Outlook | U-shaped car market highlights the influence of China's automotive industry in the first half of the year

It is expected that China's automobile sales will reach 27 million units in 2022, a year-on-year increase of about 3%; New energy vehicle sales are expected to reach 5.5 million units, a year-on-year increase of over 56%.

In the global new energy vehicle track characterized by electrification and intelligence, China's advantages are becoming increasingly apparent, and the Chinese market is accelerating to become a benchmark for the automotive industry. Many global automotive giants are adjusting their development strategies around the Chinese market.

Looking back at the trend of the domestic automobile market in the first half of 2022, it can be described as ups and downs.

At the beginning of the year, based on the good production and sales situation of the previous year, many forecasts gave positive judgments, and the mainstream view was that the annual growth of automobile production and sales could reach about 5%. In mid to late March, the situation took a sharp turn for the worse, with some supply chains being tight or even interrupted, resulting in a halving of industry production and sales for the month. Subsequently, with policy support, the automobile market quickly rebounded strongly.

According to data released by the China Association of Automobile Manufacturers, domestic automobile production and sales reached 12.117 million and 12.057 million units in the first half of the year, a year-on-year decrease of 3.7% and 6.6%, respectively. In June, automobile production and sales increased by 28.2% and 23.8% year-on-year, respectively. The industry believes that the supply chain of China's automobile industry, which has been affected by the epidemic, has fully recovered, the pace of enterprise production has accelerated, and automobile consumption has significantly rebounded.

Among them, the performance of new energy vehicles is particularly outstanding. Not only has China achieved strong production and sales, but more importantly, it has gradually become a leading indicator for the development of new energy vehicles worldwide. On the one hand, several multinational automotive giants have begun to adjust their new energy vehicle development strategies and layouts around the Chinese market; On the other hand, China's position in the global new energy vehicle industry chain has been further elevated.

In an interview, industry insiders stated that currently, under the influence of the epidemic and changes in the international situation, the global new energy vehicle industry chain and supply chain are quietly undergoing changes. For China, it is both a challenge and an opportunity.

Positive policies help the car market achieve a U-shaped reversal

June is traditionally the off-season for car consumption, but the passenger car market in June this year is not sluggish. According to data from the China Association of Automobile Manufacturers, in June, the production and sales of passenger cars in China were 2.239 million and 2.222 million respectively, with a month on month increase of 31.6% and 36.9%, and a year-on-year increase of 43.6% and 41.2%, respectively.

At a car sales store in Jiangbei District, Chongqing, citizen Zhang Jie is buying a car. I asked the salesperson and they said that if you buy this car now, you can save more than 5000 yuan in purchase tax compared to usual. "Zhang Jie told the Outlook Weekly reporter that the halving policy of vehicle purchase tax prompted him to quickly place an order to buy a car.

Looking back at the first half of the year, the automobile market was able to achieve a U-shaped reversal in a short period of time, thanks to a series of favorable policies.

Since April, in order to promote automobile consumption, the government has successively issued a series of policies such as halving the purchase tax on some passenger vehicles, issuing 90 billion yuan in truck loans to central automobile enterprises, and promoting the development of new energy vehicles in rural areas in 2022, greatly stimulating market vitality.

Taking the halving policy of vehicle purchase tax as an example. According to data released by the State Administration of Taxation, since the implementation of the policy of halving the vehicle purchase tax for passenger cars one month ago, a total of 7.1 billion yuan in vehicle purchase tax has been reduced nationwide, and 1.097 million vehicles have been reduced, achieving overall good results.

In addition to the preferential policies for automobile purchase tax introduced by the country, several provinces and cities have also introduced supporting policies such as increasing car license plates and purchasing subsidies, which have effectively boosted automobile consumption. Shenzhen has added an incremental quota of 20000 ordinary cars this year, Chongqing has lifted restrictions on pickup truck traffic, and Hefei City has provided a one-time electricity subsidy of 1000 yuan/vehicle to consumers of new energy vehicles on top of the original electricity subsidy of 2000 yuan/vehicle, further encouraging the consumption of new energy vehicles

With the joint efforts of all parties, the automotive industry has quickly emerged from the trough, and production and sales have now fully recovered to normal levels. Taking FAW Volkswagen, which ranks first in domestic production and sales, as an example, its monthly sales from January to March were all above 100000 vehicles. In April, due to the impact of the epidemic, its actual sales were only 81000 vehicles. After resuming production in May, it reached 150000 vehicles. In June, it continued to expand its sales and stepped up to 214000 vehicles, marking a clear U-shaped reversal and setting a positive tone for the car market in the second half of the year.

The new policy is still being intensified. Recently, 17 central departments issued a notice on measures to invigorate automobile circulation and expand automobile consumption, proposing to continue expanding automobile consumption by supporting the purchase and use of new energy vehicles, accelerating the activation of the second-hand car market, promoting automobile renewal consumption, optimizing the automobile usage environment, and enriching automobile financial services.

In the medium to long term, China's automobile market is generally in the late stage of popularization, and residents' consumption demand for automobiles remains strong. In addition, the industry dividends brought by industrial transformation and consumption upgrading provide sufficient guarantees for the stable growth of the automobile market in the future, "said Chen Shihua, Deputy Secretary General of the China Association of Automobile Manufacturers.

Looking ahead to the second half of the year, the China Association of Automobile Manufacturers predicts that the recovery momentum of the passenger car market will further increase, and new energy vehicles will continue to maintain a high-speed growth momentum. It is expected that China's automobile sales will reach 27 million units in 2022, a year-on-year increase of about 3%; The sales of new energy vehicles are expected to reach 5.5 million units, a year-on-year increase of over 56%.

China gradually becomes a global benchmark for the automotive industry

Automobile consumption is accelerating its recovery, with new energy vehicles firmly occupying the "C-position". Data shows that in the first half of the year, the production and sales of new energy vehicles in China reached 2.661 million and 2.6 million respectively, an increase of 1.2 times year-on-year, with a market share of 21.6%, achieving the goal of "20% of new energy vehicles by 2025" ahead of schedule.

The industry believes that after more than a decade, China's new energy vehicle industry has grown from small to large and from weak to strong, becoming an undeniable force in the global automotive industry transformation. Especially in recent years, in the global new energy vehicle track characterized by electrification and intelligence, China's advantages have become increasingly evident, and the Chinese market is accelerating to become a benchmark for the automotive industry.

——Many global automotive giants have begun to adjust their development strategies around the Chinese market.

For example, based on its own development strategy, Toyota has long been resistant to pure electric vehicles. However, in June of this year, Toyota announced the closure of its hydrogen energy vehicle factory, stopped investing in hydrogen energy technology, and instead devoted itself to the research and development of electric vehicles. According to the plan, Toyota will invest 4 trillion yen in the development of pure electric technology and products over the next 10 years.

Coincidentally, European multinational automotive groups that previously held a strong position in the fuel vehicle market are also accelerating the deployment of new energy vehicle projects in China. The Volkswagen Anhui MEB factory, with an investment of 20 billion yuan and a production capacity of 300000 vehicles, will produce pre production vehicles this year and achieve mass production in the second half of 2023.

In addition, joint ventures are also actively exploring. As a benchmark enterprise for Sino German joint venture cooperation, FAW Volkswagen has launched models such as ID.4CROZZ and ID.6CROZZ. At the same time, there is a continuous increase in research and development investment in remote control vehicles, intelligent cockpits, voice interaction, and other fields that are compatible with new energy technologies, and an independent company called Morse Intelligent Connected has been established to specialize in vehicle networking.

These international automotive giants are stepping up their layout in the era of electric vehicles, indicating that the global era of electric vehicles is accelerating, and China has truly stood at the forefront of the automotive industry for a hundred years, or may become the protagonist of industry transformation, "said Xu Haidong, Deputy Chief Engineer of the China Association of Automobile Manufacturers.

——Chinese car companies, especially new energy vehicle companies, have further elevated their position in the global automotive industry chain.

In the first half of the year, a group of Chinese new energy vehicle companies continued to grow strongly, accelerating their "arm wrestling" with giant car companies on the international industrial stage. BYD sold over 640000 new energy vehicles in the first half of the year, surpassing Tesla for the first time and becoming the world's largest electric vehicle manufacturer in terms of sales.

Battery is one of the core technologies of electric vehicles and also a technological highland for global enterprises to compete. In the first half of the year, Chinese enterprises dominated half of the global power battery market. Among them, CATL continued to maintain its position as the global sales champion, with its market share further increasing to 34%; BYD ranks third with a global market share of 12%.

In terms of technology, the Kirin battery released by CATL in the first half of the year has set a new global record for system integration, with a volume utilization rate exceeding 72%, and can achieve a vehicle range of 1000 kilometers. The semi-solid state battery developed by Guoxuan High Tech will be installed in vehicles this year. The battery has a single energy density of 360Wh/kg, a battery capacity of 160kWh, and a range of over 1000 kilometers... With the comprehensive improvement of China's power batteries in fast charging, safety, lifespan, and low-temperature performance, China's technological and market advantages in this field will be further consolidated.

The industry believes that China has the ability to lead the world in the field of electrification. Combined with technological advancements and market prospects in the field of intelligence, the Chinese automotive industry is ushering in a "golden age" of "intelligence+electrification" through "lane changing overtaking".

——The integration and development of new energy vehicles and intelligent connected vehicles in China are further deepening.

Since this year, Internet giants represented by Huawei, Baidu, Xiaomi, 360, etc. have continued to deeply layout the new energy vehicle market, and accelerated the integrated development of new energy vehicles and intelligent connected vehicles. Huawei is accelerating the implementation of the "Huawei Inside" model, which is deeply bundled with car companies, and continuously deepening intelligent connectivity; Baidu Apollo also continues to provide intelligent software for automobile enterprises, and also accelerates the implementation of Robotaxidemonstration operation... With the entry of Internet technology giants, the development of intelligent connected automobile technology is further accelerated.

At the government level, multiple departments including the Ministry of Industry and Information Technology are accelerating the development of the intelligent connected industry, promoting the coordinated development of bicycle intelligence, smart roads, communication networks, and cloud control technology. Pilot projects for the coordinated development of smart city infrastructure and intelligent connected vehicles are also being accelerated.

The National Automotive Standardization Technical Committee recently disclosed that China has completed the construction of the first phase of the intelligent connected vehicle standard system, and has approved and released 39 relevant standards. China has initially established an intelligent connected vehicle standard system that can support driving assistance and low-level autonomous driving.

Transformation of the automotive industry chain and supply chain

China is already the world's largest automobile market and the largest single market for many brands, but supply chain stability still faces challenges. Currently, influenced by multiple factors, the open global market and fast logistics transportation are facing challenges. The automotive supply chain continues to undergo "changes" and accelerate reshaping, bringing challenges and new opportunities to car companies.

——The supply chain is shifting from extreme emphasis on cost and efficiency to balancing safety and resilience. Industry insiders say that the supply chain crisis caused by the epidemic highlights the previous overemphasis on cost and efficiency in the automotive industry, while neglecting the safety and resilience of the supply chain. At this point, it is necessary to re-examine the relationship between safety, efficiency, and cost, establish a safe new supply chain, and maintain a balance.

According to Lan Xiangwen, General Manager of Changan Automobile Logistics Center, the current outbreak of the epidemic has spread to multiple locations, increasing uncertainty. To cope with these uncertainties, companies will first shift from the past 'low inventory' to higher inventory. In recent years, the inventory of enterprises has increased compared to before, and it may be even higher in the future, which is a necessary measure, "said Lan Xiangwen.

The method adopted by FAW Volkswagen is to build storage throughout the entire chain. Not only do we need to build assembly inventory in our own warehouse, but we also require every link in the supply chain to build storage to ensure the safe and stable operation of the entire supply chain. At the same time, it also disperses the pressure of construction and storage at various nodes, ensuring that personnel can be on duty, raw materials can come in, and finished products can come out. According to Zhang Ming, the purchasing director of FAW Volkswagen, the company's goal is to build a reserve of one to two weeks, which can be used to respond to emergencies temporarily; In times of tight parts, actively balance resources and maximize the utilization of common parts on the shared platform.

——Accelerate the construction of an independent and controllable supply chain system to support the strong growth of automotive companies. In the first half of the year, BYD's sales surged strongly, winning the first place among global electric vehicle companies in one fell swoop. The industry believes that there are certainly factors such as technological progress and brand strength enhancement behind it, but it cannot be ignored that BYD is the only independent car brand that can operate independently in the entire industry chain, such as in car chips, semiconductors, IGBTs, and other fields, without being "choked", and can also "stand alone" in the supply shortage of April and May.

This provides inspiration for the development of China's new energy vehicle industry. Currently, many regions are carrying out targeted actions to extend and supplement the automotive industry chain. At present, Chongqing has analyzed the problems in the industrial and supply chains under the epidemic situation, planned a list of investment projects for key components, raw materials, and other "missing" and "weak" links, accurately attracted enterprises, and promoted the landing of a batch of extended and supplemented chain projects. Hefei City vigorously promotes the integration of supply and demand in the upstream and downstream of the industrial chain, organizes enterprises to negotiate and purchase in bulk, enhances the bargaining power of chip, raw material, and component procurement, and regularly holds production and demand docking meetings to encourage local "chip screen car" enterprises to form stable cooperative relationships and enhance the resilience of the industrial chain.

——Automobile companies are deeply binding with key suppliers to achieve joint development, data sharing, and build an emerging supply chain system. The industry believes that simple order based management is outdated and requires the establishment of an agile supply chain. With the restructuring of the automotive industry, the automotive supply chain is shifting from traditional vertical stratification to integrated network. In the field of chips, vehicle manufacturers, chip companies, and software companies are working together to create a "round table" innovation ecosystem to meet consumers' needs for smart car functionality and safety.