In the past few years, subsidy policies for new energy vehicles in various countries around the world have continuously stimulated new car sales and market development. Among them, the use of new energy, intelligent control systems, and remote information processing has become one of the most notable trends in the global automotive industry. It is expected that in the coming years, policy guidance and transformation of the automotive industry in various countries around the world will continue to drive rapid growth in the global new energy vehicle market.
Current Development Status of the Global Passenger Vehicle Market Driven by Policies
Currently, the global passenger vehicle market is divided by region into three major markets: Europe, North America, and China.
Globally, major passenger vehicle regional markets such as the United States, Canada, Australia, and European countries have successively introduced policies in recent years, including car income tax relief limits and purchase subsidies, further driving the development of the global passenger vehicle market over the past few years. Subsequently, the global passenger vehicle market peaked in 2017 and then entered a continuous decline phase. The main reasons for this were the overall weakness of the world's largest passenger vehicle market, namely the Chinese market, in 2018 and 2019, leading to significant consecutive declines in sales. In addition, due to high market saturation and slow macroeconomic growth, the overall automotive market in Europe and North America lacks momentum for growth.
Entering 2020, the global automotive market was severely impacted by the pandemic. Factories for complete vehicles and parts were shut down and production reduced, and large-scale lockdowns occurred in areas with severe outbreaks. The global automotive industry experienced a serious decline, with global passenger vehicle sales in 2020 being only about 5,925.8 million units, a 15.5% decrease compared to 2019. By 2021, global passenger vehicle sales had reached 6,401.6 million units, a slight decrease compared to 2015. Starting from 2021, optimistic expectations based on large-scale vaccination against COVID-19 and the gradual effective control of the pandemic have led to a gradual recovery in the global passenger vehicle market. It is projected that by 2026, global passenger vehicle sales will reach 7,591.4 million units, returning to a scale close to that of 2018. At the same time, policy guidance and automotive industry transformation in various countries around the world will continue to drive rapid growth in the global new energy vehicle market and further boost the overall growth of the passenger vehicle market space.
Source: World Automotive Organization, Frost & Sullivan
The current development status of China's passenger vehicle market driven by policies
Since 2017, the Chinese automotive industry has issued a series of industry support and guidance policies to achieve transformation and upgrading. The industrial policies of the Chinese automotive industry have been consistent. In 2019, the Ministry of Industry and Information Technology released the 'Draft for Soliciting Opinions on the Development Plan for New Energy Vehicles (2021-2035)', which summarized and revised the 'Development Plan for Energy Conservation and New Energy Vehicles (2012-2020)' and put forward new development requirements and goals. In 2020, the National Development and Reform Commission and the Ministry of Industry and Information Technology issued the 'Innovative Development Strategy for Intelligent Vehicles', promoting the coordinated construction of 5G and connected vehicles, and supporting advantageous regions in creating national connected vehicle pilot zones.
In 2021, the Ministry of Industry and Information Technology issued the 'Limits on Fuel Consumption for Passenger Vehicles', which stipulates the fuel consumption limits for Class M1 vehicles that use gasoline or diesel fuel and have a maximum design total mass not exceeding 3,500 kg. It is one of the important supporting standards for China's automotive energy conservation management. Subsequently, in the first half of 2022, to further stabilize and increase automotive consumption, and to lift restrictions on related purchase quotas and traffic limits in order to increase automotive circulation, the State Council issued the 'Opinions on Further Unleashing Consumption Potential and Promoting Continuous Recovery of Consumption' and put forward specific guiding opinions.
From the perspective of national automotive industry policies and regulations, the new four modernizations have become a consensus for the development and transformation of the automotive industry. By taking electric vehicles as the carrier of power system transformation and intelligentization and networking as the development direction for automotive added value, it ultimately provides diverse services for consumers' travel needs, achieving cross-integration and development among multiple industries such as automotive industry, communication, internet, energy, and electronics.
Against the backdrop of significant changes in China's automotive consumption policies, the Chinese passenger car market has been affected by multiple factors such as market saturation, reduced demand, and a slowdown in macroeconomic growth in recent years. After reaching a historical peak in sales in 2017, China's passenger car sales began to decline. In 2018, China's passenger car sales were 23.71 million units, a year-on-year decrease of 4.1%, marking the first negative growth in nearly 30 years; the downward trend became more pronounced in 2019, with total sales amounting to 21.45 million units, a year-on-year decrease of 9.6%.
In the first half of 2020, the Chinese automotive market was severely impacted by the pandemic, with both demand and production sides experiencing significant declines. In February alone, production and sales fell by about 90% year-on-year. Entering May 2020, the epidemic in China gradually came under effective control. With a series of automotive consumption stimulus policies introduced and some consumer demand delayed in the first quarter, the sales volume of passenger cars in the Chinese market showed a continuous growth trend.
Looking at the whole year, the decline in China's passenger vehicle market will narrow from the double-digit forecast for the first half of the year to around 7%. In 2021, passenger vehicle sales increased significantly to 21.482 million units.In the future, driven by the urbanization process and a new round of automotive consumption incentive policies, the overall passenger vehicle market is expected to maintain a growth trend and reach 25.486 million units by 2026, with a compound annual growth rate of 2.1% from 2021 to 2026.
Source: China Association of Automobile Manufacturers, Frost & Sullivan
Policy guidance and the transformation of the automotive industry have driven rapid growth of the new energy vehicle market
In recent years, the use of new energy, intelligent control systems, and remote information processing has become one of the most notable trends in the global automotive industry. The new energy vehicle market will further drive the development of the global and Chinese passenger vehicle markets. At the same time, due to the demand for low-carbon emissions reduction, the proportion of new energy passenger vehicles has gradually climbed in recent years. In recent years, with a series of policies introduced by various countries to support and guide new energy vehicles, new energy vehicles have become a hot topic in industry development. This includes China, where the 'New Energy Vehicle Industry Development Plan (2021-2035)' issued by the General Office of the State Council in November 2020 positioned pure electric models as the main technical direction of China's new energy vehicle industry.It is expected that the share of pure electric passenger vehicles will continue to increase in the future, and their proportion in the overall new energy passenger vehicle market will also rise significantly.
New energy vehicles, compared to traditional fuel vehicles, adopt more technological innovations, including electronic and electrical architectures, vehicle platforms, domain controllers, and connected vehicles. New energy vehicles place more emphasis on user experience, human-machine interaction, and the application of intelligent technologies, with the penetration rate of connected vehicles in new car sales approaching 100%.
New energy vehicles mainly include pure electric vehicles, plug-in hybrid vehicles, extended-range hybrid vehicles, and hydrogen fuel cell vehicles.
Source: Public information, Frost & Sullivan
Divided by new energy power types, China's new energy vehicle market is dominated by pure electric models, with sales accounting for more than 70%.There are two main reasons: 1) The main power source of plug-in hybrid models still comes from traditional engines, which are more complex than pure electric vehicles. Therefore, for Chinese automakers with a lower starting point, the technical threshold, R&D costs, and cycle time for pure electric models are shorter; 2) Affected by subsidy policies, the subsidy standards for new energy vehicles in China mainly refer to the battery pack capacity. Pure electric models equipped with larger-capacity batteries can receive higher subsidies, thus providing greater motivation for automakers.
The mainstream technology direction for the electrification transformation of China's automotive industry is the pure electric vehicle (PEV). This has been incorporated into the 'New Energy Vehicle Industry Development Plan (2021-2035)' as part of macro policies. In addition to continuous policy encouragement, from the supply side, the development level of China's PEV industry has rapidly improved. Both the cruising range and intelligent networking capabilities rank among the world's leading levels. The enhancement of product quality has continuously led to PEV products being recognized by the market, thereby driving up the total sales of new energy vehicles.
New energy vehicles have become an industry consensus over the past few years, and policy guidance along with the transformation of the automotive industry will continue to drive rapid growth in the global new energy vehicle market.In the past few years, global new energy vehicle sales have increased from 1.162 million units in 2017 to 6.201 million units in 2021. The proportion of global new energy vehicle sales in total passenger vehicle sales has also risen year by year, increasing from 2.3% in 2017 to 9.7% in 2021.
China's new energy vehicle production and sales volume have ranked first in the world for five consecutive years, accounting for more than 50% of the global total.Affected by urban license plate and administrative restrictions, the promotion of new energy vehicle subsidy policies, as well as a series of restrictive and encouraging policies from the government towards automakers, China's new energy passenger vehicle market has experienced explosive growth since 2019. By 2021, the new sales volume of new energy vehicles exceeded 3.334 million units, and the proportion of new energy vehicles in total passenger vehicle sales nationwide doubled from 6.2% in 2020 to about 15.5% in 2021.
In the past two years, with the reduction in subsidy intensity, the sales growth of new energy vehicles has slowed down, but affected byA new round of preferential policies, especially the extension of subsidy periods and encouragement for foreign-funded enterprises to enter, are expected to continue driving growth in China's new energy passenger vehicles over the next few years. At the same time, against the backdrop of policy guidance and the transformation of the passenger vehicle industry, the growth rate of the new energy vehicle market will also drive overall passenger vehicle market growth.
