About a slower-than-expected transition in the market

ℹ️ The article was first published on LinkedIn on 28.11.2023.

Welcome to the exciting new edition of China EV Pulse, our sixth journey together.

Your enthusiasm and commitment to exploring Chinas electric vehicle advancements in Europe are truly motivating. I am dedicated to offering you in-depth and insightful coverage of the Chinese EV market, focusing on the latest trends, innovative technologies, and the ever-changing dynamics of this thrilling sector.

Join me as we delve into the future of electric vehicles with this latest issue of China EV Pulse. Enjoy your read!

EV Insider

In todays edition of China EV Pulse, we have the privilege of featuring insights from William Li, the CEO and founder of Nio. Li gave an internal speech to all of his employees in mid of november.

William Li, in his speech, addressed the slower-than-expected transition from fuel to electrification in the premium market, highlighting the need for reflection and preparation for more intense competition ahead. He noted that many competitors are reducing prices significantly, some with negative gross margins.

Li emphasized that the electric vehicle industry is nearing the end of its qualifying round, and it's crucial for companies to strategize for the next two highly competitive years. He mentioned that his company has shifted from five-year strategic plans to more detailed two-year business plans due to rapid market changes, focusing on a shorter, more manageable timeframe.

Key priorities for the company include:

• Long-term investment in essential technologies, with a focus not just on survival but on thriving and staying competitive. This includes increasing personnel in critical areas like chip and autonomous driving development.

• Enhancing sales and service capabilities to withstand market competition. This involves building the capacity to support sales of 30,000 units monthly from mid-year and converting this capacity into actual sales.

• Preparing for new product launches while being resolute in improving efficiency. Projects that don't contribute to financial performance within three years will be either canceled or postponed.

Li also stressed the importance of developing systematic capabilities across the company to adapt to the upcoming competitive phase. His personal goal is to foster these capabilities in all departments, enhancing the company's overall competitiveness and securing its position in the final round of the E-Mobility race.

Market Momentum

China Leads Global Electrified Auto Sales, Outpacing Western Europe and USA

Chinas market for electrified vehicles, including electric cars and plug-in hybrids, is experiencing significant growth, continuing its upward trend. In the first nine months of the year, six million new electrified cars were delivered, with a notable surge in the third quarter, where 2.4 million units were sold, according to analyst Matthias Schmidt and confirmed by the China Association of Automobile Manufacturers (CAAM).

In comparison, Western Europe saw 0.75 million units sold in the same period, significantly trailing China's figures. The United States also marked a significant milestone, surpassing one million units sold. Over the past twelve months, electric vehicles and plug-in hybrids accounted for 26.3 percent of all new car registrations in Western Europe, a modest increase from 20.9 percent in 2021.

The sales of plug-in hybrids have slowed down since 2022 and 2023, partly due to the emergence of more competitive electric vehicle models in new segments and the reduction of subsidies for plug-in hybrids in key markets, especially Germany. Plug-in hybrids constituted 33.1 percent of all electric vehicles in Western Europe in the first nine months of 2023, down from 40.9 percent in the same period last year, dropping further to 31 percent in the third quarter.

XPENG Unveils Competitive Electric MPV X9, Undercutting Li Auto

XPENG has officially launched its first Multi-Purpose Vehicle (MPV), the X9, setting a competitive tone in the market with its lower pricing compared to Li Auto Li Mega. The X9, starting at 53,540 USD, is now available for pre-sale, with customers able to place a deposit for early orders. Deliveries are expected to begin in January.

The X9 stands out with its size and design, measuring 5,293 mm in length, 1,988 mm in width, and 1,785 mm in height, and features a wheelbase of 3,160 mm. It offers both single-motor and dual-motor versions, with the single-motor variant boasting a peak power of 235 kW. The dual-motor version adds a rear motor with a peak power of 135 kW.

Battery options include a lower-cost lithium iron phosphate battery pack with a capacity of 84.5 kWh, offering a range of 610 kilometers, and higher-capacity Li-ion ternary battery packs for longer ranges.

Zeekr Unveils 007 Sedan with Impressive Pre-Sale Success

Zeekr has made a significant impact in the electric vehicle market with its first sedan model, the Zeekr 007, which has garnered over 25,000 pre-orders in just nine days since pre-sales began.

The Zeekr 007 marks Zeekr's entry into the mainstream EV market, a shift from its previous focus on niche markets. The company has been actively updating the models performance features to maintain public interest. The sedan, based on Geelys Sustainable Experience Architecture (SEA), boasts impressive dimensions and offers both rear-wheel and four-wheel drive versions. The rear-wheel drive can accelerate from 0 to 100 km/h in as fast as 2.84 seconds, while the four-wheel drive version takes 5.4 seconds.

All versions of the Zeekr 007 feature an 800 V high-voltage architecture, enhancing range and charging speed. The entry-level version offers a range of 688 kilometers, and the long-range version extends to 870 kilometers.

Xiaomis Electric Vision: The SU7 Sedan Set to Hit Roads in 2024

Xiaomi, renowned for its smartphones, is venturing into the electric vehicle market with its first electric sedan, the Xiaomi SU7. The company has sought regulatory approval in China, marking a strategic shift towards electric mobility.

The SU7 is a stylish electric sedan, measuring 4997/1963/1455 mm with a 3000 mm wheelbase, and offers 19- and 20-inch wheel options. It comes in two versions, one equipped with a Lidar system.

Powered by either a 220 kW rear-wheel-drive motor or a 495 kW all-wheel-drive system, the SU7 offers two battery types: a cost-effective LFP battery from BYD and a premium NMC battery from CATL. The base model weighs 1980 kg with a top speed of 210 km/h, while the higher-end version weighs 2205 kg and reaches 265 km/h.

MIIT reveals three variants of the SU7: the standard, Pro, and Max, some with an active rear wing. Mass production is set for December 2023, with deliveries starting February 2024.

Tech Innovations

Oversupply Drives Down Lithium Carbonate Prices in China

In China, lithium carbonate prices, crucial for power batteries, are continuously dropping due to an imbalance in supply and demand. The main futures contract for lithium carbonate, set for January 2024 in Guangzhou, has seen a significant decline of 6.86 percent to RMB 116,800 per ton. Since its introduction in July, the price has plummeted by about 53 percent from RMB 246,000 per ton. The spot market also reflects this trend, with prices not seeing any increase since Mays end. Battery-grade lithium carbonate is currently priced at RMB 140,000 per ton, and industrial-grade at RMB 133,000 per ton, both experiencing over 50 percent drops.

Experts predict further declines in lithium carbonate prices, with a supply-demand equilibrium not expected until late 2024 or 2025. The current oversupply is attributed to rapid production expansion and an influx of new industry players in 2021 and 2022. As prices continue to fall, some of these new entrants are being pushed out, but this trend is not yet strong enough to restore balance. Analysts suggest that prices could fall below RMB 100,000 per ton before equilibrium is achieved.

Despite this downturn, China's robust new energy vehicle (NEV) sales could provide some support to raw material prices. NEV production and sales have exceeded expectations, positively impacting the industry chain. The decline in lithium carbonate prices is also beneficial for NEV manufacturers, as it leads to lower battery costs and improved gross margins.

VWAC Begins Battery Production, Bolstering VWs Electric Vehicle Strategy in China

Volkswagen Anhui Components (VWAC), Volkswagen Groups first fully-owned battery plant in China, has started producing its first high-voltage battery system, crucial for Volkswagen Anhui's electric vehicle production using VW's MEB architecture. With an initial capacity of 150,000 to 180,000 units annually, the battery systems are developed in collaboration with Gotion High-Tech. The plant, a significant step in VW's "In China, for China" strategy, sources 96% of its components locally.

The production process at VWAC is enhanced by advanced automated technologies, ensuring precision and quality in line with Volkswagen's standards. The facility, located next to Volkswagen Anhui's electric vehicle production site, was constructed in just 12 months, demonstrating rapid development and commitment to the region. VWACs focus extends to employee well-being, with ergonomic workstations and a strong emphasis on health and safety.

Policy Pulse

Chinas 'Little Giants' Challenge Europe's Hidden Champions

Germanys "Hidden Champions," instrumental in sectors like electric vehicles, are facing increasing competition from China. The Chinese government is boosting domestic high-tech firms, particularly small and medium-sized enterprises (SMEs), through its "Little Giants" program. This initiative, aimed at fostering technological independence over Western trade, selects innovative companies in priority sectors for support, posing a direct challenge to European industry leaders.

The program's impact is significant, with over 12,000 Chinese SMEs receiving support in areas like electric vehicles and control technology. These "Little Giants" benefit from easier access to capital through simplified stock market rules, with a notable presence in Shanghai, Shenzhen, and Beijing's stock exchanges. This surge in domestic high-tech firms is reshaping competitive dynamics, especially in sectors critical to China's strategic interests.

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Sebastian | China EV Pulse