After the New Year, new energy vehicle manufacturers such as BYD and "We Xiao Li" have successively released their December and annual automobile sales figures.
BYD achieved sales of 3.024 million vehicles, securing the top spot in the Chinese and global new energy vehicle markets, with a year-on-year growth of 61.9%. Ideal Auto led among new energy vehicle enterprises with a remarkable year-on-year growth rate of 182%, while NIO and XPeng achieved growth rates of 30% and 17%, respectively.
In November of this year, monthly production and sales of new energy vehicles exceeded two million units for the first time.
According to data from the China Association of Automobile Manufacturers, in November 2023, production and sales of new energy vehicles reached 1.074 million and 1.026 million units, respectively, with year-on-year growth rates of 39.2% and 30%.
From January to November, new energy vehicle sales reached 8.304 million units, representing a year-on-year growth of 36%, and the market penetration rate of new energy vehicles reached 30.8%.
The growth of new energy vehicles is particularly prominent in an environment of weak consumer demand. However, behind the industry's positive outlook, signs of caution are evident among some automakers.
In November, NIO's Chairman, William Li, responded to rumors of layoffs in a company-wide letter, stating that the company would reduce around 10% of its workforce, with specific adjustments to be completed in November.
Recent online rumors suggested that Li Bin, the founder of NIO, sought mergers with other leading new energy vehicle companies, but this was directly rejected by the top player of one such new energy vehicle enterprise, citing a focus on competition with existing brands during phases 1-10.
On November 9th, at the "2023 World Internet Conference in Wuzhen – Automotive Night Talk," Wei Jianjun, Chairman of Great Wall Motors, discussed industry competition, stating, "Today, many people are anxious.
They haven't made money, and they have lost a lot. Now, the competition in components and whole vehicles is fierce, and profits are thin.
But since we have embarked on this path, we must persevere." Wei also suggested that automotive companies should adhere to a bottom-line mindset, long-term thinking, and a return to a pure love for making cars, while abiding by laws and regulations.
From 2020 to the present, China's domestic production and sales of new energy vehicles have experienced four consecutive years of high growth.
The growth rates for new energy vehicle sales in 2020, 2021, 2022, and the first 11 months of this year were 16.47%, 168.79%, 88.14%, and 36%, respectively. Although the growth rate is still at 36% this year, it has significantly slowed down.
More concerning than the slowing growth rate is the speed of industry capacity expansion.
Data Source: Wind, China Association of Automobile Manufacturers
I. From Power Batteries to Whole Vehicles: Massive Expansion
Annual reports show that BYD's total workforce was 288,000 in 2021, reaching 570,000 in 2022. During this year's autumn recruitment period, BYD received 120,000 resumes in a single day, causing the website to lag. It is expected that the total number of employees will reach 700,000 by the end of this year.
Alongside the rapid increase in personnel, capital expenditure and capacity are also expanding rapidly. By the end of last year, BYD's fixed assets and construction projects totaled 176 billion yuan, more than double that of 2020.
In the first three quarters of this year, BYD's capital expenditure exceeded 100 billion yuan, accelerating its expansion. According to statistics, BYD has established and planned nine vehicle factories in cities such as Shenzhen, Xi'an, Changsha, and Hefei, with a planned annual production capacity of 5.82 million vehicles.
This planned capacity exceeds the expected total domestic new energy vehicle sales of 9 million units this year.
Expanding production is not unique to BYD. Other new forces are also expanding, with Ideal's Beijing base starting production of 100,000 vehicles by the end of this year, NIO's second factory in Hefei planning to expand production by 200,000 vehicles next year, and XPeng also having expansion plans.
Traditional automakers are also accelerating their involvement in the new energy vehicle wave. In the first nine months of this year, Geely and Changan's cumulative sales of new energy vehicles exceeded 300,000 units, and SAIC's new energy vehicle sales reached 650,000 units.
The proportion of new energy vehicle sales at Great Wall Motors increased from 12% at the beginning of the year to 19.5%, and GAC Aion's sales proportion in the total sales of GAC Group increased from 11% at the beginning of the year to 19.6%, nearly doubling from the beginning of the year.
Data Source: Wind, China Association of Automobile Manufacturers
Despite the substantial growth in the production and sales of new energy vehicles, the total volume of car consumption has not increased. From 2018 to 2022, the total sales of domestic passenger cars were 23.67 million, 21.43 million, 20.13 million, 21.46 million, and 23.55 million, respectively.
The total sales peaked in 2018, with two consecutive years of negative growth in 2019 and 2020. Even though there was a recovery in 2021 and 2022, it did not reach the sales peak of 2018. In other words, the overall market size has not increased, and new energy vehicles have taken a share from traditional fuel vehicles.
Is going global a solution to alleviate the anxiety of capacity expansion in the saturated domestic automotive market? Since last year, domestic automakers have been expanding into overseas markets.
BYD's ATTO3 model (Yuan Plus) achieved monthly sales crowns in countries such as Thailand and Singapore, and SERES opened up markets in Europe and Japan. Great Wall Motors has established complete vehicle production bases in Russia, Thailand, and Brazil, and Chery's export sales have continued to rise.
In the first nine months of this year, the cumulative export volume of automobiles reached 3.383 million units, accounting for 16% of the total automobile sales. However, the overall export ratio is still relatively small, and it mainly consists of traditional fuel vehicle exports, with new energy vehicle exports being negligible.
In the first nine months of this year, the cumulative export of new energy vehicles was 96,600 units, accounting for 2.8% of the export volume, only 1.3% of domestic new energy vehicle sales.
II. Huawei's Firm Stance Against Vehicle Manufacturing
In March of this year, Ren Zhengfei issued another announcement regarding Huawei's decision on its automotive business, emphasizing that Huawei would not manufacture cars or invest in any car company within the next five years.
He also emphasized that cooperating automakers could not use the Huawei/HUAWEI trademark in vehicle promotion and appearance. Although Huawei does not manufacture cars itself, it is increasingly cooperating with automakers, and Huawei's cooperation with automakers follows three main modes.
The first is the component supply model, where Huawei only supplies components to automakers, including motors, battery management systems, components related to intelligent driving, and intelligent cockpits.
The second is the "Huawei Inside" (HI) model, where automakers use Huawei's full-stack intelligent automotive solution, including computing and communication architecture, intelligent cockpit, and intelligent driving.
Huawei and automakers jointly define and develop. For example, AVITA, which cooperates with Changan, and FOX, which cooperates with BAIC Blue Valley, have upgraded from the HI model to the "Smart Selection" (HI Upgrade) model.
The third is the "Smart Selection" model, which involves deeper participation by Huawei in areas such as automakers, selection of core components, marketing service systems, and the like. Coordinated models will also be sold in Huawei's terminal stores.
For example, AITO Wanjie, a brand that cooperates with SAILC, is mostly led by Huawei in terms of design, R&D, and marketing throughout the entire chain, supported by HarmonyOS intelligent cockpit. SAILC is mainly responsible for production and delivery. SAILC also cooperates with Huawei in the "Smart Selection" mode, as well as with Chery and JAC.
In October, SAILC's brand sales reached 14,500 units, breaking 10,000 units for the first time in 10 months, ranking fifth among new forces in terms of sales. With the hot sales of the new M7 and the upcoming M9, SAILC's ambitions go far beyond this.
Currently, SAILC's two intelligent factories, Yijiang Smart Factory (Plant 1) and Fenghuang Smart Factory (Plant 2), have a combined annual production capacity of 300,000 vehicles. The super factory (Plant 3), which will start production at the end of December, has a designed annual production capacity of 700,000 vehicles, and the planned total annual production capacity is 1 million vehicles.
If SAILC reaches full production and sales, it is equivalent to having another "We Xiao Li" in the car market next year, and the level of competition can be imagined to be intense.
The Huawei-cooperated AITO Wanjie brand of vehicles was also launched and listed in November. It was displayed with the We Xiao Li brand at the Hongmeng Intelligent Travel Exhibition during the Guangzhou Auto Show.
The MPV and high-end SUV jointly developed with JAC are progressing as planned and are expected to be launched in the second half of next year. Although Huawei does not manufacture cars, it is the biggest catfish and promoter in the car manufacturing industry.
According to sources close to Huawei, the three car companies that cooperate with Huawei in the "Smart Selection" model are benchmarking the emerging car company We Xiao Li.
The range includes the range-extended Wanjie, which benchmarks Ideal, the new M7, which benchmarks L8, the upcoming M9, which benchmarks L9, the pure electric Wanjie developed by Chery, which benchmarks XPeng, and the mid-to-high-end SUV developed by JAC, which targets NIO.
III. Aftermath of Policy Stimulus
When the economy is on the decline, and there is insufficient consumer demand, the country and local governments will introduce policies to promote car consumption to offset economic downturns and boost spending. China has historically implemented three rounds of policies to stimulate car consumption.
The first round, from 2009 to 2010, utilized a combination of measures, including reducing the purchase tax on cars, promoting rural car purchases, and encouraging the replacement of old cars with new ones. In 2009 and 2010, car sales increased by 45% and 32% year-on-year, respectively.
However, the stimulus policy prematurely exhausted car consumption in the following two years, with sales growing only 2% and 4% in 2011 and 2012. It wasn't until 2013 that sales recovered to double-digit growth.
The second round, from October 2015 to 2016, also used a purchase tax reduction policy, implemented in October 2015. Car sales increased by 15% year-on-year in 2016, but subsequently declined to 3% and -3% in 2017 and 2018. The effects of the stimulus policy on future overdraw were evident.
The third round, from March 2019 to 2020, primarily targeted new energy vehicles, including incentives for replacing old vehicles, increased subsidies, and exemptions from new energy vehicle purchase taxes.
Under the dual impact of the stimulus policy and the trend of transitioning from oil to electricity, sales of new energy vehicles increased significantly, but the overall car consumption volume did not grow.
Data Source: Wind, China Association of Automobile Manufacturers
This year, the country has implemented multiple measures to promote the growth of new energy vehicles. In April 2023, the National Development and Reform Commission and the National Energy Administration issued a notice to accelerate the construction of charging infrastructure and promote new energy vehicles in rural areas.
In September, the National State Administration for Regulation of Workplaces issued the "Management Measures for Official Vehicles of Central State Organs and Institutions (Trial)," advocating for new energy vehicles for official use. Many regions, including Hunan and Jinan, actively responded.
The total demand for cars is limited, and stimulating car consumption merely brings forward potential demand and overdraws future demand. Based on the effects of the first two rounds of stimulus policies, the growth rate of car sales in the one or two years after stimulation shows a significant decline.
In the first 11 months of this year, under the stimulus policy, the sales of new energy vehicles increased by 36%, maintaining high growth for four consecutive years. However, the growth rate is clearly slowing down.
In October, the market penetration rate of new energy vehicles exceeded 30%, an increase of 5 percentage points compared to the beginning of the year. However, the rate of penetration is also slowing down. After the stimulus, how much can the sales of new energy vehicles grow next year?
The total demand for cars is limited, and existing new energy vehicle companies continue to expand production. Huawei's new force in car manufacturing is rising, and gasoline cars forced into a corner must also reduce prices to counterattack. Will next year's car market be more intense?
