1. Structural growth opportunities in the context of low growth of the automobile industry
We start from the entire automobile industry, top-down analysis and outlook of the future market space of new energy automobile industry.
First of all, from the perspective of the overall car sales in China, after the overall car market slump in 2018 and 2019 (domestic car sales shrank by 4.2 percent and 8.2 percent respectively in 2018 and 2019) and the impact of the epidemic in early 2020, with the policy support mainly for sending cars to rural areas,
The overall domestic auto sales have stabilized somewhat in 2020, with cumulative sales growth of 6.7 percent from April to December 2020, excluding the worst phase of the epidemic in early 2020.
The early part of 2021 benefited from a low base due to the pandemic in 2020, with cumulative sales in the first three months up nearly 77 percent year-on-year.But year-over-year growth has struggled since then, with cumulative sales from April to December 2021 down 5 percent from the same period last year.
In the first half of 2022, the serious impact of the epidemic led to the failure of domestic automobile sales again. The stagnation of production and the wait-and-see in consumption led to a year-on-year decline of nearly 7 percent in the first half of the year. If the consumption rebound after the recovery of the epidemic in June is excluded, the cumulative decline of automobile sales from January to May of the first half of the year reached 12 percent .
In April, when the epidemic was at its peak, domestic car sales shrank by 47 percent /48 percent month-on-month/year.
The first is the imbalance between the number of urban and rural residents and the number of cars. According to the car ownership data in 2020, the number of cars owned by every 100 urban residents is 44.9, while the number of cars owned by every 100 rural residents is only 26.4.
According to the seventh national census in 2021, 510 million people, or 36 percent, live in rural areas.
This is reflected in the income and consumption growth rate of rural residents in the past 10 years. It can be seen that both the per capita disposable income and the year-on-year growth rate of per capita consumption expenditure of rural residents are significantly faster than that of urban residents.
1.2 Automobile export has reached a historic breakthrough
While the overall volume of 26.275 million units sold and the corresponding 3.8 percent year-on-year growth rate in China's 2021 auto sales figures are not impressive, breaking them down reveals structural bright spots.
In the total sales volume of 2021, the sales volume of exported vehicles reached 2,015 million, an increase of nearly 100 percent compared with the same period of 2020, accounting for 7.7 percent of the total sales volume.
For the past few years, China's car exports have hovered around 1 million units, but this is the first time that they have exceeded 2 million units.
And such rapid growth trend continued in the first half of this year. By the end of June 2022, China's automobile export volume reached 249,000 units in June, a record high, with a year-on-year growth of 57.4 percent .
Cumulative exports from January to June reached 1.218 million units, up 47.1 percent year on year.
The strong export growth since 2021 has been driven by a number of factors.
1) Global auto market demand is picking up, but due to the supply shortage of chip and other source components, foreign production reduction has caused a large supply gap.
By the end of May, the global auto market had cut production by about 1.98 million units this year due to a chip shortage, while China had cut production by only 107,000 units due to a lack of core, according to AutoForecast Solutions.
Europe remains the region with the largest cumulative reduction in vehicle production due to core-deficiency.
2) The global new energy trend is accelerating, and China benefits from being the world's largest new energy vehicle production and marketing market.
China has a strong export performance in the new-energy electric vehicle sector, becoming the world's largest exporter of electric vehicles in 2021.
From the perspective of annual export structure in 2021, the export growth of new energy vehicles is the biggest bright spot.
In 2021, the export volume of new energy vehicles reached 310,000 units, an increase of nearly three times year-on-year, accounting for 15.4 percent of the total automobile export volume.
In the first half of this year, the export volume of new energy vehicles continued to be strong, increasing by 1.3 times year-on-year, accounting for 16.6 percent of the total export volume of automobiles.
3) The international competitiveness of Chinese automobile enterprises continues to improve, and the international influence of Chinese brands continues to strengthen.
In May 2022, exports of China's own brands reached 141,000 units, up 77 percent year on year, according to the Federation.
Saic, for example, sold 86,000 vehicles in overseas markets in May, up 97 percent year on year.
From January to May, the cumulative overseas sales are close to 300,000, and its own brands have ranked among the top 10 single brand sales in 18 countries around the world, including Australia, Saudi Arabia and Mexico.
Overall, we believe that the surge in auto exports since 2021 May not be sustainable and may even face downward pressure in the future, but the long-term positive trend of auto export market will remain.
In 2021, all major markets in the world have witnessed strong sales growth of new energy vehicles. China, Europe and the United States are the three largest markets of new energy vehicles in the world in turn, with year-on-year sales growth of 158 percent , 66 percent and 99 percent respectively in 2021.
Analyzing the current situation of these three major markets, China, as the largest new energy vehicle market with the largest production and sales volume, has gradually weakened the policy role of the domestic new energy vehicle market, policy-driven has shifted to market driven, and the development stage of the market has been ahead of the policy-driven European and American markets.
1.3. The general trend of new energy vehicles
From the second half of 2019 to the first half of 2020, the domestic new energy vehicle market experienced a "darkest moment", accompanied by the decline of industry subsidies, fuel vehicle promotion, sudden epidemic and other factors, domestic new energy vehicle sales appeared a "Waterloo".
From the second half of 2019 to the first half of 2020, domestic new-energy vehicle sales experienced 12 consecutive months of year-on-year decline, with the cumulative sales decline of 31 percent in the second half of 2019, and the year-on-year decline of 41 percent in the first half of 2020 compounded by the impact of the epidemic.
Starting from the second half of 2020, the domestic new energy vehicle market will usher in a "rebirth from the nirvana", and electrification will become the general trend.
In the second half of 2020, the domestic market gradually got out of the haze of the epidemic in the first half of the year. Combined with the introduction of various policies to promote the consumption of new energy vehicles, the sales volume of domestic new energy vehicles in July 2020 turned from negative to positive for the first time since the past 12 months, and the year-on-year growth jumped from -32 percent in June to plus 23 percent .
In 2021, the sales volume of domestic new energy vehicles reached 3.5 million, with a year-on-year growth of up to 165 percent , far exceeding the market expectation of 2-2.2 million at the beginning of 2021.
The strong growth momentum continued in 2022. During the January-June period, except for April, when the sales growth rate fell to 45 percent due to the impact of the epidemic, the year-on-year growth rate of the other months remained above 100 percent . The cumulative sales volume in the first half of the year reached nearly 2 million, with a year-on-year growth of 117 percent .
