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China just reported electric vehicle sales data for October and the numbers continue to break records. A total of 722,000 plug-in cars and commercial vehicles were sold. Battery electric vehicles accounted for 22% of the passenger car market, with plug-in hybrids accounting for another 9%.
Analysis of the Chinese EV market takes up a growing portion of our time at BloombergNEF, largely as China represents an ever-increasing share of the global EV market. China’s share of global EV sales has increased from 26% in 2015 to 48% in 2021 and 56% in the first half of 2022. We expect a big surge in the last few months of the year that could push the stake up from 60%. China is even further ahead in other segments such as trucks, buses and two-wheelers.
Last month we reported on how China’s commercial vehicle market is now picking up speed. This week I present a new analysis by my colleague Siyi Mi in our Beijing office, which goes into more detail on the trends in the passenger car market there. Here are five takeaways from their recent report:
1) The average EV range is steadily increasing. There are currently nearly 250 different battery electric models for sale in China’s passenger car market, and the average range of models sold so far this year has been 420 kilometers (1) (261 miles). This average number hides many differences, with mini cars averaging less than 250 kilometers of range and large cars and SUVs going well over 500 kilometers. Average reach across all segments has increased by 42% since 2018.
2) Lithium Ion Phosphate (LFP) batteries are gaining more and more market share. LFP batteries contain no cobalt or nickel, so they generally cost less than other types of EV batteries. The number of new EV models in China using LFP batteries is increasing rapidly and now accounts for half of all models launched. Many of these models are volume sellers, so the actual proportion of units shipped is well above this threshold. More and more car manufacturers are turning to chemistry to keep costs under control. This leads to significant downward revisions to forecasted demand for cobalt and shows how the EV market is able to adapt to different price dynamics and external pressures. Other automakers outside of China are beginning to follow suit, setting the stage for even higher global LFP adoption in 2023.
3) Electric vehicle efficiency in China is slowly but steadily improving. Despite increasing average ranges and associated battery pack sizes, the average efficiency of electric vehicles has improved by around 2% per year since 2018. That’s largely due to more efficient engines and power electronics, better thermal management systems, and efforts to reduce weight in other parts of the car. The largest vehicles have seen the greatest improvements, although their average battery pack sizes have increased over this period. There’s likely more room here as more dedicated EV architectures emerge, more cell-to-pack and cell-to-chassis battery designs, and other advances in the coming years.
4) Plug-in Hybrids (PHEVs) are on the rise in the larger vehicle segments. While plug-in hybrid sales have slowed in Europe and never really picked up speed in North America, they are finding real traction in China in the larger vehicle segments. PHEVs accounted for 15% of sales in the large car segment and nearly 25% in the large SUV segment from January through August. This is partly because high battery prices make it difficult to fully electrify larger, heavier vehicles while remaining competitive. Chinese automakers are also offering their PHEVs much greater electric range than most global brands, many of which viewed PHEVs primarily as a compliance tool to meet emissions targets rather than gearing them to consumer needs. Plug-in hybrids are also becoming a popular choice in regions where public charging infrastructure is not as well developed. Selling patterns in China show that the technology is certainly not dead and likely will still play a role. The biggest challenge is making sure they actually get charged.
5) Electric vehicle sales are spreading beyond major cities. Places like Shanghai and Beijing have had high EV adoption rates for several years, in part due to city-level policies limiting the number of new license plates issued. EVs were exempt from some of these restrictions, making them a popular choice in China’s megacities. These cities also have clusters of local automakers and suppliers, good charging infrastructure, and other incentives that help drive EV adoption. But in the last two years, EV sales have rapidly spread to smaller cities, showing that electrification is not just a big-city phenomenon.
China’s EV market is a fascinating example of how quickly technology can change, and there are sure to be other interesting developments to come. BNEF customers can access the full China EV Trends report here.
–With support from Siyi Mi.
(1) The ranges are based on the NEDC test cycle. The real range will be less.
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