2022 Car Market Forecast: Annual sales of passenger cars will reach 22.55 million units, and the penetration rate of new energy passenger cars will reach 21%

2022 Car Market Forecast: Annual sales of passenger cars will reach 22.55 million units, and the penetration rate of new energy passenger cars will reach 21%

In 2021, under the influence of various unfavorable factors such as chip shortage, high raw material prices, and repeated outbreaks of the epidemic, China's automobile industry has struggled to surpass others. With a total production and sales volume of 26.082 million and 26.275 million vehicles, it has remained the world's number one for 13 consecutive years; With year-on-year growth rates of 3.4% and 3.8%, it ended the three-year continuous decline in production and sales since 2018.

Analyzing the sales performance of various segmented markets throughout the year, it can be seen that passenger cars, especially new energy passenger cars, are an important battlefield for driving the overall production and sales growth of automobiles in China in 2021 against the trend. Data shows that in 2021, the production and sales of passenger cars reached 21.408 million and 21.482 million respectively, an increase of 7.1% and 6.5% year-on-year, with growth rates 3.7 and 2.7 percentage points higher than the industry. New energy passenger vehicles maintain a strong development trend in both production and sales, with a cumulative annual sales volume of 3.33 million vehicles, a year-on-year increase of 181%. The market penetration rate has also significantly increased from 5.8% in 2020 to 14.8%.

After bidding farewell to 2021, the development trend of China's automotive industry in 2022 is touching the hearts of the entire industry. To this end, Gaishi Automotive Research Institute has launched the "2022 Future Outlook for the Chinese Passenger Car Market" report, which analyzes and predicts the 2022 passenger car market from multiple dimensions such as production and sales trends, market development patterns, and supply chain dynamics.

The 'chip shortage' will continue, and passenger car sales are expected to reach 22.55 million units in 2022

Looking back at the sales changes in the passenger car market in 2021, the overall market showed a rapid growth trend in the first quarter due to a relatively low base during the same period; In the second quarter, the decline continued to expand due to the high base of the recovery period after the 2020 epidemic and the gradual emergence of chip supply shortages; Until the fourth quarter, the chip problem gradually eased, the market operation stabilized, and the decline gradually narrowed. Overall, the performance in the fourth quarter was slightly better than in the third quarter, but the market performance in the second half of the year was significantly worse than in the first half.

By comparison, Gaishi Automotive Research Institute pointed out that the passenger car market in the first quarter of 2022 will still be greatly affected by the supply chain; 2、 In the third quarter, due to the low base of the same period in 2021, the year-on-year growth rate will remain relatively high; Looking at the whole year, the proportion of sales in the second half of the year will be significantly higher than that in the first half.

Taking the chip supply, which is the core of automobiles, as an example, at the beginning of this year, the Omicron epidemic broke out in multiple locations, and natural disasters such as typhoons in Malaysia and tornadoes in multiple states in the United States caused some chip supply production interruptions and capacity limitations to a certain extent. At the same time, the continuous increase in the penetration rate of new energy vehicles also means that the demand for single vehicle chips will continue to grow under the premise of producing the same number of vehicle models. Based on the current supply and demand situation, Gaishi Automotive Research Institute estimates that the "chip shortage" problem will continue in 2022. In the field of chip segmented products, 70% of MCU production capacity comes from TSMC, and domestically produced products are in the low-end process. The shortage will continue to exist in the future; The supply of high-performance SOC chips is mainly concentrated in chip giants such as NVIDIA and Qualcomm, and there is also an estimated risk of shortage. However, for IGBT chips and storage chip products, IGBT companies represented by BYD, CRRC, and STAR Semiconductors, as well as storage chip companies such as Zhaoyi Innovation and Fudan Microelectronics, will see an increase in localization rates, which will be a breakthrough in solving the shortage of domestic chip products. Overall, it is expected that the supply-demand balance of automotive chips will be delayed until 2023.

In terms of inventory, in 2021, the shortage of chips led to limited supply from manufacturers, with some car models in short supply and overall channel inventory at historically low levels; The monthly inventory coefficient of luxury cars is the lowest, and the joint venture and independent inventory are also below the warning line of 1.5. Some popular car models have delivery times as long as 3 months.

According to the latest "China Automobile Dealers Inventory Warning Index Survey" released by the China Automobile Dealers Association, the inventory warning index of automobile dealers in December 2021 was 56.1%, a year-on-year decrease of 4.6 percentage points and a month on month increase of 0.7 percentage points. The inventory warning index is above the boom bust line.

Qiu Kai, Director of the Industry Coordination Department of the China Automobile Dealers Association, analyzed that the 2021 dealer inventory warning index is closer to the boom bust line in all months than in 2020, but approaching the boom bust line does not mean that the market has reached an ideal level. The survey shows that the overall business situation of car dealers in 2021 is basically the same as that in 2020, or slightly decreased. The main reasons are firstly due to the shortage of chips since the second half of 2020, resulting in a shortage of main sales models. Secondly, in 2021, the epidemic has shown a multi-point distribution trend, which has to some extent affected the normal operation of dealers. Thirdly, there is currently downward pressure on the economy, and the recovery of residents' income is not particularly ideal, with insufficient consumption ability, which has had a certain impact on dealer customer acquisition and transaction achievement.

For the channel inventory trend in 2022, Gaishi Automotive Research Institute predicts that due to the rise in raw material prices and the shortage of core components, inventory will remain low in the first half of the year, and some car companies will replenish inventory in the second half of the year. However, inventory in the car market in the past two years will not be at a high level as in previous years.

In terms of macroeconomics, there will be significant downward pressure on the economy in 2022, and "stable growth" has become the core demand for national economic development. Due to the ongoing impact of the epidemic, consumers' disposable income is greatly affected, and there are significant challenges in the short-term return of consumer confidence; However, investment is subject to macroeconomic regulation by the government, and investment in real estate, infrastructure, and other fields is also facing certain challenges. Therefore, mainstream institutions such as the World Bank expect the domestic macroeconomic GDP growth rate to be around 5.0% in 2022. At the same time, the low macroeconomic leading index PMI (Purchasing Managers' Index) and the widening scissors gap between CPI (Consumer Price Index) and PPI (Producer Price Index) will have a significant impact on the automotive supply chain.

Based on the analysis of various factors, Gaishi Automotive Research Institute predicts that the production of passenger cars in China is expected to reach 22.58 million units in 2022, a year-on-year increase of 5.5%; Sales are expected to reach 22.55 million units, a year-on-year increase of 4.9%. In the medium to long term, the overall car market is not expected to experience a significant increase, with a projected compound annual growth rate of 3.2% for passenger cars

In the medium and long term, as China's economy enters a low-speed growth channel, the compound annual growth rate of passenger vehicle sales in China is expected to be 3.2% from 2021 to 2028, based on factors such as China's population growth trend, the level of thousands of people in major cities, the level of road network density, and the combination of statistical models, automobile industrial restructuring and technological innovation; By 2028, the absolute sales volume of China's passenger car market is predicted to be around 26.8 million.

The report points out that the size of the domestic automobile market depends on the growth potential of the thousand person car ownership, which in turn depends on the average level of economic development and urban transportation carrying capacity.

In terms of economic development level, as mentioned earlier, mainstream institutions predict that the macroeconomic GDP growth rate will be around 5% in 2022, indicating that China's economy has entered a low-speed growth channel. In this context, from the demand side, factors such as consumer confidence in the post pandemic era, aging population, and the increasing dependency ratio of the elderly population will affect household purchasing power, especially large consumption expenditures, which will tend to be cautious. This shift in consumer values will to some extent affect the increase in new car sales.

In terms of urban transportation carrying capacity, from the perspective of social infrastructure construction, during the 14th Five Year Plan period, the focus of China's infrastructure development has shifted from growth rate to quality improvement. In addition to steadily increasing the construction of new energy supplementary infrastructure, China will not expand road infrastructure on a large scale in the short term. This also means that one of the main factors determining market size, the number of cars per thousand people, will not quickly reach the current high level in developed countries. In the medium and long term, the overall domestic car market will not rise significantly, and the changes will be more reflected in the car market structure and segmented markets.

From the perspective of vehicle segmentation market, SUVs continued to surpass sedans as the largest segment market in 2021. From January to December, the cumulative sales of SUVs reached 10.101 million units, surpassing sedans by 167000 units. From a brand perspective, the share of domestic brands continued to rise in 2021, with a total sales of 9.543 million vehicles sold throughout the year, accounting for 44.4% of the total passenger car sales, an increase of 6.0 percentage points in market share compared to the same period last year. On the contrary, among joint venture brands, Hyundai, Volkswagen, and General Motors have experienced significant fluctuations in sales due to chip supply shortages and their own product strategies.

The sales forecast for new energy passenger vehicles in 2022 is 4.8 million units, and it is expected to continue to develop in a "dumbbell shaped" manner in the short term

Specifically in the new energy passenger vehicle sector, China's new energy passenger vehicles showed an unprecedented trend of popularity in 2021, with a total sales volume of 3.33 million vehicles for the year, setting a new historical high. Meanwhile, the penetration rate of the new energy passenger vehicle market has significantly increased from 5.8% in 2020 to 14.8%.

According to the analysis of Gaishi Automotive Research Institute, the explosive growth of new energy passenger vehicles is the result of the convergence of policy orientation, supply side efforts, and demand side increases.

In terms of policies, the "New Energy Vehicle Industry Development Plan (2021-2035)" has put forward higher requirements for the new energy vehicle market; At the same time, the compliance ratio of new energy points is stricter; The further reduction of new energy subsidies in 2022 has stimulated some consumers to consume ahead of schedule; In addition, the stricter traffic restrictions in first tier cities represented by Shanghai have made the advantages of new energy licenses more apparent.

On the supply side, new car manufacturers, domestic brands, and joint venture brands have launched numerous new energy and vehicle models, providing consumers with more diverse choices. At present, traditional independent car companies are launching high-end brands in new energy to differentiate themselves from existing brands, while also accelerating their hybrid layout and launching hybrid platforms and models, forming a situation of pure electric+hybrid dual wheel drive; Joint venture brands have already occupied a place in the hybrid market, so since 2020, many multinational groups have released electrification strategic plans and launched pure electric dedicated platforms to accelerate the layout of pure electric products.

As one of the earliest domestic car companies to deploy new energy vehicles, SAIC Motor Passenger Vehicle has sold 161000 new energy vehicles in the past year, a year-on-year increase of 107% and a penetration rate of over 20%. It ranks among the top five in the domestic market and among the top six globally, and is in the first camp both globally and domestically.

On the demand side, due to the higher level of intelligence and more comfortable driving experience of new energy vehicles, more and more young people are choosing new energy vehicles as their first car; In addition, many people who have the need for replacement also include new energy vehicles in their purchasing range. Under the combination of the two, C-end users have become the main consumer group in the new energy market. Data shows that from January to December 2021, the proportion of private users in the new energy vehicle market reached over 80%.

In 2022, as the supply/demand side continues to strengthen and multiple new energy promotion policies such as national subsidies and exemption from purchase tax enter the countdown, it is expected to trigger a wave of early consumption of new energy vehicles. Based on this, Gaishi Automotive Research Institute predicts that the annual sales of new energy passenger vehicles will reach around 4.8 million units, with an expected year-on-year growth of 45% and a penetration rate of 21%. This means that the goal of achieving 20% of the total sales of new energy vehicles by 2025 will come earlier.

However, regarding the issue of when the cost-effectiveness of new energy vehicles can reach or exceed that of traditional fuel vehicles, the Gaishi Automotive Research Institute analyzed that under the "3060" dual carbon target, energy transformation will limit the production of heavy polluting materials, insufficient internal energy for enterprise investment, and limited production of core chips, high-quality power batteries, etc. These factors will slow down the price iteration process of pure electric passenger car products of the same level and configuration compared to traditional fuel vehicles.

In the specific market structure adjustment, the pure electric passenger car market will still maintain a two-tier growth rate in the short term, showing a "dumbbell shaped" development trend, with A00 level models represented by Wuling Hongguang MINI EV (configuration | inquiry) and B-class vehicles represented by Model Y (configuration | inquiry) maintaining rapid growth. Compact A-class cars use hybrid as a breakthrough point, with plug-in hybrid models represented by BYD Qin PLUS DM-i (configuration | inquiry) driving rapid market share growth in compact class models. In the medium to long term, with the large-scale increase in battery costs and supply/demand, pure electric passenger vehicles will slowly expand towards compact models.

From the perspective of vehicle ownership, as new energy has entered the market driven stage, individual vehicle ownership will maintain a proportion of nearly 80%; However, driven by the "3060" dual carbon target, the volume and proportion of operational vehicles will increase slightly. On January 18th, the State Council released the "14th Five Year Plan for the Development of Modern Comprehensive Transportation System", which clearly stated that it is necessary to promote the electrification of urban public service vehicles and vehicles in ports and airports. In cities with a population of over one million (except for cold regions), the proportion of electric vehicles in newly added or updated ground buses, urban logistics and distribution, postal express delivery, rental, official, environmental sanitation and other vehicles should not be less than 80%.