China’s Electric Vehicles | Key EV Market News and Insights — Q1 2022

China’s electric vehicle (EV) sales have grown strongly over the past two years. They are expected to reach 5.5 million units this year.

Tesla ended 2021 with strong profit figures, supported by high consumer demand in both China and Europe.

Battery manufacturer CATL maintained its dominant position in the global EV battery market last year, followed by a group of smaller domestic competitors.

BYD’s semiconductor division is moving quickly to complete an initial public offering on the mainland stock market amid explosive growth in EV sales and a global chip shortage.

January EV Sales Point to a Strong 2022

News: China’s electric vehicle market remains buoyant despite the seasonal holiday slowdown and the impending impact of recent subsidy cuts.

According to data released by the China Passenger Car Association (CPCA), retail sales of new energy vehicles (NEVs) — including battery electric vehicles, plug-in hybrids and hydrogen-powered vehicles — reached 347,000 units in January, up 132% year-on-year.

However, this figure was 27% lower than in December 2021, as vehicle sales in China in January and February are typically affected by the Lunar New Year holiday — which fell roughly within the first two weeks of February that year — when consumers often postpone purchases and automakers suspend production, the industry association noted.

Insights: The market was relatively quiet in the first half of January after automakers made a last-minute push to deliver vehicles in December.

Sales recovered fairly quickly during the final two weeks of the month, according to Cui Dongshu, Secretary-General of the CPCA.

Cui remained positive about the impact of Beijing’s 30% reduction in EV subsidies, while the CPCA reaffirmed its previous forecast of 5.5 million passenger EV sales in China in 2022.

Although many automakers raised EV prices just enough to offset the subsidy reduction, Cui expected overall EV prices to remain relatively stable as manufacturers adopted various cost-reduction measures, including diversifying component supplies.

Tesla Posts a Second Profitable Year as Shanghai Factory Reaches Full Capacity

News: Tesla recorded a profit for the second consecutive year amid growing consumer interest in environmentally friendly vehicles.

The company reported net income of $5.5 billion in 2021, more than six times higher than a year earlier.

Annual vehicle deliveries increased by 87% year-on-year, the fastest growth rate since 2019, supported by strong sales in China and Europe.

The U.S. electric vehicle manufacturer expected to achieve 50% annual growth in vehicle deliveries “over a multi-year horizon,” while warning that the continuing global chip shortage could constrain production “at all factories” during the year.
Insights: Growing demand in China was a key driver of Tesla’s expansion.

According to the CPCA, total sales of China-made Tesla vehicles reached 484,130 units last year, accounting for more than half of the company’s total global deliveries.
The company’s Shanghai factory also played an important role in its global expansion, becoming its “primary export hub” and shipping around 163,000 vehicles to the European Union, Japan and other markets during the previous year, Tesla CFO Zachary Kirkhorn said during an earnings call.

As electric vehicles continued along their growth trajectory, Tesla planned to invest RMB 1.2 billion ($188 million) to increase the workforce at Gigafactory Shanghai by 25% to approximately 19,000 employees, Bloomberg reported in November, citing sources.

The Shanghai plant, which began deliveries in late 2019, was designed to produce up to 500,000 vehicles annually and had regularly operated at an annualized production capacity of 450,000 units.

Battery Giant CATL Maintains Its Dominance Amid China’s EV Boom

News: CATL’s dominance of the electric vehicle battery market showed no signs of weakening.
The company retained its position as the world’s largest battery supplier last year, supported by the accelerating transition toward electric vehicles in China.

In 2021, the Chinese battery giant supplied 96.7 GWh of EV batteries, representing year-on-year growth of 167%.

According to data compiled by SNE Research, CATL accounted for 32.6% of the global market.

South Korea’s LG Energy Solution ranked second with 60.2 GWh, while Chinese automaker BYD was a distant fourth with 26.3 GWh.

Smaller Chinese players Gotion High-Tech, CALB, AESC and SVOLT ranked lower within the global top ten battery manufacturers and together accounted for around 8% of the market.

Analysis: CATL had maintained its position as the world’s largest battery manufacturer for five consecutive years, supported by demand for electric vehicles in its domestic market.

A total of 150 GWh of battery capacity was installed in newly sold NEVs in China during the previous year.

According to a report published on January 12 by Chinese brokerage Huaan Securities, this figure was expected to increase by more than 50% year-on-year to 230 GWh in 2022.

The battery manufacturer was also rapidly expanding production capacity to meet rising demand.

In December, it began production at its largest plant to date in Fuding, Fujian Province, with a designed annual capacity of 120 GWh.

BYD’s Semiconductor Division Plans Shenzhen Stock Market Listing

News: The semiconductor division of Chinese automaker BYD was preparing for a stock-market listing after receiving approval from the Shenzhen Stock Exchange, with plans to raise up to RMB 2 billion ($315 million).

The listing was expected within the next several months, and the company would become China’s first listed manufacturer of automotive chips.

BYD Semiconductor became an independent subsidiary of the Chinese EV giant in April 2020 and primarily develops less advanced chips such as microcontroller units (MCUs) used to control basic functions in vehicles.

The company had become China’s largest MCU manufacturer, with almost two decades of chipmaking experience, Chinese media outlet Caixin reported the previous month, citing analysis by Omdia.

Insights: The planned IPO came as China’s electric vehicle manufacturing industry experienced a significant surge in demand despite major disruptions caused by the global chip shortage during the previous year.

BYD Semiconductor estimated that its net profit would rise 574% year-on-year to RMB 395 million in 2021. Revenue was forecast to reach the upper end of RMB 3.2 billion, representing growth of 122% compared with 2020.

However, the company remained a very small player in the global automotive MCU market, which was dominated by Japan’s Renesas and six other chip manufacturers with a combined market share of 98%, according to IHS Markit.

Nevertheless, investors had high expectations for the subsidiary.

Before filing for its IPO, the company had already raised RMB 2.8 billion from a range of major investors, including Xiaomi’s industry investment fund, Sequoia Capital China and CICC Capital.

BYD’s ownership stake was expected to decline from 72% to 65% following completion of the listing.