Recently, the China Association of Automobile Manufacturers (CAAM) released the latest data on the automotive market. People were surprised to discover that in the domestic market, the market share of petroleum cars has been surpassed by new energy vehicles.
According to CAAM data, from April 1st to 14th this year, the national retail sales of passenger vehicles were 516,000 units, with wholesale reaching 534,000 units. Among them, the retail sales of new energy vehicles were 260,000 units, with wholesale reaching 268,000 units. Calculated accordingly, the retail and wholesale sales of new energy vehicles in the automotive market accounted for 50.4% and 50.2%, respectively, both exceeding 50%. In the domestic market, petroleum cars have unexpectedly become a niche choice.
Indeed, this outcome is both unexpected and logical. If, five years ago, purchasing a new energy vehicle was a result of license plate restrictions, today, consumers are buying them more as a recognition of their product quality. New energy vehicles have become the mainstream choice for Chinese consumers.
In recent years, the improvement in the product quality of new energy vehicles has been evident to all. Compared to traditional fuel-powered cars, today's new energy vehicles accelerate faster, drive smoother, offer quieter rides, and boast a superior level of intelligence. Additionally, the completion of charging infrastructure and the introduction of plug-in hybrids and extended-range new energy vehicles have addressed the biggest drawback of new energy vehicles: range anxiety.
Another major reason for the accelerated adoption of new energy vehicles is the decrease in their prices. New energy vehicles have long been recognized as "cheap to use, expensive to buy." If a car has both a fuel and a pure electric version, the pure electric version is often tens of thousands of yuan more expensive, if not more. However, with the maturation of China's new energy vehicle industry chain, the prices of new energy vehicles have become more affordable, with some car manufacturers even advertising slogans like "same price for oil and electricity" or "electricity cheaper than oil."
In the past year, there has been a trend of price wars in the new energy vehicle market. Surprisingly, the primary targets of this price war have not been new energy vehicles but rather traditional fuel-powered cars.
At the beginning of 2023, BYD launched a series of "Glory Edition" models, initiating a quasi "price war" by offering upgrades at reduced prices. Subsequently, brands such as Wuling, Changan, and NIO followed suit, lowering the prices of their new energy vehicle products. The stores of these brands were soon flooded with consumers.
However, in stark contrast, some traditional fuel-powered car brands found themselves in a predicament.
According to the China Association of Automobile Manufacturers' statistics on the March 2024 retail sales rankings, among the top 10 selling manufacturers, except for the luxury brand Beijing Benz, the sales trends of other brands were very noticeable. Domestic brands such as BYD, Geely, Changan, and Chery all experienced significant increases, while joint venture brands either declined or only maintained slight growth.
For Japanese brands, which are transitioning to electrification at a slower pace, the downward trend is more pronounced. Taking March sales figures as an example, Honda sold 60,400 units in China, a year-on-year decrease of 26.3%; GAC Toyota sold 55,300 units, down 31.9% year-on-year; and FAW Toyota sold 58,000 units, a decrease of 7.2% year-on-year. The relatively lower decline in sales for FAW Toyota may be attributed to the increase in sales of electrified models such as the bZ3. Official data shows that out of FAW Toyota's 58,000 units sold in March, 27,000 units were electrified models (including some hybrid models), accounting for 46% of total sales.
Due to sluggish sales performance, some brands focused on conventional fuel vehicles have begun offering discounts to stabilize their dealer networks. However, in reality, some dealers have started closing down or transitioning online, and there's even a wave of sales staff resignations as they switch to new energy vehicle brands.
In the tidal wave of new energy replacing conventional fuel vehicles, second-hand car dealers are facing the hardest hit. Over the past year, price wars have disrupted the traditional pricing system of automobiles. For example, traditionally, A-segment cars from joint venture brands like the Toyota Corolla and Nissan Sylphy had new car prices of over 100,000 RMB, while B-segment cars like the Volkswagen Passat and Honda Accord had prices exceeding 200,000 RMB. However, in the face of price wars, these models have all fallen below their original price ranges. Clearly, the decline in new car prices will also affect the prices of used cars, ultimately leading to a decrease in resale value.
During the process of declining used car prices, the turnover cycle of used cars has become a major concern for second-hand car dealers. If vehicles acquired cannot be sold promptly, they may become loss-making assets. Low-cost clearance of inventory further depresses used car prices and ultimately leads to a further decline in resale value.
Sluggish sales and declining resale values are likely to be the final straw that crushes conventional fuel vehicles. As more and more consumers abandon conventional fuel vehicles, new energy vehicles will gain more word-of-mouth publicity for their powerful, smooth, and quiet driving experience, accelerating the further increase in the penetration rate of new energy vehicles. Stereotypes such as "range anxiety" and "low resale value" associated with new energy vehicles will also fade away. By then, more consumers will embrace new energy vehicles.
