the Economic Information Daily reported.

The market penetration rate target of NEVs was achieved ahead of schedule, Chinese brands caught up with joint venture brands and foreign brands, and China surpassed Germany to become the world's second largest automobile exporter.

China's automotive market is undergoing a revolution that is far deeper and broader than expected.

-- The rising market penetration rate of China's NEVs

The growth of NEVs' market penetration rate in China has accelerated since 2021, and was extremely fast in 2022.

According to the data of China Association of Automobile Manufacturers (CAAM), the market penetration rate of NEVs reached 33.8 percent in November 2022 and 25 percent from January to November 2022, achieving the growth target of 25 percent three years ahead of schedule.

China's automotive market is undergoing a revolution. The driving force of the development of electric vehicles (EVs), which was initially policies and licenses, has gradually become the real consumer demand, said Guan Mingyu, Global Managing Partner of McKinsey & Company, and Head of Automotive Consulting of McKinsey Greater China.

According to McKinsey's latest report, the growth of electrification in China's passenger vehicle market increased strikingly in the past few years, from less than 5 percent in the first quarter of 2020 to nearly 30 percent now. Besides, the growth was not limited to first- and second-tier cities in China, but also seen in third- and fourth-tier cities.

The deep reason of the shift of NEVs' driving force from policies to the market demand is the appeal of the products.

From the perspective of the products, NEVs have made rapid technological progress. The product quality and level have been continuously improved and the average technical indicators have taken the leading position, especially the battery technologies, drive motors and intelligence of electronic control systems, said Shi Jianhua, Deputy Secretary-General of China EV100.

From the perspective of the market, the competitiveness of NEV market has continued to be enhanced, the sales volume of the main NEV types has increased, and the consumer recognition has grown day by day, Shi added.

-- The accelerated reshaping of market landscape

In 2022, the structure of the automotive market has changed significantly. For example, there was a significant increase in the market share of Chinese brands, while the market shares for joint venture brands and foreign brands has shrunk, demonstrating that foreign brands are seeing weakening popularity.

According to the data of China Passenger Car Association (CPCA), the retail market share of NEVs of mainstream Chinese brands, including traditional indigenous brands and emerging brands, reached about 83 percent in November 2022, of which the share of traditional indigenous brands exceeded 70 percent.

Relying on new energy products, China's indigenous brands have completely changed the automobile market landscape dominated by joint venture brands in the past fuel vehicle era, said He Songsong, a partner of RIES (China).

The electric vehicles and Chinese brands are gaining more consumer recognition. Chinese consumers have long been willing to pay higher premiums for international brands, but now the advantage of international automakers is gradually disappearing, according to Peng Bo, Global Managing Partner of McKinsey & Company.

Another major change in the market structure of NEVs is that new brands of traditional automobile enterprises, relying on their product strength, supply chain and channel advantages, have the ability to catch up with new start-up brands with first-mover advantages, showing their strength and potential.

The market has higher trust for the new brands with the background of traditional automobile enterprises, which will drive the sales volume of traditional enterprises to continue to rise, said He Jiankang, senior vice president of China Capital Management Co., Ltd..

For example, the Zeekr 001 model of Zeekr, an intelligent battery electric brand of Geely Auto, started to be delivered in late October 2021. In November 2022, 11,011 vehicles were delivered, up 447.3 percent year on year. With an average price of over 336,000 yuan per order, it became the sales champion of battery electric models of Chinese brands priced at more than 300,000 yuan.

-- A new "business card" of China's intelligent manufacturing

According to CAAM, in the first eight months of 2022, China became the world's second largest exporter as its automobile export volume has surpassed that of Germany.

Data show that China's brand SAIC Motor sold about 883,000 vehicles in the first 11 months of 2022 and the sales volume of its MG brand exceeded 100,000 vehicles, achieving the annual goal of "the first 100,000-vehicles overseas regional market" in advance.

In 2022, Geely Auto's new energy products has accelerated to go global and entered the European market in strategic cooperation with Grand Automotive Group. In Israel, Geely's Geometry C accounts for 24.3 percentage of the local EV market.

At the same time, many automobile enterprises such as GWM, BYD, SAIC Motor and NIO have also focused on the exports to Europe.

The pace of overseas investment of Chinese brands is also more solid. Chery Automobile plans to invest nearly 1 billion U.S. dollars in producing and manufacturing EVs in Indonesia with the annual production capacity estimated to reach 200,000 vehicles.

Nowadays, China's new energy vehicle industry chain has achieved global leadership in both the raw material field and the core components of power batteries. Based on the advantages of the market and industry chain, Chinese automobile brands have ushered in a historic opportunity to achieve global leadership, said Michael Brandtner, a global partner of Ries Europe.

Experts said that the unit price of China's automobile exports is rising, indicating that the export model is changing from low-quality and low-price exports to high-quality and high-price model. Chinese automobile brands should seize the established market advantages of NEVs to build true global brands.