Zhejiang LEAPMOTOR TECHNOLOGY CO., LTD. (hereinafter referred to as 'LEAP') successfully went public on September 29, 2022, with a global issuance of 130,819,100 shares at an issue price of HK$48.00 per share.
During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, sponsor, and other professional intermediary institutions in completing the writing of relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), facilitating communication between the issuer and the Stock Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on industry-related issues from the Stock Exchange.
Overview of China's New Energy Passenger Vehicle Market
According to Frost & Sullivan data, China is the world's largest passenger vehicle market by sales volume in 2021. In 2021, global passenger vehicle sales were approximately 6290 million units, of which 2090 million units were sold in China. China's passenger vehicle sales are expected to grow to 2120 million units by 2026, accounting for 30.9% of the global total sales volume in 2026.
New energy passenger vehicles include pure electric passenger vehicles (EVs), plug-in hybrid passenger vehicles (PHEVs), and extended-range electric passenger vehicles (EREVs). In 2021, the sales volume of new energy vehicles in China reached 3.3 million units. Based on the sales volume in 2021, China has the world's largest new energy vehicle market, approximately twice the size of the entire European market and about five times that of the US market. By 2026, the sales volume of new energy vehicles in China is expected to reach 10.6 million units, with a compound annual growth rate of 26.0% since 2021, accounting for 43.9% of the global new energy vehicle market. As new energy vehicles rapidly replace fuel vehicles, it is expected that the sales volume of new energy vehicles in China's passenger vehicle market will exceed that of fuel vehicles for the first time in 2026.
The new energy vehicle market in China reached a growth inflection point in 2021, with the growth rate continuously rising. The penetration rate of new energy vehicles in China's passenger car market has rapidly increased from 2.4% in 2017 to 16.0% in 2021, and it is expected to rise from 22.4% in 2022 to 50.1% in 2026. New energy vehicles are becoming increasingly popular among mainstream consumer groups. It is expected that the mid-to-high-end mainstream market with an estimated price range of RMB 150,000 - 300,000 yuan will become the largest and fastest-growing segment in the new energy vehicle market in China starting from 2022.
The following figure illustrates the sales volume of passenger vehicles in China from 2017 to 2026, classified by power source, as well as the penetration rate of new energy vehicles. It also shows the sales volume and proportion of China's global new energy vehicle market in 2021 and 2026:
Sales volume of passenger vehicles in China by power source, penetration rate of new energy vehicles, and global sales volume of new energy vehicles by region from 2017 to 2026 (forecast)
Note: The new energy vehicle sales figures in the chart include pure electric passenger vehicles (EV), plug-in hybrid passenger vehicles (PHEV), and extended-range electric passenger vehicles (EREV).
Data source: China Association of Automobile Manufacturers, China Passenger Car Market Information Joint Conference, Frost & Sullivan analysis
Electric vehicles have become the most popular type of new energy vehicle in China. According to Frost & Sullivan data, in 2021, the penetration rate of electric vehicles in China's new energy vehicle market reached 82.0%. The penetration rate of electric vehicles in China's passenger car market has risen from 1.9% in 2017 to 13.1% in 2021, and is expected to climb from 18.2% in 2022 to 40.6% in 2026.
China's Electric Vehicle Sales and Penetration Rate, Forecast from 2017 to 2026
Data source: China Association of Automobile Manufacturers, China Passenger Car Market Information Joint Conference, Frost & Sullivan analysis
The mid-to-high-end mainstream market is expected to become the largest and fastest-growing segment in China's new energy vehicle market.
In 2021, new energy vehicles priced between RMB 150,000 and 300,000 accounted for 36.2% of China's total new energy vehicle sales. It is expected that this segment will become the largest and fastest-growing market segment in China's new energy vehicle market starting from 2022, with an annual growth rate of 59.6% in 2022. The sales volume of this segment is expected to increase from 1,207,000 units in 2021 to 5,209,000 units in 2026, with a compound annual growth rate of 34.0%. By 2026, it is estimated that new energy vehicles priced between RMB 150,000 and 300,000 will account for 49.1% of China's total new energy vehicle sales and become the main driving force for growth in the market.
New energy vehicle sales in China by price range
Forecast from 2017 to 2026
Data source: China Association of Automobile Manufacturers, China Passenger Car Market Information Joint Conference, Frost & Sullivan analysis
The rapid growth in the sales of new energy vehicles reflects consumers' increasing demand for automotive intelligence, as well as the continuous improvement of charging infrastructure for new energy vehicles and their growing market acceptance. Before 2019, the sales of new energy vehicles in China were mainly driven by the following factors: (i) lower ownership costs of new energy vehicles, and (ii) the enthusiasm for trying out new models with cutting-edge technology and advanced features. Therefore, in the past, the main customers of new energy vehicles were consumers who could afford new energy vehicles priced below RMB 150,000 and 'tasters' of high-end models.
Looking ahead, consumers who purchase new energy vehicles as their first car will demand more complex intelligent technology levels and a wider range of intelligent connected features. In addition, with the increase in disposable income among Chinese residents and the implementation of policies encouraging childbirth, more families expect to purchase a second vehicle or replace an existing one to meet their growing travel needs, and they will pay more attention to the size of the interior space. Therefore, new energy models with intelligent functions, spacious interior design, and reasonable prices will become the top choice for Chinese consumers, especially those priced between 150,000 and 300,000 yuan, which are expected to gain a larger market share.
Trends in China's New Energy Vehicle Market by Vehicle Class
New energy vehicles in China are mainly classified into five grades based on wheelbase, taking into account factors such as vehicle length and model type. These grades are A00, A0, A, B, and C. In 2021, B, A, and A00 grade models constituted the three major sub-markets in the new energy vehicle market, with market shares of 30.6%, 28.5%, and 27.0% respectively. It is expected that B and A grade models will continue to provide consumers with superior value propositions and attract mainstream consumer groups. By 2026, the market share of B, A, and A00 grade models is expected to reach 36.4%, 30.6%, and 24.4% respectively, totaling 91.4% of China's total new energy vehicle sales.
Sales volume of new energy vehicles in China classified by grade
Forecast from 2017 to 2026
Note (1): According to the 'Terminology and Definitions for Motor Vehicles, Trailers and Motor Vehicle Trains' (Draft for Comment) issued in 2021, GB/T 3730.1
Data source: China Association of Automobile Manufacturers, China Passenger Car Market Information Joint Conference, Frost & Sullivan analysis
Main growth drivers of China's new energy vehicle market
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Advancements in battery technology
As a core component of new energy vehicles, the continuous improvement of batteries has enhanced the performance, safety, service life, and range of new energy vehicles. This progress has alleviated consumers' concerns about the safety of new energy vehicles and range anxiety. At the same time, the slowdown in battery degradation helps maintain vehicle range and improve customer satisfaction. The reduction in battery costs has gradually made the bill of materials (BOM) cost of new energy vehicles comparable to that of fuel vehicles of the same level, highlighting the cost advantage of new energy vehicles due to their lower energy consumption costs.
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Improvement of intelligent technology
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Consumers' preference for new energy vehicles
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Progress in charging technology and expansion of infrastructure
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Positive policies introduced by the Chinese government
In addition, in January 2022, the National Development and Reform Commission, together with several other Chinese central government agencies, jointly issued the 'Implementation Plan for Promoting Green Consumption', demonstrating the Chinese government's firm determination to promote new energy vehicles through supportive policies such as gradually lifting purchase restrictions, promoting the implementation of exemption from traffic restrictions, and strengthening the construction of charging infrastructure.
According to the Government Work Report released on March 5, 2022, the Chinese central government plans to continue promoting new energy vehicle consumption.
The 'Opinions on Fiscal Support for Achieving Carbon Peak and Carbon Neutrality' issued by the Ministry of Finance in May 2022 reiterated the above policies, encouraging the implementation of preferential tax policies and improving the government's green procurement policies for new energy vehicles.
In August 2022, the State Council's executive meeting decided that the exemption of vehicle purchase tax for new energy vehicles would be extended until the end of 2023. Together with the existing policy of restricting the registration of fuel vehicles to reduce air pollution, all favorable policies in these countries will stimulate Chinese consumers to purchase new energy vehicles, especially electric vehicles.
Future Trends of New Energy Vehicles
New energy vehicles apply more advanced power and intelligent technologies, which are mainly reflected in the following aspects:
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Improvement in cruising range
New energy vehicle manufacturers are developing more lightweight models by optimizing car structures, streamlining processes, and reducing the materials used. For example, they are applying battery-cell carrier (CTC) technology, which reduces the weight of the entire vehicle without compromising chassis strength and directly leads to an increase in range. In addition, battery suppliers are continuously developing cells with higher energy density, greater safety, and lower costs.
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Application of fast charging technology
In addition to range anxiety, another pain point for driving new energy vehicles is the anxiety about refueling caused by slow charging speeds. Thanks to breakthroughs in silicon carbide materials and related high-voltage fast charging technologies, new energy vehicles will have faster charging speeds and higher battery efficiency.
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Customizable intelligent cockpit
The connected car ecosystem and advanced wireless communication technologies have accelerated the application and development of in-vehicle entertainment systems, providing numerous intelligent interactive functions such as voice recognition and interaction, touch panels, and in-car applications, achieving a more personalized and content-rich interactive experience. Intelligent cockpits are expected to offer more custom vehicle features to enrich users' travel experiences. Therefore, new energy vehicle manufacturers with excellent intelligent connectivity technology will possess an industry competitive advantage.
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More advanced autonomous driving technology
New energy vehicle manufacturers are committed to providing a safer driving experience while reducing manual intervention. Leading companies in the new energy vehicle sector have made significant investments in ADAS/autonomous driving technology, which requires specialized research and development in advanced machine learning algorithms, multi-level sensors, and powerful computing power. Pure vision perception, lidar, and their integrated solutions are currently the mainstream approaches to autonomous driving technology. In addition, it is becoming increasingly common for new energy vehicle manufacturers to offer ADAS/autonomous driving as a paid service.
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Continuously upgrade intelligent features through OTA
As an intelligent technology, OTA provides a convenient and cost-effective way to improve and extend smart features. Leading new energy vehicle manufacturers can upgrade the entire vehicle software and firmware through OTA. New energy vehicle manufacturers that achieve vertical integration of software and hardware and a more centralized electronic and electrical architecture can speed up OTA updates, which will become a major focus of the industry. Customers can choose more additional paid features and services through cloud-based OTA in the future.
Market competition pattern of electric vehicles in China
As of the first half of 2022, about 70 automakers in China sold new energy vehicles. The main participants in the Chinese new energy vehicle market are emerging electric vehicle companies and fuel vehicle manufacturers that produce new energy vehicles. In the first half of 2022, the top 25 new energy vehicle companies accounted for more than 90% of the overall new energy vehicle sales in China. Newly joined new energy vehicle companies have quickly seized market opportunities with their innovative intelligent technologies and product differentiation.
At the same time, fuel vehicle manufacturers have also quickly adapted to the rapidly growing electric vehicle market by launching intelligent electric vehicle models, leveraging their established brand and traditional manufacturing technology. New energy vehicle manufacturers compete in key factors such as electronic and electrical architecture performance, driving functions, quality, reliability, and price, as well as design, brand awareness, and user experience. In 2021, Leapmotor sold approximately 43,900 electric vehicles, ranking fourth among emerging electric vehicle companies in China by sales volume.
Top 5 Emerging Electric Vehicle Companies in China by Sales Volume in 2021 and the First Half of 2022
Data source: Frost & Sullivan analysis, Sino-Vietnam Chamber of Automotive Industry
Among the cars sold to C-end customers by emerging electric vehicle companies in China in 2021 and the first half of 2022, the Leapmotor T03 ranked third. The following table lists the top five models sold to C-end customers by emerging electric vehicle companies in China in 2021 and the first half of 2022, ranked by sales volume:
Top 5 Models Sold to C-end Customers by Emerging Chinese Electric Vehicle Companies in 2021 (Based on Sales)
Data source: Analysis by Frost & Sullivan, Sino-Chinese Automotive Centre
Top 5 Models Sold to C-end Customers by Emerging Chinese Electric Vehicle Companies in the First Half of 2022 (Based on Sales)
Note: Sales volume is calculated based on the number of insured vehicles from Chinese automobiles registered with the China Automotive Center.
Data source: Analysis by Frost & Sullivan, Sino-Chinese Automotive Centre
Frost & Sullivan has extensive research experience in the automotive and transportation industries, assisting well-known companies in successfully listing on capital markets. Successful listings include: DBS Global (2418.HK), Kuaidou Didi (2246.HK), NIO (NIO.SGX), NIO (9866.HK), Cangang Railway (2169.HK), YGMZ (YGMZ.NASDAQ), Asia Express (8620.HK), InfinityL&T (1442.HK), TOMOHOLDINGS (6928.HK), EH (EH.NASDAQ), Aodima (8418.HK), Xiangxing International (8157.HK), CIMC Vehicle (1839.HK), Xunlong (1930.HK), CSSC Leasing (3877.HK), Chengdu Expressway (1785.HK), Tianrui Automotive Interior (6162.HK), Perian Holdings (2885.HK), Huazi International (2258.HK), Pulin Chengshan (1809.HK), NIO (NIO.NYSE), Wanli Da (8482.HK), Qilu Expressway (1576.HK), Yingheng Technology (1760.HK), Asia Industry (1737.HK), Ruifeng Power (2025.HK), Gaomeng Technology (8065.HK), Hebei Yichen (1596.HK), Zhengli Holdings (8283.HK), Jun'ao Holdings (8035.HK), Yade Group (1585.HK), Yihai Car Rental (EHIC.NYSE), Xinchen Power (1148.HK), Zhengxing Wheels (ZX.NYSE), Shuanghua Holdings (1241.HK), Changche Bridge (1039.HK).
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*The above order is not sequential and is arranged in reverse chronological order based on listing time.
