Picking Up Speed

By Li Xiaoyang

Although Chinas auto market shrank in the early months of 2020 as the novel coronavirus epidemic dampened demand， car sales have continued to expand in recent months. Data from the China Passenger Car Association（CPCA） shows that sales dropped 6.8 percent year on year last year， contracting from the year-onyear decline of 7.3 percent in 2019 as resumed sale of new-energy vehicles （NEVs） made key contributions.

According to China Association of Automobile Manufacturers， NEV sales stood at 1.37 million units in 2020 with a year-on-year increase of 10.9 percent. The CPCA projected， the total sales this year could reach 1.5 million units as exports and domestic demands further resume.

“Domestic NEV makers faced production suspension caused by the epidemic， financing difficulties and reduced government subsidies in 2020. The pressure forced the firms to improve the quality of their products to gain a stronghold in the market， which benefited consumers，”Pan Helin， Executive Director of the Digital Economy Academy of the Zhongnan University of Economics and Law， told Beijing Review.

Key players

As a result of the booming market， leading NEV manufacturers， especially the three major homegrown electric car startups， NIO， Li Auto and Xpeng， reported strong performance.

Established in 2014-15， the three companies reached a record high in their deliveries in December 2020. NIO delivered 7，007 units， a year-on-year growth of 121 percent. Li Auto saw sales of its electric sport utility vehicle Li One rise by around 530 percent to 6，126 units. Sales of Xpeng jumped 326 percent to 5，700 units. NIO， which had the best performance， saw its 2020 sales total around 40，000 units.

In 2020， shares of NASDAQ-listed NIO and Li Auto rose 1，110 percent and 150 percent， respectively， while New York-listed Xpeng saw a 185-percent surge in stock price.

However， the combined sales of the trio， totaling around 90，000 units in 2020， were still lower than that of U.S. electric carmaker Tesla in China. With gigafactory built in Shanghai in 2019， Teslas sales in the Chinese market exceeded 20，000 units as of late November 2020. Its global sales in 2020 reached nearly 500，000 units. The company launched the new made-in-China Model Y on January 1， with a price similar to that of the NIO EC6 at around 300，000 yuan （$46，436）. The deliveries began on January 18.

But Cui Dongshu， Secretary General of the CPCA， said the price decline of Tesla cars will not affect Chinas NEV startups greatly， as the former still targets high-end markets while the homegrown brands are gaining a firm footing in the domestic market with more cost-effective products.

Traditional car manufacturers have also ridden the tide to expand market share. Homegrown brands such as Dongfeng Motor Corp.， Changan Auto and SAIC Motor all introduced high-end electric cars last year. The NEV sales of SAIC-GM-Wuling， a joint venture （JV） between SAIC， General Motors and Liuzhou Wuling Motors， saw robust growth in 2020， surging 190 percent year on year to around 174，000 units.

“The performance of SAICs electric cars meets the demands of consumers in rural areas， which is a large market remaining to be tapped，” Fu Yuwu， head of the Society of Automotive Engineers of China， said at a forum in early January.

Many foreign automakers have also developed JVs in China， eyeing to further explore its NEV market through vehicle production and charging services. Last year， Japans Toyota Motor and Chinas largest electric car manufacturer BYD forged a 50-50 JV to produce car batteries and electric vehicles. BMW later signed a contract with State Grid Electric Vehicle Service Co.， a subsidiary of electricity supplier State Grid， to provide charging services jointly.

German carmaker Volkswagen invested in Gotion High-Tech Co.， a manufacturer of electric batteries based in Anhui Province， east China， making the latter the certified battery supplier for its vehicles. According to Volkswagens development plan， it intends to deliver around 1.5 million NEVs to Chinese customers by 2025.

Market competition will become fiercer as new players are entering the market. Internet company Baidu announced on January 11 that it will build a smart electric car company in collaboration with Geely， the largest private automaker by sales in China.

“Traditional carmakers with strong manufacturing capabilities can save costs on research and development to ensure profit margins and attract consumers with brand recognition，” Pan said. He predicted that competition between traditional automakers and NEV startups will drive the improvement of manufacturing technologies.

Driving forces

China， with the worlds largest inventory of NEVs， accounted for 55 percent of global NEV sales since 2010， the Ministry of Ecology and Environment said last October.

In addition to improving the quality of electric cars， the rising domestic consumption of NEVs can be attributed to preferential government policies and increasing charging facilities， Liang Wei， an assistant research fellow with the Ministry of Commerce （MOFCOM）， told International Business Daily. To develop China into an automotive powerhouse， the government has issued plans and supporting policies for the NEV industry in recent years.