China’s New Energy Vehicle market jumped by 240% year-on-year in H1 2021. The hybrid sector grew by 75% year-on-year, with sales of 599,000 units. MHEV (48V) accounts for 47% of the overall hybrid sector and growth nearly doubled at the start of this year.
Hybrid has always been considered as a transitional technology, but is, once again, a key point of focus, in light of the government’s revised dual-credit policy and Technical Roadmap 2.0. Based on the currently available technology, 48V has few advantages within the framework of the dual-credit policy because it is not categorised as low fuel consumption. This has not, however, prevented further development for two reasons: 1) 48V does go some way to lowering fuel consumption; and 2) it is easier to adapt a vehicle for 48V than it is to manufacture a full hybrid model. So, most OEMs have the technical capability to produce 48V-equipped vehicles.
Chinese consumers generally perceive these vehicles as high-end models. That said, high-end does not necessarily translate into high sales volumes, as underscored in the chart below, which shows sales in H1 2020 versus H1 2021.
Domestic players were the first to launch 48V models in China, but their non-domestic counterparts soon joined the race. Indeed, with the arrival of the Mercedes-Benz C-Class, competition in the 48V sector has ramped up considerably.
The future of 48V will, in our view, hinge upon sound strategic moves by automakers.
Of the foreign OEMs, the leading players are 1) Land Rover, whose focus on Medium to Large SUVs entails high fuel consumption ratings and therefore greater pressure, hence the move towards 48V; 2) Audi, which has fitted its full range of imports, along with the successful domestically built A6L 3.0T with 48V; and 3) Volvo/Cadillac, whose full line-ups are now equipped with 48V.
Of the Chinese OEMs 1) Hongqi has enjoyed rapid sales growth by equipping its full product range with 48V, focused on 2.0T and 1.8T engines; 2) JMC-Ford and Chery have developed new configurations, but sales remain low; 3) GJMC-Ford has steered clear of a full 48V line-up, choosing instead to launch a 1.5T 48V variant of its key model, the JMC Territory 1.6T; and 4) Geely is among the players to offer two powertrain options for each leading model, ICE and 48V, with the latter accounting for higher volumes.
As shown in the above data (taken from Geely’s official website), the addition of 48V technology has raised model prices. Prices range from CNY11,000 to CNY45,000, with the same 1.5T 177 PS configuration. The combined year-on-year figures show that all models suffered volume declines. This contrasts with the Buick Excelle, whose volumes were unchanged, despite a price increase from the addition of 48V.
This technology can contribute to an OEM’s CAFC credits, meaning that development is being driven by manufacturers, not consumers. For buyers of vehicles with advanced technology, price is the overriding priority (both sticker price and running costs). The strategy adopted by foreign automakers is judicious in that it removes any price comparison between ICE and 48V models, particularly those with the same powertrain configurations, thus eliminating the issue of price sensitivity. Geely, on the other hand, offers a full product range, but has been caught out by its pricing strategy.