Xu Haidong, China Association of Automobile Manufacturers

According to the statistics of China Association of Automobile Manufacturers, the production and sales of new energy vehicles in China reached 3.023 million and 2.99 million units respectively from January to November 2021, both marking an increase of 1.7 times year on year, and the market penetration hit 12.7%. In November, the production and sales of new energy vehicles were 457 000 and 450 000 units respectively, up by 1.3 times and 1.2 times from a year ago. The market penetration rose to 17.8% in the month, in which, the market penetration of new energy passenger vehicles reached 19.5%.

China's new energy vehicles exceeded 3 million units in 2021, which is a milestone for the market. According to the Energy-saving and New Energy Automobile Industry Development Plan (2012-2020), the government’s target is that the capacity of pure electric vehicles and plug-in hybrid vehicles should reach 2 million units by 2020. However, in fact, the production and sales of new energy vehicles only hit 1.366 million and 1.367 million units respectively in 2020, far from the original target. In the context, the sales of more than 3 million units in 2021 becomes a strong stimulus to the plan, which indicates that China's new energy vehicle market has returned to the trajectory of normal development and growth.

There are six reasons behind the rapid growth of China's new energy vehicle market:

First, the central government is providing unwavering and continuous support to the development strategy of new energy vehicles, which has promoted sustainable development of the new energy vehicle market. The State Council issued the Plan for Adjustment and Revitalization of the Automobile Industry in 2009 to set up a strategy for promoting new energy vehicles; the State Council issued the Decision to Speed up the Cultivation and Development of Strategic Emerging Industries in 2010, which specified that the new energy vehicle industry has become one of the top ten strategic emerging industries; the State Council released the Energy-saving and New Energy Automobile Industry Development Plan (2012-2020) in 2012, which formulated specific plans and targets for the development of new energy vehicles; President Xi Jinping said during his inspection of the Technology Center of Shanghai Automotive Industry Corporation in 2014 that developing new energy vehicles is the only way for China to march from a big automobile country to a powerful automobile country; in 2015, the State Council printed Made in China 2025, in which, the sector of "energy saving and new energy vehicles" was put forward as one of the ten key areas of development. The Ministry of Industry and Information Technology, the National Development and Reform Commission and the Ministry of Science and Technology published the Medium and Long-term Development Plan of the Automobile Industry in 2017, in which, new energy vehicles and intelligent connected vehicles were promoted as special projects. These national-level policies have unswervingly navigated the development of the new energy vehicle industry against the unprecedentedly great changes and challenges in the automobile industry, and have played a vital role in promoting the development of China's new energy vehicle industry.

Second, backed by the supportive national policies, automobile manufacturers were making great efforts to develop new energy vehicles. They kept doing research & development and carrying out experiments, and accumulated a lot of experience and lessons. However, after the sharp retreat of government subsidies for new energy vehicles in 2019, manufacturers had to make strategic choices. Bracing new energy vehicles means bracing the future, but as the cost of batteries is relatively high, new energy vehicles are suffering losses. Thus, a barbell market structure is seen, with low-end vehicles (above class B vehicles) on one side of the barbell and higher-end vehicles (such as A00, A0) on the other. The latter is not to pursue long cruising mileage, and instead, it reduces battery loading, so amazing models such as MINI EV have been rolled out.

Third, the supply chain of China's new energy vehicles has gradually developed in line with the growing vehicle market given the continuous support from the governmental policies and automobile manufacturers. Consequently, battery producers, motor producers, electronic control manufacturers and some IGBT chip makers have gradually grown bigger-scaled. The quality of their products is getting better and better, the production process and quality control are greatly improving, and the cost of products is gradually decreasing. With the development of new energy vehicle industry, enterprises along the supply chain are industrialized, laying a solid foundation for the development of new energy vehicles and hence providing a solid basis for the explosive growth of China's new energy vehicle market.

Fourth, from the perspective of consumers, the more competitive new energy vehicles in China can meet more needs of electric vehicle consumers. High-end consumers who pursue innovation and environmental protection turn from low-cost luxury brands to high-end new energy vehicles. China's new car-making forces and traditional brand car manufacturers are able to provide such medium and high-end products. There are also needs for small electric vehicles or needs for replacing low-speed electric vehicles from urban families that want to buy the second car and young persons who want to buy the first car, or in lower-tier cities and rural markets. Chinese-brand automobile enterprises provide a large number of models for various consumers.

In general, the synergy of new energy vehicle manufacturers and consumers promoted the explosive growth of new energy vehicles in China in 2021.

Fifth, new energy vehicles are being adopted after nearly a decade of publicity and popularization in China. There are some advantages of new energy vehicles: fast speed, cheap charging and lower noises than traditional internal combustion engine vehicles. Especially in recent years, Chinese-brand new energy vehicles have gained much higher competitiveness because of sharply improved quality, good looking, a variety of configuration and multiple aided driving functions. In addition, the safety technology of batteries has been greatly improved, and the fast-charge technology of some models has also been developed rapidly. In the meanwhile, the cost of new energy vehicles is also declining rapidly. All these give full play to the advantages of new energy vehicles and attract consumers. Furthermore, according to the law of product life cycle, when the market penetration of new energy vehicles reaches 10%, new energy vehicles market will go into a phase of rapid growth.

Sixth, the infrastructure construction of new energy vehicles in China has been big after nearly a decade. As of November 2021, the charging devices in China was 2.385 million units in total, which can basically apply more than 6 million new energy vehicles. China's charging infrastructure is the largest in the world. The rapid establishment of charging devices facilitates the owners of new energy vehicles and promotes the rapid development of new energy vehicles. In addition, regional governments have also issued a number of preferential policies for the use of new energy vehicles so as to promote the industry, such as no traffic restriction, no purchase restriction, parking discounts, charging subsidies, etc.

     Given the above reasons, China's new energy vehicles achieved explosive growth in 2021, and we believe the market will continue the rapid growth in the future. It is predicted that the production and sales of China's new energy vehicles will exceed 5 million units in 2022, with an annual growth rate of about 50%.     

(Note:China Chemical News (CCN) is the Sister magazine of CCR. It is a comprehensive chemical journal in Chinese and also belongs to CNCIC. )