How important is the rising new energy vehicle industry in China

How important is the rising Chinese new energy vehicle industry?

According to the data from the China Association of Automobile Manufacturers, the cumulative sales volume of new energy vehicles in my country in the first half of this year reached 3.747 million, with a market share of 28.3%. In other words, at least one out of every four cars sold in the domestic market in the first half of the year was a new energy vehicle. In July, the market share of new energy vehicles rose to 32.7%, close to one-third.

In the past five years, the sales of fuel vehicles have continued to decline, but new energy vehicles have bucked the trend and increased sales by more than 4 times despite the sluggish auto market and economic downturn. For overseas markets, the export of new energy vehicles has increased nearly 3 times in 5 years, and Chinese companies have also begun to set up factories and layout supply chains abroad.

Behind the explosive growth of new energy vehicles is the rapid change in consumer perceptions and the deep transformation of the automotive industry. At the Shanghai Auto Show in April, new energy vehicles accounted for more than 70% of the exhibited models, which can be said to be the most direct reflection of the theme of the auto show, "Embracing the New Era of the Automotive Industry."

Today, the electrification trend in China's automotive industry is unstoppable. The rise of the new energy vehicle industry is not only reshaping the industry ecosystem, but also providing a model that opens up our imagination of a high-quality, sustainable economic society.

The rise of new energy vehicles helps stabilize the auto market    

2017 is the year with the highest domestic auto sales so far, with nearly 28.88 million cars sold that year. In 2018, auto sales fell for the first time since 1990, and the entire market entered a plateau period. After several years of fluctuations, total sales in 2022 have dropped to 26.86 million vehicles. This set of data seems to have limited changes, but in fact, there are undercurrents.

This period witnessed the rise of new energy vehicles. In 2017, my country's new energy vehicle sales were close to 800,000 units, accounting for less than 3% of new car sales that year. By 2022, new energy vehicle sales had exceeded 6.88 million units, accounting for more than 25%, of which nearly 80% were pure electric vehicles.

In sharp contrast, fuel vehicles are declining. The sales of fuel vehicles have been declining since 2018, from 26.8 million vehicles that year to 19.98 million vehicles in 2022, and the proportion has dropped from 95.5% to below 75%.

Although this increase and decrease is not obvious in the overall sales data, it is not difficult to see that it is the strong growth of new energy vehicles that has driven the stabilization of China's automobile market.

In addition, although the domestic market is relatively weak, China's automobile exports have performed well, and new energy vehicles have played an indispensable role in this achievement. In 2018, China's automobile exports exceeded 1 million vehicles, of which 14% were new energy vehicles; in 2022, China's automobile exports surpassed Germany and jumped to second place in the world, with total exports reaching 3.11 million vehicles, and the proportion of new energy vehicles increased to 22%; in the first half of this year, China's automobile exports reached 2.14 million vehicles, surpassing Japan to become the world's first, of which new energy vehicles accounted for 25%.

New energy vehicles have become a new driving force for stabilizing the economy    

The automotive industry chain is long, driving many related industries and employment, and is of great significance to economic and social development. The stability brought by new energy vehicles to the entire automotive market plays an irreplaceable role in the current context of stabilizing the economy, maintaining employment and promoting consumption.

1. The contribution to the operating income of the automobile manufacturing industry has increased year by year

With the change of market share, the contribution of new energy vehicles to the operating income of the automobile manufacturing industry is increasing year by year. In 2017, the operating income of the domestic automobile manufacturing industry was 8533.3 billion yuan. According to the sales share, the operating income of the new energy vehicle manufacturing industry was about 230 billion yuan; in 2020, the operating income of the new energy vehicle manufacturing industry has risen to about 440 billion yuan; by 2022, this figure will increase to about 2380 billion yuan, which is 10 times that of 7 years ago, equivalent to the annual GDP of Finland.

2. Created a large number of employment opportunities

The rapid development of new energy vehicles has also created considerable employment opportunities, especially high-end positions that require high R&D capabilities and technical levels. The "New Energy Vehicle Employment Trend Data Report" compiled by Liepin Big Data Research Institute shows that in the past two years, the number of new jobs in the new energy vehicle industry has been growing at twice the rate of the traditional automobile industry, and the average annual salary of new jobs has also continued to grow, far higher than the traditional automobile industry.

3. Enhance the overall competitiveness of Chinese auto brands

The development of new energy vehicles in my country has also helped to enhance the overall international competitiveness of Chinese auto brands. Although Tesla is still the main force in China's export of new energy vehicles, the market share of independent brands such as BYD, Geely, and Changan is steadily increasing. Take BYD as an example. Since the announcement of its passenger car export plan in May 2021, its new energy vehicle exports have grown rapidly. From January to May this year, BYD's new energy vehicle exports have exceeded the annual total, close to 64,000 vehicles, accounting for 14% of the total new energy vehicle exports.

In fact, companies in the new energy vehicle industry chain have not stopped at the trade export model, but have entered a new stage of in-depth "going overseas", starting to build factories overseas through foreign investment and sell locally. According to statistics, there are currently 10 domestic power battery companies planning or have already carried out industrial layout overseas. Based on public information, there are 33 projects that can be searched, with a total investment budget of more than 400 billion yuan. The pace of "going out" of Chinese auto companies is also accelerating. For example, Great Wall has built factories in Thailand and Russia; BYD recently announced that it will build a large-scale production base complex in Brazil, with a total investment of about 4.5 billion yuan, creating nearly 5,000 local jobs; SAIC also revealed plans to build a factory in Europe.

New energy industries, including electric vehicles and lithium batteries, are likely to drive Chinese companies to achieve leapfrog development and give birth to a group of highly competitive Chinese multinational companies.

New energy vehicle industry for future development    

The value of the new energy vehicle industry is multifaceted, not only in its potential scale and quantitative contribution to economic development, but also in its qualitative promotion of science and technology, economic competitiveness and ecological environment improvement.

1. New energy vehicles reflect the technological strength of the country and the industry

The development of China's new energy vehicle industry is mainly driven by pure electric vehicles. "Technology and futuristic" is the first impression of many people on electric vehicles. The core areas of the electric vehicle industry chain, including new technologies such as power batteries, motor electronic control, and autonomous driving, do not exist in the traditional automobile industry chain. Moreover, electric vehicles are good at "cross-border". They can be both a means of transportation and a mobile smart terminal, and can even become an energy storage unit.

Therefore, compared with fuel vehicles and other traditional manufacturing industries, the new energy vehicle industry, including electric vehicles, is more closely integrated with strategic emerging technologies such as new materials and electronic communications. The development of the new energy vehicle market has not only put forward requirements for the advancement of these emerging technologies, but also provided impetus and space for the research and development and application of technologies. It can be said that the two empower and complement each other.

It can be seen that the development of the new energy vehicle market is not only a reflection of residents' consumption capacity, but also a reflection of the country's and industry's scientific and technological strength. From a global perspective, Chinese companies lack advantages in the field of traditional automobile manufacturing, but due to their early start and rapid expansion in new energy vehicles, it is possible for the Chinese automobile industry to "overtake on the curve". In the new energy vehicle industry chain, Chinese companies have begun to play an important role. The global power battery market was once dominated by Korean and Japanese companies, but with the rise of Chinese companies, the pattern has changed greatly. Judging from the global power battery usage data from January to June 2023, 6 of the top 10 in the global power battery industry rankings are Chinese companies.

2. New energy vehicles will contribute to environmental protection and the realization of the "dual carbon" goals

The development of the new energy vehicle industry is future-oriented. From it, we can not only see the future technological and economic competitiveness, but also gain insight into the new development model of Chinese companies' "going global", and even imagine a living environment with clean air and harmonious ecology.

The development of electric vehicles has obvious environmental and health benefits. A study by a team from Tsinghua University on Beijing and Shenzhen shows that, in the context of ultra-low emission technology development in the power industry, electric passenger cars in Shenzhen can reduce PM2.5 by 58% and carbon dioxide emissions by 71% compared with gasoline vehicles. By 2030, the popularization of electric vehicles can enable 67% of Beijing's PM2.5-exceeding areas to meet the standards, and help all areas within the Third Ring Road where nitrogen oxides exceed the standards to meet the standards. As the power supply becomes further decarbonized, the life cycle emissions of electric vehicles will continue to decline, continuously promoting air quality improvements and protecting residents' health, while also contributing to the realization of the country's "dual carbon" goals.

3. The development of new energy vehicles is beneficial to energy security

The popularity of new energy vehicles will help energy security. China's oil and natural gas supply depends on imports, but the development of new energy vehicles will reduce the demand for oil and gas. According to the Energy Foundation, based on the domestic 13.1 million electric vehicles, electric vehicles can help save 7.93 million tons of fuel in 2022, equivalent to 2.45% of the crude oil imports that year, with a value of about 59.6 billion yuan; by 2030, with the further popularization of electric vehicles, the amount of fuel saved can reach 43.91 million tons, equivalent to 13.6% of the annual crude oil imports.

In addition to reducing oil and gas demand, electric vehicles can also be used as energy storage units to promote the development of renewable energy electricity. By connecting to the power grid through charging piles, electric vehicles can choose to charge or transmit electricity back to the grid to participate in the peak load regulation of the grid. If the energy storage and regulation capabilities of electric vehicles can be fully mobilized, they can complement the volatility of renewable energy generation and promote the consumption of renewable energy. According to calculations by Ouyang Minggao, an academician of the Chinese Academy of Sciences, it is estimated that the number of new energy vehicles in my country will exceed 300 million by 2040, and the energy storage capacity of on-board batteries will exceed 20 billion kilowatt-hours, which is equivalent to China’s current total daily electricity consumption. Even considering travel needs, it is a very considerable energy storage and flexibility resource for participating in grid regulation.

Sustainable development still needs to break through bottlenecks    

The development prospects of new energy vehicles are optimistic, but as the scale of the industry expands, some new challenges will also emerge. To maintain steady and rapid growth and give full play to the economic and environmental benefits of new energy vehicles, it is necessary to deal with the problems in development.

In the next few years, the two major limiting factors that the development of new energy vehicles has been facing - the service capacity of charging infrastructure and the cost-effectiveness of new energy vehicles, especially heavy-duty new energy vehicles - will still exist. Therefore, it is necessary to further strengthen investment and research and development to pave the way for industrial expansion.

The expansion of the new energy vehicle market will significantly drive the demand for upstream raw materials. The International Energy Agency predicts that based on the policies announced by various countries, the global electric vehicle industry's demand for key raw materials will increase 10 times within 20 years. Whether the stable supply of power battery raw materials such as lithium, nickel, and cobalt can be guaranteed will increasingly become an important concern for countries in developing the electric vehicle industry. In this regard, international competition will also become increasingly fierce, adding uncertainty to the stability of the supply chain.

Looking further ahead, the industry predicts that by 2030, the number of new energy vehicles in China will exceed 100 million. However, when the development of new energy vehicles enters a new level, meeting the charging and energy replenishment needs of vehicles will put forward new requirements for energy supply and infrastructure upgrades at another level. By then, the hardware facilities and corresponding rules and mechanisms for orderly charging and vehicle-grid integration need to keep up in a timely manner. China's new energy vehicle development is based on pure electric as its strategic orientation. With the arrival of the retirement tide of electric vehicles, how to recycle and utilize power batteries in an environmentally friendly and efficient manner to avoid environmental pollution and alleviate the pressure on primary resource supply is also a major challenge that the new energy vehicle industry must face in the future.

The new energy vehicle industry will create new high-quality jobs and promote the automation of production processes and after-sales services, but this also means a structural adjustment of employment in the entire automotive industry. Overall, the number of jobs in the automotive industry will decrease with the electrification transformation, and the number of jobs affected may reach 2.5 million. How to respond to the structural adjustment of employment and provide corresponding training and support for those in need is an issue that must be actively addressed in the future development of the electric vehicle industry.

Looking back at the development history of new energy vehicles, every step forward was achieved by overcoming numerous obstacles. Facing future challenges, we have reason to believe that this spirit of pioneering will continue. As the saying goes, a journey tests the strength of a horse. The further we go, the more the potential and value of new energy vehicles will become.