Wen\Li Jin, Liu Jin
The development of new energy vehicles plays an important role in the path of achieving carbon neutrality in China and the world, and new energy vehicles have developed from the level of tens of thousands of global sales ten years ago to nearly 6.5 million global sales in 2021, achieving a compound annualized growth of 57%, and the sales volume in the Chinese market alone has reached 3.52 million.
The development rate of new energy vehicles has accelerated significantly in the past two years, such as the penetration rate of new energy vehicles in the European market from 3.6% in 2019 to 14% in the first half of 2021; the new energy penetration rate of China's passenger car new car market has been around 20% in recent months, while the data has never reached 10% before 2021; the U.S. and Japanese markets, where new energy development is relatively slow, have also accelerated significantly, and the penetration rate of the United States has increased from 1.9% in 2019 to 3.2% in the first half of 21.
Combined with the new energy planning of various governments and the electrification timetable of major car companies, we expect that the new energy penetration rate of major markets may reach 40% to 50% in 2030, and the replacement of traditional fuel vehicles by new energy vehicles will be basically completed by about 2050.
The fierce momentum of the development of new energy vehicles can be seen from the fiery performance of related companies in the capital market, the leader Tesla market value once exceeded 1 trillion US dollars, more than toyota, Volkswagen, General Motors, Hyundai, Ford, BMW, the sum of the 6 established car companies; China's new car-making force Wei Xiaoli Three market value once exceeded 100 billion US dollars; and the market value of the leading Ningde era in the field of power batteries has also exceeded PetroChina, these strong contrasts tell us that the era of new energy vehicles has undoubtedly come. And it contains great commercial value.
The automobile industry has the characteristics of long chain and large ecology, such as BMW has more than 12,000 suppliers distributed in more than 70 countries around the world; in terms of downstream sales and maintenance, China has nearly 30,000 4S stores and more than 300,000 maintenance companies, employing nearly 3 million people. Therefore, the development of new energy vehicles not only affects the car industry itself, but also has a profound impact on its upstream and downstream industrial chains and related ecology, and also brings many new "track" opportunities. There are five main findings from our study:
Race 1:
The power battery industry has developed in a spurt
The most direct "track" driven by the development of new energy vehicles is the power battery industry. Power batteries account for about 40% of the cost structure of new energy vehicles (for low-end vehicles), which is the core factor that determines the performance and comprehensive cost of automobiles. The most direct reason for the rapid development of new energy vehicles is that the decline in the cost of new energy vehicles and the improvement of performance have achieved market competitiveness relative to traditional automobiles, while the performance improvement and cost reduction of new energy vehicles are mainly driven by the technological progress and scale manufacturing of batteries. From the average of the entire industry, the energy density of batteries has increased by about 3 times in the past 10 years, and the cost has dropped by nearly 90%.
With the rapid development of the new energy automobile industry, the power battery industry has ushered in a huge development opportunity, and it is expected that the global power battery market size will exceed 3000GWh in 2030, which is more than 20 times the global installed capacity in 2020. In addition, power battery companies have a huge development driver---- from the demand for energy storage. With the structural adjustment of the energy supply side (the proportion of photovoltaic, wind energy, etc. continues to increase), the energy storage industry has also ushered in huge development opportunities. We expect the demand for batteries in the global energy storage market to be around 1000GWh in 2030. The power battery industry itself is also a large industrial ecology, and its rise has pulled a lot of related small "tracks", from lithium, cobalt, nickel mineral resources, phosphorus chemicals to positive and negative electrode materials, diaphragms, electrolyte fields and other related industries such as equipment manufacturing and battery recycling.
The development of China's power battery industry is exciting, and it has top competitiveness in the world: in the past two years, the shipments of Chinese enterprises can account for about half of the world; China's power battery industry has the world's most complete industrial chain, such as 2021, Chinese companies in the field of anode materials and electrolytes account for 86% of the global market share, but in the most upstream mineral resources, foreign dependence is still relatively high, which may be a challenge to the future development of the industry; in the past two years, the Ningde era, Guoxuan Hi-Tech and other head Chinese power battery companies have gone abroad to build factories overseas, it is foreseeable that in the future, China's power battery industry will appear several large multinational enterprises that have great influence on the global new energy vehicle supply chain.
Second Lane:
New energy vehicles entered the Warring States era
The development of new energy vehicles has profoundly affected the track of "car building". In recent years, we have witnessed the rapid rise of Tesla, from a layman to an automotive giant; we have seen the dynamic growth of new car-making forces such as China's Weilai, Ideal, Xiaopeng and Weima, as well as independent operating brands such as Eian, Jihu, Lantu, and JiKr, as well as new companies such as Lucid and Rivian in the United States; and seen Huawei's technology companies cross-border into the car-making field in a certain and extremely ambitious way. This is a situation that has never happened in the traditional automobile manufacturing industry.
The structure of traditional fuel vehicles is relatively complex, the technical threshold is high, the patent barrier is thick, and the intertwined technical/engineering problems such as engine, gearbox, chassis technology, and vehicle safety performance jointly construct a high industry entry threshold. In addition, the sales and maintenance model of fuel vehicles has a certain network effect, which also makes it difficult for small enterprises to compete. Taking the US market as an example, from the birth of the automotive industry to the entry of Japanese cars into the US market in the 1970s, the three major AMERICAN auto companies General Motors, Ford and Chrysler have always occupied more than 80% of the market share. Before Tesla was born, few new car companies could successfully challenge the automotive market.
New energy vehicles turn engines, gearboxes, and fuel tanks into power batteries, motors, and electronic control systems, which greatly reduces the complexity of automobile manufacturing. For example, the number of moving parts of the automobile engine is more than 2,000, while the motor is only about 20. This transformation also greatly reduces the value of the traditional giants' patents and knowledge accumulation.
The reduction of the threshold for car manufacturing has a profound impact on the competitive landscape of the automotive industry, and the stable market pattern of the fuel vehicle era is facing a reshuffle, and the automobile brand in the electric vehicle era will bloom in a hundred flowers. One piece of evidence is that although the growth of the head electric vehicle companies is generally very rapid, from 2019 to the first half of 2021, the market share of the world's top ten new energy vehicle companies has dropped from 63.2% to 56.7%. In the process of a hundred flowers blooming, new forces, old forces have opportunities, new forces car companies often have Internet product thinking, there is no historical baggage in the product architecture, in the sense of science and technology, intelligence often have bold attempts and highlights; although traditional car companies generally start late in electrification and intelligence, but now they have basically seen the situation, and generally plan to invest a lot of resources for transformation. For example, Volkswagen plans to invest a total of 159 billion euros in the next five years, of which 89 billion euros will be used for technologies such as software and electric vehicles, and will increase the number of pure electric models to 50% by 2030 and achieve full electrification by 2040 Toyota announced that it will invest about 70 billion US dollars in electrification technology development and equipment investment by 2030, of which 50% will be invested in pure electric vehicles.
The reduction of the threshold for car manufacturing has also brought a historic opportunity for Chinese car companies to overtake in curves. Due to the support of China's industrial policy, China's new energy vehicle market and industry have gained a first-mover advantage, and the value of this first-mover advantage is enormous. Now China has the world's largest new energy vehicle market, a number of new forces with characteristics or new energy car companies supported by traditional car companies, the world's most complete power battery industry chain, Huawei and Baidu and other local giants that provide intelligent infrastructure. We believe that with the combination of these advantages, China's new energy automobile enterprises have great prospects in the future.
Third Lane:
The electronic/softwareization of automobiles is a major trend
In addition to electrification, the electronicization and softwareization of automobiles is another major trend in the development of new energy vehicles. In the 1970s, software and electronic systems accounted for only 3.6 percent of vehicle costs, and by 2020 the ratio was as high as 35 percent. Compared with the complex mechanical system and electronic control system of fuel vehicles, the "three electricity" system composed of batteries, motors and electronic controls of electric vehicles makes the control logic of the vehicle more simple, the transmission of signals more convenient, and the control of voltage and current more sensitive, which is more natural than that of fuel vehicles and the development of automobile electronics and software.
For a new energy vehicle, the most important in the vehicle's electrical architecture is the vehicle control system, intelligent driving system and intelligent cockpit system. The vehicle control system is responsible for chassis drive, braking and vehicle safety, directing the car to complete the basic driving functions; the intelligent driving system and the intelligent cockpit system focus on realizing the intelligent interaction between the car and the operating environment, the car and the person, and supporting the car to upgrade from a simple means of transportation to an intelligent mobile terminal. All of these systems need to rely on a combination of chips, software, algorithms, etc. to achieve functions.
From the perspective of electronic hardware, the car has been armed into a "computer". Taking Huawei's automotive product planning as an example, a new energy vehicle needs to use a variety of chips: Kirin chip (SOC), Ascend chip (AI), Kunpeng chip (CPU), Balong (5G) and MCUs (micro-control unit) chips on many electronic components. Different chips are designed to meet the increasingly diverse computing needs of car driving, control, and entertainment, and one of the most important types of computing needs is to process the large amount of data collected by more and more cameras and sensors on the car. For example, the newly released NIO ET7 in 2021, in addition to equipping the autonomous driving domain controller with 4 Nvidia Orin SoCs, is also equipped with 33 high-precision sensors: 1 lidar, 5 millimeter-wave radar, 12 ultrasonic sensors and 11 high-definition cameras. It is estimated that in the future, for L4-level autonomous driving, a car will need to process up to 4.08 billion bytes of data per second, which is equivalent to about the computing power of 9 iPhone 12. This brings huge hardware market space, and it is expected that the market size growth of automotive chips will reach $115 billion in 2030, accounting for about 11% of the entire chip market.
From a software perspective, the car is already a highly software-oriented product. Automotive chips provide computing power, and software and algorithms are needed to exert the value of these computing powers. Modern high-end automotive in-vehicle systems require up to 100 million lines of code, compared to just 6.5 million lines used by the Boeing 787 and 24 million for the F-35 fighter jet. With the intelligence of the car, the vehicle control system needs more agile response and control capabilities, the intelligent driving system needs more accurate and safe algorithms, and the intelligent cockpit system needs to support diversified applications and services. This is also why some of the "new forces" that build cross-border cars from the Internet have achieved good results, because these companies have strong software development capabilities; on the other hand, software capabilities may also be the biggest shortcomings of traditional car companies, and the challenges of software/intelligent transformation for traditional car companies are not lower than the challenges brought by electrification transformation.
Grand Track 4:
The gradual maturity of autonomous driving
Autonomous driving is an important track that brings major changes to human travel and transportation with the development of new energy vehicles. In order to "drive", the whole society has paid a lot of manpower, time and money costs. The number of Chinese driver's license holders is about 410 million, assuming that each person spends 100 hours learning and practicing cars, which adds up to 460 years; assuming that the average driver's license holder spends 50 hours a year driving, according to China's latest per capita wage, it is equivalent to the wasted output of the whole society; there are nearly 3 million taxi drivers, more than 30 million online car drivers, more than 30 million truck drivers, a large number of manpower as professional drivers; the cost of drivers accounts for 10 in logistics costs %。 With a wide range of data, you can see how much social cost will be reduced once driving is automated.
According to estimates, in the five-year operating cycle, self-driving taxis can be about 330,000 lower than the operating costs of online ride-hailing; according to another set of calculations, if the penetration rate of autonomous driving in the United States reaches 10%, the whole society can save $37.7 billion per year; assuming that the number of self-driving cars exceeds 90%, the United States can save $447.1 billion in social costs per year.
Autonomous driving will not only save the driver's labor costs, but also significantly improve social resources and traffic efficiency, such as improving congestion and accident rates. In the third quarter of 2021, Tesla's Autopilot automatic assisted driving technology participated in an average of one collision accident per 8 million kilometers of driving distance, and during the same period, vehicles in the United States traveled an average of one traffic accident per 780,000 kilometers, and the safety level was more than 10 times higher. It can be expected that with the development of autonomous driving technology, this advantage will continue to be magnified.
Global shipments of autonomous vehicles with L3 and above are expected to grow from 32,000 units in 2020 to 863,000 units in 2024, an annualized increase of 128%. At the same time, autonomous driving has begun to be applied in scenarios such as driverless taxis, unmanned delivery vehicles and long-distance cargo transportation, such as Baidu, Antu, Didi, Wenyuan Zhixing, Xiaoma Zhixing, etc. in China have launched driverless taxi business and entered the trial operation stage.
Grand Track 5:
The automotive ecosystem is changing dramatically
The last track is in addition to the above four points, the development of new energy vehicles to bring about other important changes to the automotive ecosystem. The upstream energy supply is changing from oil to electricity; the energy replenishment method of the automobile is correspondingly changing from refueling to charging and replacing, resulting in new industries such as charging piles, power stations, and battery recycling. Downstream car sales and service methods are also changing.
As the mainstream of new energy vehicles, the number of charging piles has maintained sustained high growth in recent years, and by the end of 2021, the number of charging infrastructure in the country has reached 2.617 million units, with a compound growth rate of 65.3% in the past 5 years. The vehicle-to-pile ratio dropped from 7.8:1 in 2015 to 3:1 in 2021. With the accelerated penetration of new energy vehicles and the reduction of the vehicle-to-pile ratio, it is expected that by 2025, the mainland charging pile market size will reach 250 billion yuan. According to the planning of mainstream car companies, 800V fast charging can be achieved around 2025, and each charging time can reach an efficiency close to that of fuel vehicle refueling.
At the same time, the number of substations in the mainland is also growing rapidly, with 1298 by the end of 2021 (including 777 in Weilai), an increase of 134% year-on-year. Since the charging pile still has problems such as long charging time and high requirements for land and power grid at this stage, the power exchange mode complements its scene with its convenience, and the supporting battery rental business model reduces the user's initial car purchase cost. With the route selection of WEILAI, BAIC, Dongfeng and other automakers and the release of standardization schemes for battery companies such as Catalonia Times, the power exchange market is expected to usher in rapid growth, and some institutions expect that domestic substations will exceed 20,000 in 2025, and the operating market size is expected to reach 260 billion yuan.
The life of the power battery is generally 5-8 years, and the battery recovery can extract the decommissioned battery material for secondary use. With the popularity of new energy vehicles, the advent of the future "decommissioning tide" will make battery recycling more and more important. According to the agency's forecast, the power battery decommissioned in the mainland in 2020 is about 200,000 tons, but it will grow rapidly to 780,000 tons in 2025. As of September 2021, there are 171 power battery recycling enterprises across the country, and 9985 battery recycling bases have been established in various places. Among the domestic new energy enterprises, many enterprises have established factories with integrated recycling, such as Ningde Times and Guoxuan Hi-Tech.
The development of new energy vehicles has also brought about tremendous changes in the sales and service market of automobiles. On the one hand, electrification has led to a significant reduction in auto parts and a reduction in the need for maintenance. The number of parts for traditional fuel vehicles is as high as 100,000, and the engine alone needs more than 10,000 parts; while the total number of parts for electric vehicles is about 10,000, which is only one-tenth of that of fuel vehicles. Compared to conventional fuel vehicles, electric vehicles have fewer parts, no need to change oil, no need to manage engines, etc., so mechanical component failures are less frequent and service contact points are reduced. It is estimated that the after-sales maintenance expenditure of electric vehicles will be reduced by as much as 40% compared with fuel vehicles of the same age. While 60% of the profits of traditional 4S stores come from maintenance services, it is clear that new energy vehicles require the automotive aftermarket to make business model adjustments.
On the other hand, intelligence/softwareization is changing the way cars are maintained and upgraded, and many performance optimizations and problem corrections can be carried out through remote software upgrades (OTAs). A typical example is the problem of too long braking distance after the launch of Tesla Model 3, and the traditional solution to similar problems has usually been a large-scale recall or replacement of parts through 4S stores. However, Tesla's engineers upgraded the system through OTA, shortened the braking distance by 6 meters, greatly improved the safety of driving, and solved the problem within a few days.
Therefore, we can see that the new forces of car manufacturing are often equipped with a lighter sales and service network, and with the electrification transformation of traditional car companies, their sales and service networks are bound to need to optimize the model.
The ongoing new energy revolution is a global historic change that can be compared to the Internet revolution, and the new energy revolution is the main means to solve the major challenge of global warming, which is the survival and development of mankind. The development of new energy vehicles plays an important role in the entire new energy revolution.
The development of new energy vehicles profoundly affects many related industries, and will promote some new tracks: such as power batteries and their upstream industries; will change the competitive pattern and business logic of some tracks: such as car-making itself and the automotive aftermarket; it will promote each other with some tracks and develop together: such as the electronic, software-based to automatic driving of automobiles. The development of new energy vehicles and the tracks they affect will be one of the main lines of global economic development in the next few decades, an important means for the world to achieve carbon neutrality goals, and a major opportunity for China's automotive industry and related industrial chains to overtake in curves and rise a number of globally influential enterprises, and also affect the daily life of each of us. ■
(Chairman of Guoxuan Hi-Tech, Li Jin, Professor, Cheung Kong Graduate School of Business)
![China's power battery installed capacity has reached a new high, but there are also dangerous signals behind this?[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)