It’s definitely not out of the question.
That’s my assessment after China Association of Automobile Manufacturers (CAAM) reported August sales data on September 10.
It was another blowout month, as sales hit a fresh record of 321,000 units, up nearly two-fold (+181.9%) year-on-year and 18.45% month-on-month. Year-to-date sales also nearly tripped (+194%) to just under 1.8 million units.
NEV sales have been on a high as of late, growing month-on-month for the fourth consecutive month since May, and crossing 300,000 units for the first time in August. To put that number into context, it was almost as many as the 330,000 units sold in all of 2015.
NEVs accounted for nearly 18% of total auto sales in August, almost 11 percentage points higher than the 7.15% achieved in January. Year-to-date, that ratio hit nearly 11%. The share of new energy PVs among PV sales was even higher, at 20% for August and 13% year-to-date.
China’s current goal is to have NEVs account for 20% of auto sales by 2025, according to the NEV Industry Development Plan (2021–2030) published late last year. That looks to be way too conservative based on current trends. In fact, Zhang Yongwei, secretary general and chief expert of China EV 100, predicted that the goal could be achieved in 2022 or 2023. Chen Shihua, deputy secretary general of CAAM, echoed Zhang’s perspective, saying at a media roundtable that the 20% target will be reached ahead of time based on the current momentum.
I agree with both gentlemen.
NEVs as a share of total auto sales could very well surpass 20% in any one of the remaining four months of this year and will be well over 10% for the year.
One thing is certain: China’s secular shift to NEVs is in full force.
As the industry enters the so-called “Golden September Silver October” period, September should be another blowout month, hitting 300,000 units again, if not more. And if the current trends hold, I am expecting 1 million NEVs to be sold in Q4 (Q3 as it stands now is on track to hit 900,000 units).
This is obviously an ideal scenario. The biggest wildcard, as everyone knows, is the chip shortage that’s been bogging down the entire global auto industry. But not all chip shortages are created equal, as we see from some of the sales data reported by various manufacturers so far. While companies like NIO and Xpeng reported a month-on-month decline in sales, others like BYD and SAIC-GM-Wuling continued to shatter sales records. In fact those two companies combined sold more than 100,000 NEVs in August. All this is happening while overall auto sales continue to fall, which means traditional ICE vehicles are taking the brunt of the semiconductor “squeeze.”
In other words, it’s a capacity issue, not a demand issue. BYD Chairman Wang Chuanfu even apologized for not being able to deliver fast enough the roughly 160,000 vehicles still on order. Though the chip shortage situation could extend well into 2022 and even possibly 2023, my fingers are crossed that it does not exacerbate any further from the current situation.
Some of the narratives that will “make or break” that 3 million-unit sales milestone, aside from the chip shortage, will be:
· Who among the “Big Three” of China’s smart EV startups — NIO, Xpeng or Li Auto — will first hit that psychological milestone of delivering 10,000 vehicles in a single month, and consistently do so for the remaining months?
· Can NIO shrug off its recent funk and return to the frontrunner position among the smart EV startups in September and beyond?
· How will the Xpeng P5, one of the most anticipated new model launches this year, perform once deliveries start in October?
· Will Tesla have a breakout September in terms of domestic sales after a paltry July and August that seemed to have been focused primarily on export?
· Can Volkswagen sustain the current up albeit very slow ramp up of its ID. series now that the ID. 3 has joined the lineup and hit that 80,000–100,000 sales target?
· Can the Wuling Hongguang MINIEV maintain its dominant position as more competitors join the fray in the micro EV segment, and will this particular segment continue to grow?
· What about traditional luxury brands such as Audi, Mercedes-Benz and BMW? Can models like the e-tron, EQC and iX3 ever be relevant again as far as having meaning sales numbers?
· And heck, will any other foreign brand besides Tesla pose any threat to the Chinese brands at all?
· Will BYD be close to selling only NEVs by the end of the year (the 60,000+ NEVs sold in August accounted for nearly 90% of all sales in the month)?
Whatever happens, 2021 is shaping up to be a record year in NEV sales no matter how you look at it, and I won’t be surprised at all if they hit 3 million units and account for well over 10% of auto sales.
