The first quarter of this year has come to an end, and passenger car sales figures for China, the world's largest single market, have been released. The estimate for the first quarter (exact figures for March are yet to be confirmed) is 4.28 million units, representing a decline for the second consecutive year since 2021 and plummeting 13% from last year. The new emissions standard, China VI-b, will be implemented in July, but the carmakers still had a total of 2 million gasoline vehicles, which do not comply with the new standard, in stock to clear at the end of March, hence the price cuts to promote sales since the beginning of the year. This, coupled with the price war on EVs waged by Tesla, has caused many consumers to be on the fence and significantly impacted the sales of less competitive brands. According to surveys, nearly two-thirds of the dealers achieved less than 80% of sales in the first quarter, and nearly half of the dealers failed to reach 70%. It means that the sales targets set by the car companies for the first quarter this year were higher than the actual results in the first quarter last year, but things did not turn out the way the car companies had wished. The excessive inventory is imposing greater pressure on them to slash prices in the second quarter. In the meantime, some high-end joint ventures are going in the opposite direction, adopting the strategy of "lower production, higher prices" to prioritize price stability and profitability, rather than getting trapped in a price bloodbath for market share. The chaotic market prices will no doubt put pressure on cash flow for brands with less financial strength and endanger normal operation. Meanwhile, sales of new energy vehicles (BEVs and PHEVs) are estimated to reach 1.48 million units in the first quarter, a year-over-year increase of 25%, accounting for 34.6% of the total passenger car market. The sales trend of NEVs and the overall car market are moving in opposite directions, which unequivocally makes traditional carmakers relying on gasoline cars even more concerned about their prospects. The Chinese market, where EVs are booming, serves as a pioneering model for other major car markets across the globe. A similar picture will be seen in Europe, the U.S., and Japan over the next three years.
During the China EV 100 Forum 2023 held a few days ago, BYD, the world's leading NEV manufacturer, suggested the Chinese government to extend the new energy vehicle purchase tax exemption for another two years, from the end of this year to the end of 2025. If BYD's hope is realized, then I think sales of gasoline vehicles will plunge further. BYD also proposed the concept of "multiple charging guns for fast charging", offering its patented technology to other NEV manufacturers for free to enable a new charging mode in which multiple charging guns charge one car simultaneously in the future. The new charging mode will reduce the charging time and save charging pile operators the trouble with increasing the power of a single gun. Plus, they won't have to worry the increased power will increase the weight of a single gun. This way, barriers to EV popularization will be removed faster. Many Chinese EV brands would benefit, but joint ventures formed with brands from Europe, the U.S., and Japan would face a dilemma. Whether to go with the flow and join this new charging ecosystem or stick to their original technology (with colossal R&D investments already made, can they readjust or redirect?) is likely to be a challenge for the headquarters, one that they must evaluate and tackle soon.
As NEV technology continues to evolve, the sales landscape will change dramatically for various car manufacturers. Specifically in the Chinese market, inventory and regulations have triggered price wars, differences in supply chain control have led to changes in production capacity, and changes in the charging ecology and modes have improved the convenience of EVs. Many factors will incessantly test the quality and responsiveness of car manufacturers. How the global car market unfolds will depend on the next move of the Chinese car market.