China EV Insights | Vol.011

New Energy Vehicles Reach 51% Penetration: ICE Vehicles Face Impact

In July, China's new energy passenger car sales surpassed ICE vehicles for the first time, achieving a 51.1% market penetration rate, signaling the mainstream adoption of new energy vehicles. This shift highlights several trends: traditional ICE vehicles are under pressure, joint venture car sales are declining, and companies like BYD are excelling through technological innovation, with sales exceeding 340,000 units in July. Consumers now view new energy vehicles not just as transportation but as intelligent mobile terminals, with advantages in charging speed, battery life, and smart features.

The market has evolved into a "the strong get stronger," pattern, with BYD leading and brands like Chery, Geely, and Changan following. This growth is challenging traditional luxury and Japanese brands, reshaping the industry.

The increasing penetration rate of new energy vehicles（NEV) is a clear sign of a comprehensive impact on fuel-powered cars: market share is being compressed, industry chains and maintenance systems are undergoing changes, and insurance costs are expected to decrease. In addition, with the popularization of charging piles reaching a ratio of about 3:1, and the policy of the first two hours of parking for free in parking lots built by the government at airports, train stations, etc., new energy vehicles will further affect consumer choices. Overall, the usage scenarios of fuel-powered cars are being impacted by the development of NEV, and all sectors of the industry chain need to be prepared for this irreversible trend.

CATL Invests Heavily to Build Brand Awareness Among Consumers

CATL, a leading new energy vehicle power battery brand, captured significant attention during the 33rd Summer Olympic Games in Paris by partnering with China Mobile Migu as the chief partner for top sports event broadcasts. This collaboration marked the launch of CATL's Direct-to-Consumer (D2C) strategy. In August, CATL announced plans to open its first offline brand display store in Chengdu, the "New Energy Life Plaza," which will showcase over 70 models from 20 automakers equipped with "CATL Inside" batteries, echoing Intel's "Intel Inside" campaign.

This strategic shift comes in response to market challenges, including a decline in business income and overseas revenue despite profit growth, as well as increased competition from automakers building their own battery factories. CATL is also expanding its consumer reach through its "CATL Service" after-sales brand, establishing 112 service stations across China offering battery maintenance and health checks.

Beyond the power battery market, CATL is diversifying into sectors such as ships, engineering machinery, and aviation, while leading in energy storage. The company is also entering the automotive testing field through its acquisition of Beijing Zhongqi Institute and plans to build the world’s largest supercharging network with 10,000 stations across 100 cities by 2025. CATL is not confining its breakthroughs to the Chinese market. Expansion into overseas markets is also imperative. CATL has already set up factories in countries such as Germany, Hungary, and the United States, striving to expand into international markets.

Tesla Faces Growing Challenges in China

In the fierce competition of China's new energy vehicle market, Tesla is facing a strong challenge from domestic brands. New models such as Xiaomi SU7 and NIO ONVO L60 have publicly announced a direct encirclement and suppression against Tesla. In the just-passed month of July, the Xiaomi SU7, with a performance of 13,120 units, outperformed the Model 3's 9,928 units. Although they still hold a place in the new energy sedan market segment of 200,000 to 300,000 RMB. Despite Tesla launching the "Refreshed Edition" of the Model 3 last year, and directly cutting prices and introducing a "5-year 0% interest" promotional policy this year, the feedback from the end consumers is not as enthusiastic and ideal as expected. Tesla, which once had an unshakable dominance and held the unassailable initiative, has been knocked off its pedestal.

Tesla, in the European and American markets, can still dominate for several years without changing its models. But in China, many competitors are eager to take over with a product iteration cycle as short as half a year to encroach and take a share of the "cake."

The "divided" macro environment makes Tesla appear very entangled, which is also the essence of the obstacles in the Chinese market.