How far is "tram" replacing "oil car"?

In less than a year, BYD's attitude towards fuel vehicles has undergone a huge change.

In June 2021, in response to the news of the suspension of fuel vehicles, BYD said, "There is no such plan at present." However, in just over the past nine months, BYD has changed its mind, and the speed of its discontinued fuel vehicles has been unexpected.

At the same time, more and more car companies have issued a "ban on combustion" timetable, but there are still some car companies that have not yet specified the date of complete suspension of sale or suspension of production of fuel vehicles.

From the perspective of domestic car companies, only Changan, BAIC and Haima Automobile have clearly proposed to ban combustion, but at the 2021 Changan Automobile Science and Technology Ecological Conference, Changan Automobile said that it plans to account for 35% of new energy vehicle sales by 2025 and 60% by 2030. FAW Group, Dongfeng Motor, SAIC Motor, AND GAC Group all do not have a clear 100% fire ban timetable. In addition, other well-known car companies such as Geely and Great Wall have not made it clear. What are these car companies insisting on?

Under the general trend of the rapid development of new energy vehicles, will "stopping production and selling fuel vehicles" become the trend of the development of the automotive industry? How far are new energy vehicles to replace fuel vehicles?

The key time point for the transformation of adult car companies in 2025

The transformation of new energy vehicles is imminent. Under the competition of Tesla, BYD and "Wei Xiaoli", the mainstream traditional vehicle companies with a huge fuel vehicle volume have no time to hesitate and tangle, and have formulated their own transformation schedules.

According to the statistics of the Beijing News Shell Financial Reporter, in addition to BYD, there are currently domestic independent brands such as BAIC Group and Changan Automobile, as well as many international brands such as BMW, Volkswagen and Honda, which have clearly announced the "ban on combustion" timetable. Among them, most of the time points for independent car brands to stop production or stop selling fuel vehicles are set in 2025, and most of the international car brands are around 2030.

As early as October 2017, Changan Automobile announced the "Shangri-La Plan", planning to invest more than 100 billion yuan in the field of new energy in the next 8 years, and will completely stop selling traditional fuel vehicles by 2025.

However, at the Changan Automobile Science and Technology Ecological Conference held in 2021, Zhu Huarong, chairman of Changan Automobile, said that Changan Automobile plans to achieve brand sales of 3 million vehicles by 2025, of which new energy accounts for 35%; by 2030, to become a world-class brand, sales will reach 4.5 million, and new energy will account for 60%.

Following Changan's announcement of a timetable for the suspension of the sale of fuel vehicles, baic motor company BAIC Group announced that it will completely stop the production and sales of its own brand traditional fuel passenger cars in China by 2025. Haima Motor plans to completely eliminate fuel vehicles in 2025.

However, for any car company, the transformation cannot be achieved overnight, and the underpinnings of "oil cut-off" need to be based on multiple considerations such as market sales, profit composition, brand positioning and technical support. Although 7 domestic mainstream car companies such as FAW, SAIC, and Geely have not clearly stated the specific time of "banning combustion", the electrification transformation is accelerating, and each has given its sales target for 2025.

Great Wall Motors is the most "ambitious". In June 2021, Great Wall Motors proposed in the "2025 Strategy" released by the 8th Science and Technology Festival that by 2025, Great Wall Motors will achieve operating income of more than 600 billion yuan and annual sales of 4 million vehicles worldwide, of which 80% will be new energy vehicles (that is, 3.2 million vehicles).

"In order to achieve this goal, we will continue to carry out 'large investment in research and development', and in the next five years, the cumulative investment in research and development will reach 100 billion yuan." Wei Jianjun, chairman of Great Wall Motors, revealed that in the next 5 years, Great Wall Motors' R&D investment will focus on new energy fields such as pure electric, hydrogen energy, and hybrid, and key core technology areas such as chips and third-generation semiconductors such as silicon carbide.

The "Smart Geely 2025" strategy released by Geely Automobile proposes to achieve a total sales volume of 3.65 million vehicles by 2025, of which the sales volume of new energy products will reach 900,000 vehicles, accounting for 30%. Coupled with the Extreme Krypton brand (targeting 650,000 vehicles), the overall sales volume of Geely new energy products will account for more than 40%.

SAIC motor plans to sell more than 2.7 million new energy vehicles by 2025, accounting for no less than 32% of SAIC's total vehicle sales. Gac's figure is 25%, FAW's is 20%, and Changan's (excluding joint venture brands) is 35%.

Changan Automobile proposed that in 2025, the Changan brand will achieve annual sales of 3 million vehicles, of which the sales volume of new energy vehicles will account for 35%, that is, 1.05 million vehicles. In 2030, the company plans to increase sales to 4.5 million vehicles, with new energy accounting for 60%.

GAC Group plans to achieve vehicle sales of 3.5 million units in 2025, accounting for more than 25% of new energy vehicle sales; of which the sales of its own brands will reach 1 million units, fully realize electrification, and strive to achieve 50% of new energy vehicles as its own brands.

During the "14th Five-Year Plan" period, FAW Group will launch more than 50 new energy models, of which more than 30 are independent brands. The sales volume of new energy vehicles is expected to account for more than 20% in 2025.

Similarly, Dongfeng Motor also plans to account for more than 20% of the company's total sales of new energy vehicles by 2025, helping to achieve the goal of "carbon peaking and carbon neutrality".

Among overseas car companies, the German brand Volkswagen has made it clear that it will withdraw from the European internal combustion engine market from 2033 to 2035. Mercedes-Benz plans to prepare for full electrification in markets where conditions permit by 2030; BMW plans to stop selling fuel vehicles in the EU in 2030.

Volvo Cars is committed to becoming a pure electric luxury car company by 2030; Ford Motor will fully electrify new vehicles sold in Europe by 2030; and General Motors plans to stop selling fuel vehicles from 2035 and transition its products to zero-emission vehicles and pure electric vehicles in the same year. Honda plans to stop selling fuel vehicles in 2040.

The development speed of new energy vehicles is "unimaginable"

Some industry analysts believe that behind the end of the production of fuel vehicles, it is the rapid progress of new energy vehicles in the fields of technology and market.

With the advantages of blade batteries, DM-i hybrid technology, e-platform 3.0 and other fields, BYD's new energy vehicle sales continue to grow, and the proportion continues to increase.

In 2021, BYD's cumulative sales for the whole year were 740,100 units, an increase of 73.34% year-on-year. Among them, new energy vehicles have become the main force of growth, with annual sales of 603,700 units, an increase of 218.3% year-on-year, accounting for 81.58% of the total annual sales, while the annual sales of fuel vehicles are only 136,300 units, down 42.54% year-on-year.

From January to March 2022, BYD's new energy vehicle production and sales were 287,530 units and 286329 units, up 416.96% and 422.97% year-on-year. The sales volume of new energy vehicles has accounted for 98.27% of total sales.

Looking at the global new energy market, BYD's sales can compete with Tesla's.

At the same time, the domestic new energy vehicle market is also growing rapidly. In 2021, the domestic retail sales of new energy passenger cars were 2.989 million units, an increase of 169.1% year-on-year, and the penetration rate was 14.8%, which was significantly higher than the penetration rate of 5.8% in 2020.

Entering 2022, the sales volume of new energy vehicles continues to grow significantly. According to the data of the Association, in the first quarter of this year, the domestic retail sales of new energy vehicles reached 1.07 million units, an increase of 146.6% year-on-year; the retail penetration rate reached 21.7%, an increase of 13.1 percentage points over the first quarter of last year.

"According to the speed of industry change last year, if it is calculated at constant speed, at the end of this year, it is expected that the penetration rate of new energy vehicles in the mainland will reach 35%." Wang Chuanfu, founder of BYD, said that the popularity of new energy vehicles has become the trend of the times. In his view, if 10 years ago, the development of new energy vehicles was mainly driven by policies; 3-5 years ago, it was a "policy + market" two-wheel drive, then the current market drive accounted for 70%, and the policy drive was 30%.

Zhang Yongwei, vice chairman and secretary general of the China Electric Vehicle 100 Association, believes that the only direction of global automobile development is new energy, or electrification, which has become the consensus of countries and enterprises around the world. Zhang Yongwei said, "In the past, many countries have disputed and wavered on this point, while China's new energy automobile industry has been growing and constantly stepping up to a new level. After several years of development, the irreversible trend of new energy has basically taken shape. ”

Based on the prediction of the 100 Talents Association research, the annual sales of electric vehicles in China will exceed 5 million in 2022 and reach at least 7 million in 2025, with an optimistic estimate of 9 million to 10 million.

"From 1 million to 10 million in just a few years, this speed has created the world's new energy 'industry's largest'." The ownership, growth rate and industrial scale of new energy vehicles were unimaginable in the past. Zhang Yongwei said.

The "temptation" of high market value of pure electric vehicle companies

Riding on the dongfeng of new energy vehicles, the performance of new energy vehicle companies in the capital market is particularly eye-catching.

On October 25, 2021, the veteran AMERICAN car rental giant Hertz placed an order for 100,000 vehicles from Tesla, and Tesla's stock price has soared all the way to break through trillions of dollars. At the close of trading on November 1, Tesla surged 8.49%, and its market value exceeded $1.21 trillion. After Apple, Amazon, Microsoft, Google and other companies, Tesla became the seventh public company in the history of the US stock market to break the trillion-dollar market.

By November 5, Tesla's stock price was as high as $1239.87, and according to the closing price of $1222.09 at that time, Tesla's market value was as high as $1227.302 billion.

In February 2022, Piper Sandler analyst Alexander Potter raised Tesla's share target from $1,300 to $1,350 and maintained the stock's "overweight" rating. The analyst expects Tesla to deliver 1.58 million units in 2022, representing a 69 percent increase over 2021. Potter said Tesla's Model Y model is the biggest growth driver in recent times.

As of April 12, 2022, Tesla's stock price has recovered to more than a trillion dollars.

In August 2021, BYD's total market value exceeded 900 billion yuan for the first time. Subsequently, a number of institutions have raised by-ONED's target price, and many securities companies such as CITIC Securities, Changjiang Securities, and Huaxi Securities have given buy or overweight ratings.

As of December 31, 2021, BYD became the top of the list of Chinese car companies in 2021 with 780.536 billion yuan, with a total market value of 47.25% year-on-year.

Tianfeng Securities said that BYD's new energy vehicle business is developing rapidly, has not yet made full profits, and is suitable for the valuation of the price-to-sales ratio, compared with the marketing rate of car companies such as Xiaopeng Automobile and Ideal Automobile, which can give BYD automobile business a marketing rate of 5.5 times. IT is expected that BYD's automotive business revenue will reach 202.4 billion yuan in 2022, an increase of 91.2%.

Not only BYD, but also the stock prices of new energy vehicle companies such as Tesla, Weilai and Xiaopeng have also led the rise.

The same is true of NIO's stock price. In July 2020, Tencent Holdings became the second largest shareholder of NIO, and due to this, THE MARKET value of NIO was once close to US$18 billion, a record high.

By October 2021, the market value of Weilai Automobile had soared to $28.57 billion, surpassing the old American car company Ford and becoming a landmark node of the new car manufacturing force.

In April 2022, the market value of Weilai Automobile continued to hit new highs, breaking through the 100 billion US dollar mark, and even surpassed Volkswagen, becoming the third largest company in the global car market capitalization, second only to Tesla and Toyota.

Ford was not only surpassed by Weilai, but also surpassed by Xiaopeng. In November 2020, Xiaopeng Motors' total market capitalization reached $32.19 billion, ranking 14th among global auto companies, a step away from Ford, and subsequently surpassing Ford in market capitalization.

Will traditional fuel vehicles withdraw from the historical stage in a short period of time?

While BYD and others blow the "ban on combustion" horn, when will fuel vehicles withdraw from the stage of history? A number of experts said in an interview that although new energy vehicles are rising rapidly, there is still a significant gap in the current sales of compared fuel vehicles, and traditional fuel vehicles will not withdraw from the historical stage in a short period of time.

"It is safe to say that the internal combustion engine will not soon withdraw from the market", Fu Yuwu, honorary chairman of the Society of Automotive Engineers of China and honorary chairman of the China Automotive Talent Research Association, said in an interview with the Beijing News Shell Financial Reporter that BYD's suspension of fuel vehicles is a case with specific historical reasons and individual factors of the enterprise, and does not represent the comprehensive withdrawal of the internal combustion engine in the whole industry.

Fu Yuwu analyzed that although BYD has produced fuel vehicles in history, electric vehicles and plug-in hybrid vehicles are the main labels and revenue pillars of the company. From the general point of view, BYD's "oil cut- off" does represent the general direction of the electrification transformation of the automobile industry, representing that the industry has entered a new era, but such transformation is also in line with BYD's consistent strategic thinking and historical accumulation, and does not represent the current choice of all car companies, "Our current society still needs a large number of fuel vehicles, although the general direction is electric vehicles to replace fuel vehicles, but this is a gradual process."

In fact, the mainland's new energy vehicle industry planning is also divided by stage.

In November 2020, the State Council issued the "New Energy Vehicle Industry Development Plan (2021-2035)", showing that by 2025, the average electricity consumption of new vehicles for pure electric passenger cars will drop to 12.0 kWh/100 km, the sales volume of new energy vehicles will reach about 20% of the total sales of new vehicles, and highly autonomous vehicles will achieve commercial applications in limited areas and specific scenarios.

By 2035, pure electric vehicles will become the mainstream of newly sold vehicles, fully electrified vehicles in the public sector, commercial applications of fuel cell vehicles, and large-scale applications of highly autonomous vehicles, effectively promoting the level of energy conservation and emission reduction and the improvement of social operation efficiency.

"The global automotive industry is seeking an electrification transformation strategy, which is a historic big change, industrial restructuring", Fu Yuwu said, now the global car companies have come up with an electrification timetable, the mainland local enterprises also have their own layout, but before 2035 for a considerable period of time, we also have to "walk on two legs", that is, energy-saving vehicles and new energy vehicles walk on two legs, in the future, fuel vehicles and new energy vehicles will be an era of coexistence and symbiosis and common development.

Zhang Xiang, an analyst in the automotive industry, believes that "because the current new energy vehicle technology is still immature, fuel vehicles will not soon withdraw from the historical stage." He said that at present, new energy vehicles still have problems such as short mileage, poor charging experience, fast decay of battery mileage in winter, and low residual value.

Zhang Hong, secretary general of the New Energy Vehicle Branch of the China Automobile Circulation Association, said in an interview with Shell Financial Reporter that whether it is because of the large traffic flow during the holiday or the cold climate in the north, the new energy vehicles are powered, there are still problems such as few charging facilities, slow charging, and non-universal facilities and payment methods. It can be said that the growth of new energy vehicle charging facilities has not kept pace with the growth of new energy vehicle sales. If the sales of new energy vehicles still have room to rise, the imbalance between supply and demand of charging facilities may become more serious.

Zhang Hong said that if you want to solve the charging difficulty, the core is to accelerate the construction of charging facilities for new energy vehicles. For example, increase the subsidy policy for the construction of charging piles, promote charging facilities manufacturers or car companies to accelerate the pace of charging facilities; for car companies that have built their own brand charging or power exchange facilities around the highway, they can comprehensively consider, open the door, and accept other brands of vehicle charging to alleviate the pressure of insufficient charging facilities.

When talking about the basic pattern of the future automobile power route, Zhang Xiang believes that a diversified power pattern will be ushered in. He said that in addition to pure electric (BEV) and plug-in hybrids, he is also optimistic about the ordinary hybrid (HEV) technology route. "In addition, series HEVs such as Nissan's e-POWER, 48V light mix, and range extender technology routes will also have a certain market share."

Cui Dongshu, secretary general of the Association, pointed out that considering the stability and balance of the energy structure, the development of new energy vehicles should still be steadily realized in accordance with the requirements of the "Opinions on the Complete, Accurate and Comprehensive Implementation of the New Development Concept to Do a Good Job in Carbon Peaking and Carbon Neutrality" and the "Carbon Peak Action Plan before 2030". "Radical one-size-fits-all policies to promote the development of new energy should not emerge, so we believe that it is reasonable to not have to introduce a nationwide timetable for the suspension of fuel vehicles."

Beijing News shell financial reporter Zhang Bing Linzi Editor Xu Chao Proofreader Yang Xuli