Countdown to the decline of new energy state subsidies: car companies push forward the "current price insulation" measures

In the past 2021, the performance of China's new energy vehicle market has once again exceeded expectations, sales and penetration rates have risen rapidly, and it has become a consensus that the market has entered a new stage of explosive growth.

"One rise and one fall" is that the financial subsidy policy that has grown up with China's new energy vehicle market has entered the countdown. On the eve of New Year's Day in 2022, the Ministry of Finance and other four departments issued a notice clarifying that "the subsidy policy for the purchase of new energy vehicles in 2022 will be terminated on December 31, 2022". After that, the vehicles with license plates are no longer subsidized.

Statistics show that from 2009, the central government subsidized the promotion and application of new energy vehicles, as of now, China's new energy vehicle market enjoys a subsidy dividend for up to 13 years, and the cumulative subsidy fund will be close to 150 billion yuan, covering nearly 2 million new energy vehicles.

"From the traditional independent brands, to the participation of joint venture brands, and then to the new car-making forces in recent years, China's new energy vehicle market has shown a pattern of a hundred flowers, the number of products and the matrix are unprecedentedly rich, and the overall product strength has been significantly improved." Lang Xuehong, deputy secretary-general of the China Automobile Dealers Association, said in an interview with the China Business Daily reporter.

In addition, a number of car company insiders told reporters that the financial subsidy "withdrawal from the stage" will stimulate the vitality and competition of the new energy vehicle market from the root, and the Matthew effect will intensify while the Chinese auto brand truly wins the "right to speak" in the world auto industry.

The withdrawal of financial subsidies has entered the countdown

On the last day of 2021, the Ministry of Finance and other four departments issued the "Notice on the Financial Subsidy Policy for the Promotion and Application of New Energy Vehicles in 2022", which pointed out that in 2022, the subsidy standard for new energy vehicles will decline by 30% on the basis of 2021; the subsidy policy for the purchase of new energy vehicles in 2022 will be terminated on December 31, 2022, and the vehicles on the plate will no longer be subsidized.

This means that 2022 will be the last year for the central government to subsidize new energy vehicles.

The financial subsidy policy for new energy vehicles began with the "Ten Cities and Thousand Vehicles Project".

In 2009, the Ministry of Finance and other ministries and commissions jointly launched the full name of "Ten Cities Thousand Energy-saving and New Energy Vehicle Demonstration and Application Project", proposing to provide financial subsidies, mainly in the field of public vehicles such as public transportation, taxi, and official business, and plan to use about 3 years to develop 10 cities per year, and each city will launch 1,000 new energy vehicles to carry out demonstration operations.

At the same time, the State Council issued the "Energy-saving and New Energy Vehicle Industry Development Plan (2012-2020)" in 2012, which put forward the goal that by 2020, the number of new energy vehicles in China will reach 5 million.

In recent years, driven by multiple initiatives, the sales volume of new energy vehicles in China has risen rapidly. According to public data, from 2016 to 2020, domestic new energy vehicle sales were 507,000 units, 777,000 units, 1,256,000 units, 1,206,000 units and 1,367,000 units, respectively. By the end of 2020, China's new energy vehicle production and sales have ranked first in the world for six consecutive years, with a cumulative ownership of more than 5.5 million vehicles, exceeding the first stage of China's new energy automobile industry planning goals.

According to the original plan, after China's new energy vehicles achieve the planning target of 5 million vehicles, the financial subsidy policy will be cancelled at the end of 2020. However, in April 2020, the Ministry of Finance and others jointly issued a document to extend the implementation period of the financial subsidy policy for the promotion and application of new energy vehicles to 2022.

At the end of 2021, the Ministry of Finance issued the Notice on Issuing the 2022 Energy Conservation and Emission Reduction Subsidy Fund Budget in Advance, arranging about 38.5 billion yuan for new energy vehicle subsidies, including about 9.98 billion yuan of subsidies for the promotion and application of new energy vehicles in 2016-2018, about 10.2 billion yuan of subsidy funds in 2019, and about 18.3 billion yuan of subsidy funds in 2019-2020.

Statistics show that counting the budget arrangement of the subsidy funds announced this time, from the central government to subsidize the promotion and application of new energy vehicles in 2009, the period of subsidy dividends in China's new energy vehicle market will be as long as 13 years, and the cumulative subsidy funds will be close to 150 billion yuan, covering nearly 2 million new energy vehicles.

In the industry's view, the mission of the central financial subsidy policy that is about to withdraw from the historical "stage" has been completed, and with its boost, China's new energy automobile industry has achieved great development in terms of products, technologies and consumer cognition.

"In recent years, car companies have changed the past idea of oil to electricity through platform planning, developed pure electric platforms from scratch, carried out research and development of new models on this basis, and then integrated differentiated technologies such as intelligence, which constitutes the basic common technology of electrification and is an important prerequisite for the overall improvement of the competitiveness of domestic new energy vehicle products." Deloitte Greater China Automotive Industry Leader Zhou Lingkun analyzed from a technical perspective.

Zhou Lingkun pointed out that as the most core component of new energy vehicles, domestic battery technology has made significant progress, for example, the cruising range has reached the level of six or seven hundred kilometers from the initial less than 100 kilometers. At the same time, the industry generally formed a consensus: electrification needs to be highly combined with intelligence to highlight the differentiated value, which makes the core capabilities and value of the new energy vehicle track transfer, in addition to the three electric, software, algorithms, semiconductors and other emerging technologies have become the new technology stack of new energy vehicle companies.

The good news is that Chinese consumers' attitudes towards electric vehicles are undergoing a positive shift. In Zhou Lingkun's view, "consumers' acceptance and tolerance of electric vehicles are getting higher and higher." At the same time, some of the obstacles that have influenced eviction purchase decisions in the past are gradually being eliminated. ”

According to deloitte's 2021 global automotive consumer survey results, "battery life" is no longer the number one problem for Chinese consumers, on the contrary, more and more consumers are concerned about the safety of electric vehicles, and anxiety about charging time has also begun to rise, which shows that more and more consumers are beginning to regard electric vehicles as a realistic choice to replace fuel vehicles.

Enter a new stage of market-driven

The decline of financial subsidies has boosted China's new energy vehicle market into a new stage of marketization.

"China's new energy automobile industry must go through three stages, namely the policy-driven stage, the policy + market-driven stage, and the market-driven new stage." Chen Qingtai, chairman of the China Electric Vehicle 100 Association, said not long ago.

"The increase in penetration rate shows that when the industry is the main body, the demand of users will be the main driving force for the development of this market." Wan Gang, vice chairman of the National Committee of the Chinese People's Political Consultative Conference and chairman of the China Association for Science and Technology, recently mentioned in reviewing the development process of new energy vehicles in China that after nearly a decade of research and development, new energy vehicles have entered the industrialization process since 2010, and the market penetration rate of new car sales is "from 0 to 1%", mainly applied to the bus and taxi markets, and is in the market-oriented start stage with policy as the main body; "from 1% to 5%", entering the market cultivation stage with industry as the main body, and the policy promotes the gradual development of the private car market; "from 5% to 10% growth; ", entered the stage of rapid marketization with diversified users as the main body.

According to the data of China Automobile Association, the market penetration rate of China's new energy vehicles in 2020 is 5.4%, and from January to November 2021, the cumulative sales of new energy vehicles in China have exceeded the annual expectations of nearly 3 million vehicles, and the market penetration rate has increased to 12.7%, and in November alone, the retail penetration rate of domestic new energy passenger cars has exceeded 20%.

Lang Xuehong told reporters that 2021 is a watershed, from the sales distribution of new energy vehicles in the country, Beijing, Shanghai, Guangzhou, Shenzhen and other cities that restrict the purchase of fuel vehicles, the growth rate of new energy vehicle sales is low, while the growth rate of new energy vehicle sales in fourth- and fifth-tier cities is increasing.

"Policies such as restricting the purchase of fuel vehicles and restricting foreign licenses objectively make people who did not intend to buy new energy vehicles have to turn to buy new energy vehicles, so that the policy is still promoting the sales of new energy vehicles." But now, in cities with non-purchase restrictions and license plates, in the case of both fuel vehicles and new energy vehicles, the sales growth rate of new energy vehicles has increased rapidly, which shows that the number of groups actively choosing new energy vehicles has become more, and the advantages of new energy vehicles such as advanced equipment, car costs, and purchase costs have been accelerated in the terminal market. Lang Xuehong said.

Zhou Lingkun also said that from the perspective of the nature of vehicle use, China's electric vehicle market is shifting from operations such as leasing to private consumption. From the perspective of car purchase areas, the main force of electric vehicle purchase has gradually shifted from places with policy constraints to second-, third-, fourth-, and fifth-tier cities and township areas that are not restricted, and there is a tendency to further penetrate downwards.

"The above trends show that China's new energy vehicle market is accelerating towards marketization. From the perspective of internal structure, the use scenarios and users of new energy vehicles are becoming more and more subdivided. For example, driven by the policy of new energy vehicles going to the countryside, the demand for electric vehicles in low-tier cities and rural areas has been activated; under the offensive of intelligent electric vehicle products, the middle and high-end electric vehicle market has been rapidly opened and achieved positive competition with the same level of fuel vehicles, which is another major sign that the current electric vehicle market is maturing and getting rid of subsidies. Zhou Lingkun said.

The impact on terminal movements is limited

With the further decline of financial subsidies and the imminent end, the industry is worried about whether the purchase cost of new energy vehicles will fluctuate greatly, which will affect the trend of terminal sales.

The reporter noted that some car companies have recently "heard the sound" and implemented measures such as "limited-time insurance price" and raising the price of bicycles.

"In the short term, the price of bicycles will be affected to a certain extent, but there is internal differentiation." Zhou Lingkun analyzed that the A00 market below 50,000 yuan is basically unaffected; the price sensitivity of mid-to-high-end electric vehicle buyers is relatively low, the loyalty is high, so it is relatively controllable by the impact of subsidy withdrawal; and the A-class car market in the middle section, especially the operational demand, is more sensitive to costs, and the subsidy decline has a greater impact.

"However, in the long run, China's new energy vehicle market has shifted from subsidy-driven to market demand-driven, while the cost of batteries and other costs, carbon credit trading revenue, software and other emerging revenues will be enough to make up for the negative impact of subsidy withdrawal on corporate profitability." Zhou Lingkun thinks.

Lang Xuehong also said that after the withdrawal of financial subsidies, the overall price of the new energy vehicle market may be affected, and there will be temporary price fluctuations, but it will quickly return to normal.

In fact, the subsidy policy has been in a state of decline in the past few years, and from a realistic point of view, while the subsidy policy has declined, the market sales have risen as a whole. According to public data, the overall sales of new energy vehicles in 2019 fell slightly by 4%; the overall sales of new energy vehicles increased by more than 10% in 2020; and the sales of new energy vehicles from January to November 2021 have doubled compared with 2020.

"Based on the sales growth trend over the years, it can be seen that the impact of subsidies on the new energy vehicle market is short-lived, and the growth is still a major trend." WM Motors, a new force in car-making, analyzed to reporters that from the perspective of the C-end, after the subsidy declines, there may be unfavorable factors such as a reduction in car purchase preferences and an increase in car purchase costs in the short term. However, from the perspective of the B-end, the trend of "market orientation" caused by the decline in subsidies can force the accelerated iteration of China's new energy automobile industry technology, force the participants to provide better mass production products to enhance terminal competitiveness, and ultimately benefit C-end users.

A relevant person in charge of a car company told reporters that the subsidy decline is in line with the development trend of China's new energy automobile industry from "policy-oriented" to "market-oriented", and is a necessary process for the development of China's new energy automobile industry, and no enterprise can rely on subsidies for a long time; from the perspective of the impact of the decline of new energy subsidies on the domestic new energy competition in recent years, those enterprises that want to "rely on subsidies to mix their days" in the past have been gradually eliminated, and brands with real technology and market recognition can achieve long-term development.

The person in charge also said that in the face of the decline of new energy subsidies, relevant enterprises focusing on the new energy automobile industry should change the competitive thinking similar to the "price war" in the past, strengthen their own research and development investment, enhance the update and iteration of forward-looking technologies such as unmanned driving and intelligent cockpits, and the creation and innovation of high-quality products and services in the closed loop, etc., to enhance the comprehensive competitiveness of their own brands in the terminal market, and these new capabilities will enable relevant car companies to cope with a new round of subsidy decline.

In addition, the good thing in the industry is that after the cancellation of the central financial subsidies, the local government's subsidies and preferential policies for promoting the development of the new energy market are still implemented, and many people in the industry believe that the central non-financial subsidy policy will increase its efforts to continue to promote the rapid development of the new energy vehicle market.

"Financial subsidies must be short-term measures, as China's new energy vehicles further achieve scale effects and competitiveness improvement, the future will be a situation of diversified support policies to promote the sustainable development of the industry." Lang Xuehong told reporters that the association has made suggestions to the relevant departments to implement new non-financial subsidy support policies, such as reducing purchase taxes and shifting production subsidies to consumers to buy cars; introducing policies that allow consumers not to spend money, such as allowing new energy vehicles to go along during the period of low utilization of urban bus lanes, or providing new energy vehicles with parking fee reduction policies in some cities.