Sales of New Energy Vehicle (NEV) models* surged by 110% in the first five months of this year in China’s passenger car (PV) market, against a drop of 5% in the overall market in the same period as it suffered from the strict regional COVID-19 lockdowns in March and April. The impact of the pandemic on the NEV market was far smaller than its effect on the internal combustion engine (ICE) market.
In May of this year, the penetration rate of NEVs among total PV sales reached 23%, while the comparable rate in 2020 was just 6%. Amazingly, the rate has quadrupled in less than two years, and there appears to be no sign of a slowdown in its momentum.
Taking a closer look by segment, the NEV penetration rates YTD to May were 27%, 20%, and 5% in the Car, SUV, and MPV segments respectively.
The reason that the Car segment NEV penetration rate was much higher than in the SUV and MPV segments was due to the fast growth of NEVs in the Mini-Car and Sub-compact Car sectors. In fact, NEV penetration in the Mini-Car segment has now reached almost 100%.
Mini BEV models such as Wuling’s Hongguang Mini and Chery’s intriguingly named ‘Ice Cream’ have been welcomed by Chinese consumers due to their very low retail prices, low usage costs, clever design, and driving flexibility. It’s fair to say that the development of NEVs has saved the Mini-Car segment. The market share of Mini-Cars among total PV sales was just 1% in 2018, and it looked like it was heading for extinction. However, the launching of battery-electric models turned it around, and the market share of Mini-Cars had risen to 5% for the first five months of this year.
As Mini BEV cars have become hot commodities, they have generally helped boost consumers’ acceptance of electric vehicles. An illustration of this effect is the subsequent rise of the NEV penetration rate in the Sub-compact Car segment which followed and reached 47% in YTD May of this year.
Because of the bigger size of the MPV bodytype, the segment was not at first expected to be suitable for BEV powertrains. However, we are seeing a change of strategy and many OEMs like BYD, SAIC, Zeekr, Li, and Xpeng all now have MPV BEVs in their product planning. We will see how they perform when they hit the market.
The early NEV market was driven by government policies, and they continue to play a significant role at this time. However, the fast growth in NEV penetration might also indicate that consumers are spontaneously purchasing NEVs more frequently.
*NEV includes battery, plug-in hybrid, extended range, and fuel cell electric vehicles