This year, the popularity of the Beijing Auto Show has extended to the Chongqing Auto Show. Amidst the crowds at the auto show, booths like BYD, NIO, AVATR, and Wenjie were packed with people. It is reported that in 2024, the penetration rate of Chinese new energy vehicles (including passenger cars and commercial vehicles) is expected to approach 40%, and the number of potential buyers for new energy vehicles is comparable to that of traditional fuel vehicles. Among them, plug-in hybrid vehicles and models priced between 100,000 to 200,000 yuan are the most popular.

01

Chinese New Energy Vehicles, Bringing a Bit of Shock to the World

On the first floor of Wangfujing APM Mall, IM Motor has a beautiful store displaying the latest L6 and L6S models. As one of the busiest centers in Beijing, foreign visitors also frequent the area. Some travelers from the Middle East were surprised to find out that they could buy such a new energy vehicle in China for only 200,000 yuan when they inquired about the price of IM Motor's vehicles.

This is considered a bit of a shock brought by Chinese new energy vehicles to the world.

According to data, China's new energy vehicles have maintained a global market share of 64% from January to April. In 2023, Chinese brand passenger cars sold a total of 14.596 million units, an increase of 24.1% year-on-year, with a market share of 56%, an increase of 6.1 percentage points compared to the previous year. In December, 1.619 million units were sold, an increase of 25.9% year-on-year, with a market share of 58%.

In recent years, the market share of Chinese brand passenger cars has been continuously increasing. On the one hand, our mainstream automakers are faster than joint venture brands in the electric transformation. On the other hand, the export market, which is dominated by Chinese brands, has performed impressively. In addition, Chinese brands have established a complete and controllable industrial chain in the process of exploring experience.

On June 11, the China Passenger Car Association (CPCA) released data showing that in May 2024, the retail sales of Chinese new energy vehicles reached 804,000 units, an increase of 38.5% year-on-year and 18.7% month-on-month. Exports of new energy vehicles were 94,000 units, a year-on-year decrease of 4.0% and a month-on-month decrease of 18.8%. The wholesale penetration rate of new energy vehicles reached 44.2%, an increase of 10.2 percentage points compared to 34.0% in May 2023.

Data from the CPCA shows that in May, the domestic retail penetration rate of Chinese new energy vehicles was 47.0%, an increase of 14 percentage points compared to 33% in the same period last year. Among them, the penetration rate of new energy vehicles among domestic retail independent brands was 71.2%; the penetration rate of new energy vehicles among luxury cars was 28.4%; while the penetration rate of new energy vehicles among mainstream joint venture brands was only 7.5%. From the monthly domestic retail share, in May, the retail share of mainstream independent brand new energy vehicles was 71%, a year-on-year decrease of 2.1 percentage points; the share of joint venture brand new energy vehicles was 4.5%, a year-on-year decrease of 0.1 percentage points; the share of new forces was 16.3%, with brands like Xiaomi Motors driving an increase of 3.5 percentage points year-on-year; and the share of Tesla was 6.4%, a year-on-year decrease of 0.5 percentage points.

Some in the industry have judged that while new energy vehicles are accelerating their overseas expansion, barriers are also increasing. On the one hand, China's automotive market has maintained rapid growth over the past decade, while new energy vehicle technology is developing in multiple directions, with faster charging, battery swapping, and more diverse energy replenishment methods. On the other hand, barriers to new energy vehicles are also strengthening. Internationally, the US has imposed tariffs, and Europe's carbon footprint requirements are increasing barriers. Technically, future challenges will include barriers to electrification and ICV.

02

How Did New Energy Vehicles Enter the Big Market?

At the beginning of 2024, Tesla took the lead in slashing prices, and NIO and Li Auto followed suit with price reductions. Although all were price reductions, their purposes were different. Tesla's price reduction was aimed at further capturing market share, while the direct reason for Li Auto and NIO's price reductions was to enable a smoother transition for product updates.

"Li Auto's price reduction was due to product iteration. The Li Auto L series is about to be updated, with plans to release and deliver in March. This is similar to the pace before the delisting of Li One," said a car dealer in Shandong. The new round of price reductions at the beginning of 2024 was driven by automakers competing for market demand before the Spring Festival, as well as leading enterprises in the segment market offering discounts to consumers due to the downward trend in upstream component costs.

The "price war" in 2023 left many automakers feeling apprehensive. This war not only affected the new energy vehicle segment but also impacted established fuel vehicle brands.

According to statistics, the scale of price reductions in the auto market in May this year has exceeded 90% of the total for the entire year of 2023, surpassing even the total scale of price reductions in 2022. Among them, the terminal prices of joint venture brand fuel vehicles have basically bottomed out, while the diversion effect of new energy vehicles has caused luxury car prices to collapse. Currently, it is common for first- and second-tier luxury brand models to offer discounts, with dealers selling cars with zero profit or even at a loss. Relevant data shows that the promotional intensity of luxury cars in May this year has reached a peak of 21.7%.

Affected by changes in the automotive market pricing system, the impact of Chinese electric vehicle brands on the luxury car market, and other factors, the market share of luxury car brands has continued to shrink. Data from the China Automobile Dealers Association's Passenger Car Market Information Joint Council shows that in April this year, luxury car retail sales reached 200,000 units, a year-on-year decrease of 12% and a month-on-month decrease of 24%. At the same time, the retail share of luxury brands was 13.2%, a year-on-year decrease of 0.9 percentage points.

Automakers whose main sales force is traditional fuel vehicles cannot resist the "full force" of new energy vehicles. Taking GAC Group as an example, its sales in May were 156,000 units, a year-on-year decrease of 25.33%. In the first five months of this year, its cumulative sales were 700,000 units, a year-on-year decrease of 24.51%. Among them, the sales of GAC Honda and GAC Toyota both saw double-digit declines, with declines of 24.3% and 27.26%, respectively.

In addition, SAIC Volkswagen sold 90,000 units in May, a year-on-year decrease of 3.01%; SAIC GM's sales in May declined by 58.27% year-on-year, with sales directly halved. In the first five months of this year, SAIC GM's cumulative sales have decreased by 44.25% year-on-year.

The most direct comparison is the launch of the Wenjie M9, which directly impacted the price and market of the X5. In the off-season auto market in May, Huawei's Wenjie M9 sales hit a new high, surpassing BMW X5 by more than two times. BMW X5, which used to sell at a premium, now sees declining sales, with domestic new energy SUVs like Li Auto and Geely diverting market share. BMW X5 lacks advantages in terms of power and cost, and its price may need to be significantly reduced to maintain sales.

Where is the impact?

NIO owners said, "In our family, we mainly take the whole family of five out on weekends; therefore, seven-seater cars are a bit cumbersome. A large five-seater car that everyone sits comfortably in and has a usable trunk is a more suitable choice. Therefore, when we were looking for a new car, we locked in on a large five-seater and ultimately brought home the all-new NIO ES6. After getting it home, its performance did not disappoint us."

Li Bin, the founder of NIO, explained quite clearly why the first car had to be made so large: due to the two-child policy, families with two children need a spacious seven-seater car.

More and more automakers are associating themselves with the two-child policy when introducing large-size seven-seater SUVs. For example, Lincoln's Navigator, which has always been a seemingly inaccessible business and executive reception vehicle in the US, would never be associated with middle-class families with two or three children. However, when introducing it to China, Lincoln executives said, "With the popularity of the two-child policy, the market for the Navigator will grow rapidly."

Tailoring cars to China's current situation, I think this is also why new energy vehicles can have an impact on the auto market. No one can resist "adapting to local conditions."

03

Are New Energy Vehicles Involved in Self-Media?

While seemingly smooth sailing, not being profitable is a pain point for new energy automakers. A salesperson from IM Motor told us, "Apart from Tesla and BYD, basically none of the rest are making money, they're all losing money." Moreover, compared to new energy vehicles, the market concentration of the top ten key enterprise groups in the fuel vehicle segment has declined.

What are new energy vehicles currently competing in? Of course, technology and price. At the Chongqing International Auto Show forum, "doing TikTok" has even become a buzzword. It seems that Lei Jun's success with Xiaomi SU7 has brought some shock to the industry.

Amid the surging wave of the new energy vehicle market, consumers' decision-making process for purchasing cars has become increasingly complex, and channels for obtaining information have become more diverse. Research reports show that the internet has gradually surpassed offline 4S stores as the main way for car buyers to obtain automotive information. According to data monitoring one week before the auto show, the proportion of social media communication in the new energy vehicle industry accounted for 76.5%, while the proportion of vertical automotive media communication accounted for 23.5%. It is evident that automakers have also realized that social media communication channels have far surpassed vertical media communication channels.

On major social media platforms, BYD has vigorously promoted brand popularity and reputation through multi-dimensional cooperation and communication strategies. Through close cooperation with various partners, BYD has not only won widespread recognition from consumers but also enhanced brand awareness and favorability. The Zeekr 007 is also a "super influencer" on various social media platforms. Especially on short video platforms dominated by TikTok, it is gradually catching up with the main battlefield for new energy vehicle launches. The marketing volume on Xiaohongshu should not be underestimated, with the channel share increasing from almost 0% to nearly 3%, becoming a new frontier for automotive promotion and publicity.

How to do it?

1) In terms of promotional content, automotive marketers should change traditional print and video advertising methods and shift the focus of promotional content from cost-effectiveness to environmental protection, convenience, and greenness. More novel and fashionable content should be created to cater to the consumption concepts of the new generation of consumers and attract them to choose new energy vehicles.

2) In terms of promotional formats, automotive marketers should simultaneously employ multiple new media promotional techniques and formulate corresponding promotional strategies by leveraging the unique characteristics of different types of new media. For example, when using TikTok to promote new energy vehicle sales, automakers can hire live streaming personnel to share their driving experience, allowing consumers to understand the environmental friendliness, cleanliness, and convenience of new energy vehicles through live streaming, thus gaining consumer recognition.