China Rises to Take Half of Global EV Market

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China’s electric vehicle (EV) market now accounts for over 50% of new EV sales globally, increasingly posing a threat to local and global transport oil demand locally and globally. Sales continue to exceed expectations, ending the year 2021 with a stunning 150% growth. Full-year EV sales roared to over 3.55 million units — or almost double what the China Association of Automobile Manufacturers (CAAM) had forecast at the beginning of 2021 (see tables). Domestically, EV penetration has deepened significantly from just 5.4% in 2020 to 13.4% in 2021 (see graph).

A long-awaited inflection point may have arrived, or is at least dawning: “The EV market is following an S curve, with a 10%-15% [penetration] rate marking the turning point for rapid growth,” said Xiong Tianbo, a manager at China’s pioneer EV manufacturer BYD, at an industry conference last month. An S curve generally refers to a pattern whereby a period of slow or steady growth is followed by a phase of rapid acceleration. As of December 2021, cumulative EV ownership in China has reached 7.8 million units for a 2.6% share of the national auto fleet, up from 1.75% a year ago.

It is worth noting that the robustness of China’s EV market has persisted through successive reductions in government subsidies — which have been cut by 20% in 2021 from 2020 levels. As the EV market approaches critical mass, “it is entering a new phase of growth that is more market-driven rather than being dependent entirely on policy support,” observed CAAM’s Secretary-General Fu Bingfeng.

20% Penetration Within Sight

Policy support, meanwhile, will continue via a mandatory “credit” scheme that effectively imposes a minimum EV production ratio on automakers. The EV credit requirement rises each year and will increase to 16% and 18% in 2022 and 2023, respectively, up from 14% last year. This year, EV subsidies will be slashed by another 30%, said the Ministry of Finance, reiterating that all subsidies will end from Jan. 1, 2023.

Yet veterans in the Chinese EV industry remain confident of another bountiful year in 2022. Sales forecasts for this year range from the most conservative figure of 5 million by the CAAM to as high as 6 million units by the more upbeat China Passenger Car Association (CPCA). Such predictions suggest EV sales penetration would sail past 18% in 2022, or even push near the state-set target of 20% by 2025. In fact, although the annual EV penetration rate averaged at 13.4% last year, the single-month figure for December has already breached 19%.

Immense improvements in quality and performance of China-made EVs are also fueling the optimism in sales outlook. Average driving range on a single charge has almost doubled from 253 kilometers (157 miles) in 2016 to above 400 km (249 miles) in 2021, said the Ministry of Industry and Information Technology (MIIT). “Consumers’ satisfaction with EVs is on par with that for oil-powered cars,” noted the ministry.

Export Prowess Poses Global Oil Threat

Importantly, China’s EV manufacturing prowess is threatening to hasten oil demand erosion not just domestically, but also globally. Made-in-China EVs are increasingly deemed chic-looking and price-competitive without compromising on quality and performance. The country quadrupled its EV exports in 2021 to some 310,000 units, CAAM figures showed.

Tesla’s Shanghai Gigafactory was the biggest driver for China’s EV export growth — singlehandedly contributing to some 160,000 units sold to over 10 countries in 2021, cornering over half of overseas sales, according to CPCA data. The Shanghai plant has a rated production capacity of 450,000 units per year, which translates to just under half of Tesla’s overall 2021 sales of over 936,000 units from the Chinese facility and its Fremont plant in California.

But local EV brand names like BYD are positioning themselves to challenge Tesla’s lead in both domestic and export markets. Shenzhen-based BYD, for example, sold a combined 584,000 EVs in China during 2021 from multiple models priced mostly in the mid- to high-end segment, outperforming Tesla’s local sales of around 321,000 units across both its Model 3 and Y. “Local brands now account for over 74% of EVs sold in the passenger car category within China,” according to the MIIT.

BYD and its compatriots such as Nio, XPeng, Shanghai Automotive and Great Wall Motor (GWM) are also aggressively seeking overseas market expansions. They have been making inroads into markets in Europe — especially Norway — as well as in Latin America, the Caribbean and Southeast Asia. Nio’s ES8 model received a five-star safety rating from the European New Car Assessment Program and the company is co-operating with Royal Dutch Shell to “jointly construct and operate battery charging/swapping facilities.” GWM also recently opened its European headquarters in Munich and has picked Saarland, Germany, as the site for building two battery production plants at a total investment of €2 billion ($2.3 billion).

China Automobile Sales
 Dec '21Y-o-Y %Chg.Jan-Dec '21Y-o-Y %Chg.
Total Auto Sales2,786,000-1.6%26,275,0003.8%
Commercial Vehicles364,000-20.14,793,000-6.6
Passenger Cars2,422,0002.021,482,0006.5
New-Energy Vehicles (NEVs)531,000113.93,521,000157.5
Plug-In Hybrid82,000121.6603,000140.0
Fuel Cell486110.0%2,000 35.0%
China NEV Exports
 Dec '21Y-o-Y %Chg.Jan-Dec '21Y-o-Y %Chg.
Passenger NEVs16,00013296,000330
Commercial NEVs2,000 156%14,00079%

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