In the first nine months of 2024, both production and sales of new energy vehicles exceeded 8.3 million units, with year-on-year growth exceeding 30%. In the automotive production and sales structure, new energy vehicle sales accounted for 38.6% of total automobile sales. Among them, the total production and sales of pure electric vehicles were 4.993 million and 4.988 million units, respectively, with year-on-year growth rates of 11.9% and 11.6%; the cumulative production and sales of plug-in hybrid electric vehicles were 3.318 million and 3.328 million units, respectively, with year-on-year growth rates of 79.5% and 84.2%.

After hybrid models from automakers such as BYD, Lixiang Auto, and Wenjie Auto gained market and user acceptance, Contemporary Amperex Technology Co., Limited (CATL) recently launched an extended-range battery with a pure electric driving range of 400 kilometers. Hybrid technology, once considered a transitional solution by traditional automakers, is now receiving increasing attention from OEMs and the entire automotive supply chain.

However, as the number of players increases, competition becomes inevitable. Beyond pricing, automakers are also competing based on the "superiority" of their hybrid technologies.

Reflecting on user experience, stronger power, longer range, lower energy consumption, and reduced noise are all highly perceived attributes. On the technical level, higher efficiency of engines and generators, higher charge-discharge rates of power batteries, optimized energy management control strategies, and better NVH control all pose challenges to automakers in understanding user needs, precise product positioning, and technical priorities.

▍Autonomous brands become more pragmatic

Previously, Cui Dongshu, Secretary-General of the Passenger Car Market Information Joint Meeting, expressed his views on the automotive market, stating that from a structural analysis perspective, the entry-level market for automobiles is shrinking due to insufficient purchasing power at the low and mid-end levels. Attracting first-time buyers will play a crucial role in driving overall market performance.

In this process, autonomous brands have become more pragmatic in their investments in the hybrid field. Early in 2024, after BYD took the lead in proclaiming the slogan "electricity is cheaper than oil," competition in the plug-in hybrid market intensified, particularly in efforts to reduce costs and increase efficiency. Chang'an, Geely Auto Group's Aurobay Jiguangwan, and SAIC-GM-Wuling have all adopted naturally aspirated engines and single-speed transmissions. Moreover, most companies have adopted the cost-optimized P1+P3 architecture for economical vehicles, achieving similar performance with lower technical costs.

Continuous optimization of the extended-range system is also one of the focus areas for autonomous brands. Not only does it further reduce energy consumption, but the number of pure electric systems on high-voltage platforms continues to increase, enhancing the technical options for complete vehicles and further segmenting vehicle models. Ideal, Wenjie, Leapmotor, and AVATR have all launched products targeting different consumer groups. From January to August this year, sales of extended-range electric vehicles reached 749,000 units, accounting for 12% of new energy vehicle sales and growing at a faster rate than pure electric and plug-in hybrid vehicles.

Yao Chunde, Professor and Ph.D. Supervisor at the School of Mechanical Engineering, Tianjin University, believes that in this fiercely competitive market, many autonomous brands have begun to re-evaluate the market and are no longer blindly stacking up new technologies, which is a very positive phenomenon. He also cited this year's "China Heart" Top 10 Engines and Hybrid Systems finalists as an example, stating that "four of the nine hybrid systems that made the cut this year are naturally aspirated engines, which aligns with the current industry trend of streamlining engine designs."

Moreover, Zu Bingfeng, Director of the Tianjin Internal Combustion Engine Research Institute, also believes that automakers focusing on hybrid architectures this year are refining their technologies, such as enhancing the sensory experience of electric driving and significantly improving calibration levels.

▍Joint ventures strive for differentiation through performance

Changes in the internal structure of the new energy vehicle market have prompted automakers to continuously adjust their technological focus. While autonomous brands emphasize energy conservation and consumer affordability, joint ventures aim to differentiate themselves through performance to meet the diverse needs of consumers. According to Ding Yan, Director of the Automobile Market Division at the State Information Center, meeting consumer needs is always the core driver of technological development.

Among mainstream joint ventures, SAIC Volkswagen, FAW Toyota, FAW-Volkswagen, and Volvo have all introduced hybrid systems. The Ford Mondeo Sport model features Ford's high-power eHybrid system, while the Volvo S60 RECHARGE boasts a 2.0T plug-in hybrid system, and the SAIC-GM Buick GL8 Luzun PHEV utilizes a 1.5T plug-in hybrid system. All of these systems prioritize performance, which has earned high praise from CRC (China Rally Championship) champion driver and instructor of the China Automobile and Motorcycle Sports Federation, Chen Dean.

Furthermore, the Volkswagen brand plans to discontinue two of its current hybrid models in 2025 and introduce three new plug-in hybrid system products in 2026. According to media reports, these new hybrid systems will be independently developed by FAW-Volkswagen, targeting BYD and Geely in terms of driving range, with iterative upgrades to its intelligent systems.

In August this year, Hyundai Motor CEO Chung Eui-sun stated during the company's 2024 Investor Day that it aims to enhance market competitiveness and achieve higher sales targets by promoting electric and extended-range hybrid models. The company aims to offer a full lineup of 21 electric vehicle models by 2030, while expanding its hybrid electric vehicle (plug-in and extended-range) lineup from the current seven models to 14.

Regarding the accelerated layout of joint ventures and the current situation where plug-in hybrid vehicle sales have grown much faster than pure electric vehicles this year, Xu Min, Dean of the Automotive Engineering Research Institute at Shanghai Jiao Tong University and Chairman of the Expert Review Committee for the "China Heart" Annual Top 10 Engines and Hybrid Systems Awards, believes that "for autonomous brands actively expanding into international markets, they must fully consider the demand for powerful performance among European and American customers and learn from joint ventures in this regard."

Judging from the changes in the new energy vehicle market structure, the share of pure electric vehicles has declined, while the shares of plug-in hybrids and extended-range electric vehicles have increased. Cui Dongshu believes that in the future, most automakers are likely to make greater efforts in extended-range technologies, thereby driving rapid development in niche markets. For automakers, it's simply a matter of who moves faster.

From an industry development perspective, if the market share of plug-in hybrids and extended-range electric vehicles continues to increase, while the share of pure electric vehicles declines, will this affect China's automotive industry's goals of achieving carbon peaking by 2030 and carbon neutrality by 2060? Zhu Xichan, a professor at Tongji University's School of Automotive Studies, gave a negative answer. The major contributor to the automotive industry's carbon emissions is heavy-duty trucks, while passenger cars, although numerous, contribute relatively low total emissions. Moreover, according to expert calculations organized by relevant departments such as the Ministry of Industry and Information Technology, even if the proportion of plug-in hybrids and extended-range electric vehicles continues to increase, it will not affect the automotive industry's ability to achieve its carbon peaking goals.

Typesetting 丨 Yang Shuo Image source: China Association of Automobile Manufacturers, Shutterstock, Changan Ford