2022 Industry Preview - Policy Subsidies Have Regressed Again, How to "Go Uphill" for New Energy Vehicles

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With the release of the latest subsidy decline policy, China's new energy automobile industry has entered a stage where innovation is king and high-quality development is pursued.

On December 31, 2021, the Ministry of Finance and other four departments jointly issued the Notice on the Financial Subsidy Policy for the Promotion and Application of New Energy Vehicles in 2022 and the subsidy plan. In 2022, the subsidy standard for new energy vehicles will be reduced by 30% on the basis of 2021, and new energy vehicles that are licensed after December 31, 2022 will no longer be subsidized by the state. This means that 2022 will be the last year for China to implement the subsidy policy for new energy vehicles.

Subsidies are declining, how can new energy vehicles continue to "go uphill"? The Shanghai Securities News reporter found that from the new force car companies to the Ningde era and other parts companies, the entire industry chain of new energy vehicles is planning to cope with the post-subsidy era. Industry experts pointed out that China's new energy vehicle companies that have grown up on policy dividends are now at the time of "weaning". In addition to short-term price increases and price insulation measures, technological innovation is the strongest driving force for sustainable development of enterprises.

The sound of receding slopes and rising prices is coming

According to the latest subsidy plan, from January 1, 2022, the subsidy for pure electric vehicle models with a cruising range of 300 km (inclusive) to 400 km is 0.91 million yuan, a decrease of 0.39 million yuan compared with 2021; the subsidy for pure electric vehicle models with a cruising range greater than or equal to 400 km is 12,600 yuan, a decrease of 0.54 million yuan from 2021; in addition, the subsidy for plug-in hybrid models is 0.48 million yuan, a decrease of 0.2 million yuan from the previous one.

Tesla has announced on December 31, 2021, that the rear-wheel drive versions of the Tesla Model 3 and Model Y will be priced up by 10,000 yuan and 21,000 yuan, respectively. Because the price of the model Y rises after the price of the whole series is higher than 300,000 yuan, it is impossible to enjoy the national subsidy policy.

"If you book a car more than a month in advance, you may still get the 2021 subsidy, which is now impossible." Tesla store sales staff told reporters. Tesla China relevant people also told reporters that the price increase of related models is related to the decline of subsidies for new energy vehicles.

The reporter visited and found that the exhibition cars of many new forces such as Xiaopeng and Weima were snapped up in advance. Xiaopeng Automobile originally had 4 exhibition cars in a store, and 3 of them were sold in early December 2021; the only WM W6 in the WM Car store has also been sold.

In order to cope with the decline in subsidies, some car companies have adopted temporary price insurance policies in addition to price increases. Nio's latest car purchase subsidy plan shows that users who pay a deposit before December 31, 2021 (inclusive) to purchase ES8 and other models, and pre-car on March 31, 2022, can still enjoy subsidies in accordance with the 2021 national supplement standard. Xiaopeng Motors also said that users who pay the deposit from January 1 to 10, 2022 can enjoy the same subsidy policy as in 2021, and the difference will be borne by the company.

The performance of the market is mixed with joys and sorrows

"In the week after New Year's Day 2022, our store sold more than 20 new cars." Huawei Shanghai Zhonggeng Roaming City store sales staff revealed that the Huawei Hongmeng intelligent new energy vehicle "AITO Q&A M5" jointly launched by Xiaokang and Huawei at the end of December 2021 is currently selling across the store, although the pricing reached 280,000 yuan, more than Tesla Model 3, still attracted the attention of some Huawei stores to new energy vehicles, and continued good sales after the announcement of the new policy of subsidy decline in 2022.

According to the Data of China Association of Automobile Manufacturers, in 2021, China's new energy vehicle market demand is strong, production and sales continue to reach new highs, with cumulative production of more than 3 million vehicles from January to November, and sales of nearly 3 million vehicles. It is worth noting that from January to November 2021, the cumulative sales penetration rate of New Energy Vehicles in China has increased to 12.7%. Chinese consumers are becoming more and more receptive to new energy vehicles. The relevant person in charge of CATL said that the company is optimistic about the follow-up development of China's new energy vehicles and will increase the acquisition of lithium lakes and other resources.

Mei Songlin, a senior automotive industry analyst, believes that the relevant departments will simultaneously release the policy of subsidy decline in 2022 and subsidy cancellation in 2023, which will not hit the short-term new energy vehicle market. For potential users who need to buy new energy vehicles, the current policy will promote them to buy cars in 2022 to enjoy the final subsidy.

In Mei Songlin's view, China's new energy vehicle consumption is undergoing a historic change from policy-driven (subsidy) to market-driven (non-subsidy). The purchase concerns of many high-end new energy vehicle consumers are shifting from the purchase cost to the convenience of use, especially the convenience of charging facilities.

Of course, the local pain of subsidy decline still exists, and the most affected of them is the micro-electric vehicle that was previously responsible for the sales of new energy vehicles. According to the data released by SAIC-GM-Wuling a few days ago, the cumulative sales of micro-electric vehicles such as Hongguang MINI EV, Wuling Nano EV, kiWi EV and so on have exceeded 750,000 units.

Industry experts pointed out that for micro-pure electric vehicles priced at 30,000 yuan to 80,000 yuan, their target consumers are highly sensitive to price, even if the price difference of several thousand yuan will also affect their decision-making and purchasing power. If car companies want to maintain the sales share of micro-electric vehicles, they can only pay for subsidies. However, the profit of such new energy vehicles is generally only a few thousand yuan, if the car company to make up for the difference in subsidies, profits will be greatly affected. A relevant person from SAIC Motor Group told reporters that although the electric vehicle sales of SAIC-GM-Wuling are high, they take the route of "small profits but high sales", and the profit of bicycles is not high, mainly relying on new energy points as a supplement to realization.

Only innovation can "go uphill"

Industry experts told reporters bluntly that China's new energy vehicle companies that have grown up by policy dividends have reached the time to "wean". The development of China's new energy vehicle industry has basically reached the original expectations, and the subsidy policy is also time to withdraw from the historical stage. Ye Shengji, chief engineer of the China Automobile Association, pointed out that the development of China's new energy vehicle industry has reached a stage of further pursuing high-quality development.

According to reports, the central government has subsidized new energy vehicles since 2009, and it has been as long as 12 years so far. According to the original plan, it was planned to cancel the subsidy in 2020. However, under the influence of the epidemic and other factors, the relevant departments decided to switch to the gradient refund strategy, that is, from 2020, the subsidy amount will be reduced by 10%, 20% and 30% every year until 2022. The continuation of subsidies has indeed promoted the development of China's new energy vehicle industry, and has also cultivated new forces such as Weilai, Xiaopeng and Ideal.

CiCC's latest research report pointed out that looking forward to 2022, it is expected that the demand for the automotive industry will grow steadily, the penetration rate of new energy will increase rapidly, and the intelligence will accelerate. In the context of great industrial change, car companies and even the industrial chain are facing innovation and reshaping, and technology and product innovation that can be rapidly iterated is an important starting point and the core driving force for the performance valuation of related companies.

On January 5, 2022, GAC Aeon, a subsidiary of GAC Group, held the "First Meta-Universe New Car Conference in 2022" to announce the listing of the world's first 1,000-kilometer endurance pure electric vehicle AION LX Plus, priced at 286,600 yuan after subsidies. According to the R&D personnel of GAC, after 5 years of technical research, GAC Aean has overcome the application problem of silicon anode materials in large power batteries, pioneered the sponge silicon anode chip battery technology, and based on this, the comprehensive working conditions of electric vehicles have been raised to more than 1,000 kilometers. The relevant person in charge of SAIC Motor Said that it will use new self-developed technologies on new energy vehicles such as Zhiji and Feifan.

"Technological innovation is the core driving force." Fang Yinliang, a global partner at Roland Berger, told reporters that although the subsidy has entered the end of the decline and will be cancelled, the future development of China's new energy vehicle industry will be faster than expected. Of course, if domestic new energy vehicle companies want to develop healthily and have global competitiveness, they must enhance their added value through technological innovation, and there is no shortcut.

Editor: Li Kuiling

Proofreader: Sun Jiehua

Editor: Zhang Dawei

Producer: He Yongxin

Editor-in-charge: Shao Ziyi

Producer: Pu Hongyi

Issued: Pan Linqing