Prospects for China's New Energy Vehicle Index: Priority will be given to micro-cars and mid- to large-size cars

On February 28, 2018, the latest data of the China New Energy Vehicle Index 3.0 (hereinafter referred to as NEVI) showed that the NEVI Composite Index was 53.8 in January 2018, which was a 1.0 increase from the previous month. Among them, the top five cities are Shanghai, Shenzhen, Tianjin, Guangzhou and Hangzhou.

Chart 1 - Trends in China's New Energy Vehicle Index (NEVI) from July 2016 to the present

Source: Caixin Media, BBD, Taibo Yingsi

As a comprehensive index that summarizes the running status of China's new energy vehicles by a single number, Caixin Media launched NEVI to use big data to interpret the pace of new energy vehicles in Chinese cities, objectively, scientifically, and forward-lookingly reflecting new energy vehicles in China. The development process shows the distinct urban characteristics of new energy vehicles in the Chinese market.

Numerically, NEVI increased slightly this month compared with last month; in the city index, Beijing still falls in the top five, Guangzhou rose to fourth, and Zhengzhou surpassed Nanjing to enter the top ten.

The rapid growth of NEVI in Chinese cities has benefited from the rapid growth of the new energy passenger vehicle market in China, and also from the major segments of new energy passenger vehicles.

Figure 2 - Sales Structure of Passenger Vehicles in China's Main Segments in January 2015-January

Source: National Federation, Taibo Yingsi;

In comparison, in the traditional passenger car market, A-Class sedans and SUVs are the mainstream consumer of the traditional passenger vehicle market. Correspondingly, the market share of A00-class cars is less than 1%, which is almost negligible.

Exhibit 3 - Sales Structure of Main Segments of China's New Energy Passenger Vehicles in January 2015 - January 2010

Source: National Federation, Taibo Yingsi

The new energy passenger vehicle market at this stage shows another picture: From the first quarter of 2016, the market share of A00-class sedan continues to increase, and the market share in the whole year of 2017 accounted for 54.5%; in the past In January 2018, the market share of the A00-class sedan continued to exceed 50%, and the leading edge in various market segments was very obvious.

For the future trend of the submarket of new energy passenger cars, our core views can be summarized in eight words: Priority breakthroughs in the field of advantage.

The priority breakthroughs in the advantageous areas include two levels of meaning: In terms of market segments, new energy passenger vehicles will receive priority breakthroughs in the most competitive market segments; in the long run, the demand structure for new energy passenger vehicles will gradually increase. Near traditional passenger cars, but there will be differences in specific market segments. Specifically embodied in the segmentation of new energy passenger vehicles: The A00-class passenger car market and the B-level (including B-class) passenger car market will be the dominant areas for new energy vehicles, and will be the first to break through in the coming years . Next, we briefly elaborated on the inherent logic and reasons of "priority breakthrough in the field of advantage" from the demand level and supply level respectively.

Demand level: low cost & ultimate product experience based on compliance

In comparison, A00-class cars not only have obvious price advantages. Especially in the limited-purchase, limited-city cities, the A00-class sedans' cost-effective and legally-compliance features have solved the problems of short-distance travel and parking difficulties, and are used as daily transportation tools. It is also a good choice. At the same time, the large-scale development of the time-sharing leasing companies in recent years has greatly promoted the market performance of the A00-class sedan in the field of new energy passenger vehicles. Under the background of green and environmentally friendly social development, the "Guiding Opinions on Promoting the Healthy Development of Small and Micro-Bus Leasing" was formally introduced in 2017. It more clearly encourages the development of shared cars. The relatively low procurement cost and maintenance cost are undoubtedly The development of the A00-class sedan in the area of ​​time-shared leasing for new energy passenger vehicles has increased.

Correspondingly, the passenger car market above Class B is due to the higher budget level of its target users, making users willing to accept higher premiums for new energy vehicles compared to traditional cars; such product premiums are not only reflected in high prices. Budget owners have lower price-sensitivity characteristics. More importantly, new-energy passenger vehicles of class B and above can provide more extreme performance than traditional passenger vehicles at the level of product performance (dynamic performance and intelligent network connectivity, etc.). product experience.

Supply Level: Policy Factors and Market Comparative Advantage Promote Supply Change

Specific to the supply side, with the implementation of the “double-integration” policy, many traditional auto companies have increased their investment in new energy vehicles. Comparing with different market segments, the relatively low input cost of A00-class new energy passenger vehicles is also an important reason for many companies to launch this model. In addition, low-speed electric vehicles have a strong attraction in the third and fourth-tier cities, but because of their “identity” reasons, they have been outside the mainstream new energy automotive industry, but some companies have officially started through transformation or mergers and acquisitions. The new energy passenger vehicle project will be launched.

While the low-end new energy passenger vehicle market is intensifying competition, the battlefield of the high-end new energy market is taking shape. Li Bin, chairman of Weilai Automobile, once stated that “from high to low” to cultivate new brands, not only to transport vehicles, but also to a kind of life, an experience, with high-quality, high-performance products. High-end market. New production vehicles such as Weilai, Xiaopeng, and Singularity are the first mass-produced vehicles to be SUV models, adding some hope to the entire new energy passenger vehicle market; medium-sized/medium-large plug-in for many multinational companies Hybrid products have been pushed into the market, and the “double-integration” policy has become a powerful driver for multinational companies to seize China’s new energy market.

On the whole, the logic of market evolution with “priority breakthroughs in the advantageous sectors” is not only evident in the current stage of China’s new energy passenger vehicle market; in the foreseeable future, “priority breakthroughs in the advantageous sectors” are still our observation and analysis of China. An important entry point for the future trend of the segmented market for new energy passenger vehicles.