Chinese Automakers Need a Rational Approach that Ensures their Viability, Sa...

AsianFin— Guangzhou Automobile Group (GAC) chairman said that China's development in the new energy vehicles (NEVs) sector has been ahead of the schedule by ten years, leaving foreign friends amazed.

Zeng Qinghong, Chairman of Guangzhou Automobile Group, made the comments at the 2024 China Automobile Chongqing Forum held on Thursday. He quoted foreigners as saying that "Wasn't it supposed to take another ten years to develop NEVs?"

By 2025, NEV sales are expected to reach around 20% of total vehicle sales, and by 2035, the core technology of NEVs will reach international advanced levels, according to China's New Energy Vehicle Industry Development Plan (2021-2035).

However, the current development has far exceeded the originally set targets.

Data from the China Association of Automobile Manufacturers shows that in 2023, China's NEV production and sales reached 9.587 million and 9.495 million units respectively, representing year-on-year growth rates of 35.8% and 37.9%. The market share reached 31.6%, up 5.9 percentage points from the previous year. In the first four months of this year, China's NEV production and sales reached 2.985 million and 2.94 million units respectively, with year-on-year growth rates of 30.3% and 32.3%.

In terms of passenger vehicles, data from the China Passenger Car Association indicates that in 2023, China's NEV passenger car sales reached 7.736 million units, with a year-on-year increase of 36.2% and a market share of 35.7%, up 8.1 percentage points from the previous year. In the first four months of this year, NEV passenger car sales reached 2.448 million units, with a year-on-year growth rate of 32.9% and a market share of 38.1%. In April, the penetration rate of new energy passenger cars reached 43.7%, up 11.7 percentage points from the same period last year.

In the first half of April, the penetration rate of new energy passenger cars reached a milestone: a 50% share of total passenger cars.

At this rate of development, it's possible to reach 50% by 2025, significantly ahead of the national target, Zeng noted.

However, it should be noted that the rapid development of the NEV industry is not solely attributed to pure electric vehicles; plug-in hybrid vehicles are also playing a major role.

Data from the China Passenger Car Association shows that of the 77.36 million NEVs sold in 2023, 51.44 million were pure electric vehicles and 25.92 million were plug-in hybrid vehicles. While the penetration rate of pure electric vehicles was 23.7%, the figure for plug-in hybrid vehicles was as high as 82.5%, while pure electric vehicles only accounted for 20.8% of total cars.

In the first four months of 2024, the sales of pure electric vehicles and plug-in hybrid vehicles grew 14.3% and 72.6% year over year to 1.435 million units and 1.013 million units respectively.

Therefore, according to forecasts from relevant research companies, by 2030, the market share of plug-in hybrid vehicles (including extended-range vehicles and hybrid vehicles), pure electric vehicles, and conventional fuel vehicles will be 40%, 30%, and 30% respectively. In other words, plug-in hybrid vehicles will dominate the market by 2030.

Among the top 10 models sold in 2023, both plug-in hybrid and pure electric versions were offered, and plug-in hybrid versions accounted for the majority of sales in seven models. For example, the annual sales of BYD Qin PLUS reached 400,000 units, with plug-in hybrid and pure electric versions accounting for 69% and 31% respectively.

Surveys also show that today’s consumers prefer hybrid vehicles, and it is related to the current energy structure, Zeng said.

In 2023, 69.9% of total electricity was generated with thermal fuels, the dominant fuel. Wind power, solar power, dyropower and nuclear power as a share of total electricity were 9.1%, 3%, 13% and 5% respectively.

Pure electric vehicles, plug-in hybrid vehicles, and conventional fuel vehicles will coexist for a long time, Zeng pointed out.

China promotes new energy vehicles for environmental protection, energy conservation, and energy security, so there should be a multi-energy structure in the future, Zeng highlighted.

However, Zeng noted that the fast growth in new energy vehicles production and sales was achieved at the cost of cutthroat competition in the industry. He warned against short-sighted practices focused solely on immediate gains, stressing the importance of long-term thinking and strategic planning. Zeng's remarks echoed a sentiment shared by many industry leaders, urging stakeholders to prioritize sustainable growth over fleeting victories.

“This is not a sustainable way. What is the purpose of a company? It is profitability. And why do automakers pursue profitability? It is to make contributions to society, including paying taxes and providing employment opportunities,” Zeng said, adding that the reality is that companies are laying off employees, including Guangzhou Automobile Group.

“Will this approach benefit society and the country? Auto companies should have a broad view and a strategic perspective, and have a long-term strategy rather than focusing only on short-term gains,” Zeng noted, adding that automakers should stand on the national perspective and think about long-term development.

In addition, Zeng suggested that after the proportion of pure electric vehicles among new energy vehicles exceeds 50%, government departments should consider the issue of "equal rights for both fuel and electric vehicles."

“How can fuel and electric vehicles be given equal rights? Without profits and efficiency, businesses cannot survive. No company can sustain losses of hundreds of billions,” Zeng pointed out.