Original title: Opportunities and challenges facing the development of new energy vehicles on the mainland under the Russian-Ukrainian conflict
Text | Mou Siyu Xie Yubin
The author works at the Research Center of the State-owned Assets Supervision and Administration Commission of the State Council
The development of new energy vehicles is an important measure for the mainland to cope with climate change, promote green development, and achieve carbon peaking and carbon neutrality. In the first quarter of this year, the mainland's new energy automobile industry continued its good development momentum. The Russian-Ukrainian conflict since February and the intensive sanctions imposed by the United States and the West on Russia may bring consumer attention and market share opportunities to the development of new energy vehicles in the mainland, but at the same time, the lack of core may continue further, the price of upstream metal raw materials has soared to raise terminal prices, exports are facing greater uncertainty, and industrial competition has intensified. In this regard, the mainland should strive to improve the supply security of key raw materials for new energy vehicles, further promote the localization and replacement of automobile chips, fully grasp the overall development of the window period, continue to establish and improve the industry risk prevention and control system, consolidate and enhance the comprehensive strength of our new energy vehicles in a multi-faceted way, and complete the historic leap of the mainland automobile industry from large to strong while helping to achieve the carbon reduction target.
First, the mainland new energy vehicles usher in development opportunities
1. The new energy automobile industry continued its good development momentum in the first quarter
Since 2022, the mainland's new energy automobile industry has continued its good development momentum. From January to March, the scale of the mainland new energy vehicle market achieved a new breakthrough, with production and sales reaching 1.293 million units and 1.257 million units respectively, an increase of 1.4 times year-on-year, the cumulative export volume of 120,000, an increase of 290% year-on-year, and the domestic market penetration rate increased to 19.3%, 5.9 percentage points higher than that of the previous year, showing a good development situation of double improvement in market scale and development quality. By the end of March, the cumulative promotion of new energy vehicles nationwide was 10.334 million units, and the global market share increased to 65%, a record high. From the perspective of industrial ecology, from January to March, the national charging infrastructure increased by 492,000 units, up 96.5% year-on-year, and the increase in pile vehicles was 1:2.6, which could basically meet the rapid growth of new energy vehicle sales. Under the background of energy structure transformation and carbon reduction targets, the new energy automobile industry is in a period of good development opportunities.
2. The Russian-Ukrainian conflict may become a special driving force
Affected by the Russian-Ukrainian conflict and a series of sanctions, the international crude oil benchmark Brent crude oil and WFI crude oil prices have exceeded 100 US dollars in the short term, rising to a new high in 7 years and maintaining a high level, directly impacting domestic refined oil prices and pushing up the cost of domestic fuel vehicles. Since March 2022, the retail price of domestic refined oil products has undergone three upward adjustments and one downward adjustment on the basis of three consecutive increases in January and February, and the cumulative increase of gasoline and diesel has been 575 yuan / ton and 555 yuan / ton respectively. In contrast, the cost advantage of new energy vehicles is prominent, and the market attention and consumer acceptance are significantly improved. In March, domestic new energy vehicle sales were 484,000 units, an increase of 114.1% year-on-year, and the retail penetration rate reached a record high of 28.2%, an increase of 17.6% year-on-year, which means that market-driven has gradually become the main support for the consumption of new energy vehicles, showing the characteristics of sustainable development of the industry.
3. Western car companies withdraw or create opportunities to make up positions
The development of domestic civilian vehicles in Russia is relatively lagging behind. In 2021, 1.667 million vehicles will be sold in Russia, accounting for about 2% of global car sales. Among them, the Market share of European car companies such as Renault-Nissan-Mitsubishi Alliance (including Volga Motors) and Volkswagen in Russia is 38% and 9.5% respectively; the market share of South Korea's Hyundai and Kia and Japan's Toyota in Russia is about 19% and 8.6% respectively. Affected by the Russian-Ukrainian conflict and a series of sanctions, the United States General Motors, Ford and other car companies, European Renault, Volkswagen, Mercedes-Benz, BMW, Volvo and other car companies, South Korea's Hyundai, Kia and other car companies, Japan's Toyota, Honda, Mazda and other car companies, have successively suspended production in Russia or exported to Russia. Mainland car companies have a wide range of layouts in And around Russia, such as Great Wall Motor's Tula plant, which put into operation in 2019, with an annual output of 150,000 vehicles, Chery's semi-bulk (SKD) assembly and production through cooperation with Russian local enterprises, and Geely's full bulk (CKD) assembly plant in Belarus. In 2021, the mainland's automobile exports to Russia will be about 122,800 units, accounting for 7% of the Russian market share, an increase of 1 times year-on-year. Therefore, mainland new energy automobile enterprises may provide a certain supplement to the Russian market.
Second, the mainland's new energy vehicles are facing new challenges
1. The lack of core pressure may be further extended
Chips are the key components that determine the core competitiveness of automobiles, especially new energy vehicles due to the higher requirements for vehicle integrated control, the types and number of chips carried by bicycles are more than 1000-2000 and more than 150, far exceeding the 500-600 and more than 40 kinds of traditional fuel vehicles, and the proportion of chips in the cost of vehicle materials is also larger. Ukraine mainly supplies krypton, krypton and xenon, which are the key raw materials for the manufacture of chips, accounting for about 70%, 40% and 30% of the global share. At present, in ukraine, ingas and Crypto, which supply more than half of the world's semiconductor-grade neon gas, have stopped operating, and the price of neon gas has risen more than 4 times in the short term. Since 2020, the global demand for chips has risen sharply, and nearly 50% of the market share except TSMC has been monopolized by infineon (Germany), NXP (Netherlands), Renesas Electronics (Japan), Texas Instruments (United States), STMicroelectronics (Switzerland) several leading enterprises, superimposed on the epidemic, natural disasters and other factors, chip supply has been in a long-term shortage. It is estimated that by 2030, the overall market size of automotive chips will reach 115 billion US dollars, 1.64 times higher than the 43.6 billion US dollars in 2021, accounting for about 11% of the chip market. If the situation in Russia and Ukraine continues to be tense, the supply of related raw materials will be blocked for a long time, and inflation may lead to the further continuation of the pressure of lack of cores, pushing up the price of automotive chips.
As the world's largest new energy vehicle market, the self-sufficiency rate of mainland automotive chips is less than 10%, especially the realization of high performance, large computing power, and localization of vehicle-grade chips still faces outstanding difficulties such as low willingness to invest and application, lack of standard systems and test platforms, and insufficient technical research and development capabilities. According to AFS data from the research company, the mainland auto market has been affected by the chip shortage in 2021 and has reduced production by about 1.98 million units. Further lack of cores will directly hinder the expansion of new energy vehicle production capacity in mainland China. From the perspective of sales terminals, the lack of cores has led to an extension of the delivery cycle of some models, which will also have a negative impact on the expansion of the new energy vehicle market.
2. The sharp rise in the price of metal raw materials raises the terminal price
Russia and Ukraine play a key role in many of the world's key metal supply chains. In particular, Russia's palladium, aluminum, nickel, platinum and other exports accounted for 26%, 12%, 14% and 12% of the global market, respectively, and accounted for 45%, 16%, 42% and 36% of the European market respectively. Among them, nickel is the key raw material for new energy vehicle power batteries, platinum and palladium are used to manufacture automotive catalytic converters, and aluminum is one of the most important materials used in automobile manufacturing in addition to steel. The foreign dependence of mainland nickel, platinum and palladium gold exceeds 80%, and the external dependence of bauxite exceeds 50%, of which more than 10% of nickel, platinum and bauxite imports come from Russia.
The Russian-Ukrainian conflict and a series of sanctions have hindered resource development and trade, and the prices of related metal raw materials have shown explosive growth after the continuous rise since the epidemic. For example, since March, the spot price of palladium gold once hit a record high of 3440.76 US dollars / ounce, the price of Lun nickel futures once rose to 101365 US dollars / ton, an increase of more than 250%, aluminum prices have also continued to hit the record high; the price of power batteries, which account for the largest proportion of new energy vehicle production costs, has risen by more than 80%. The sharp rise in upstream costs will lead to the difficulty of compressing the cost of new energy vehicles in the mainland under the condition of state subsidies. Since March 2022, Tesla, BMW, Mercedes-Benz and other foreign car companies and Great Wall Euler, SAIC Roewe, BYD, Xiaopeng, Ideal and other more than 20 domestic new energy vehicle brands or traditional brands under the new energy vehicle intensively announced the increase in price to alleviate cost pressure, the increase in thousands to tens of thousands of yuan, some low-end models with low profits have stopped taking orders. The general rise in the price of new energy vehicles may inhibit consumer enthusiasm and market demand to a certain extent, affecting the popularity of new energy vehicles.
3. Exports face greater uncertainty
Affected by the spread of the epidemic and the conflict between Russia and Ukraine, although mainland automobile exports achieved a year-on-year increase of 28.8% in March 2022, the growth rate slowed down significantly. As the United States and Europe continue to increase sanctions such as SWIFT against Russia, the local automobile sales market in Russia has almost stagnated. According to the European Business Association (AEB), russian new car sales fell by 63% year-on-year in March. The World Bank released a report predicting that the Russian-Ukrainian conflict will cause the Russian-Ukrainian economy to shrink by about 45% and 11% respectively, and its new energy vehicle consumption capacity will also decline. At the same time, European and American countries may use "long-arm jurisdiction" and "secondary sanctions" to extend the effect of sanctions from the Russian government, banks, and individuals to enterprises that have economic contacts with the mainland and Russia, and may even continue to exert pressure on existing or upcoming projects invested by mainland enterprises on a global scale. In addition, the difficulties or uncertainties of economic and trade cooperation between mainland car companies and Russia in terms of order fulfillment, international shipping logistics costs, and cross-border capital settlement may rise. In general, the export of new energy vehicles from the mainland to Russia and Ukraine is facing greater uncertainty.
4. The industry is facing a more fierce competition pattern
In the past two years, the scale of the European new energy vehicle market has shown a rapid catch-up trend, and the sales volume in 2020 once exceeded that of the mainland. In 2021, the sales volume of new energy vehicles in Europe reached 1.95 million units, an increase of 65% year-on-year, and the market penetration rate reached 21%, far higher than the 15.5% of the mainland in the same period. Among them, the penetration rates of Norway, Sweden, Denmark and other countries reached 89.3%, 45.8% and 36.3% respectively. From the perspective of policy support, in July 2021, the EU proposed a bill to require zero emissions for new car registration from 2035 onwards, and increase investment in core components such as chips and batteries. Compared with the 30% decline in subsidies for new energy vehicles in the mainland, the decline in Europe in 2022 is not large, and major markets such as Germany, Spain and Ireland have been postponed. In August 2021, the U.S. government issued an executive order proposing to achieve the goal of 40%-50% of total U.S. car sales by 2030, and recently vigorously promoted the Build Back Better bill, which may provide up to $12,500 in tax credits for each new energy vehicle within 10 years. Canada, Japan, South Korea, India and other countries also implement different degrees of car purchase subsidies, tax incentives or points and other promotion incentive policies. At present, although the mainland new energy automobile industry leads the world in terms of market scale, there is still a gap with developed countries in terms of basic research, technological innovation and brand influence of the industry, and the overall situation is still in the critical period of "climbing over the hill". In the context of the current global oil price increase, the mainland will face comprehensive competition with international new energy vehicle companies, and the parts and components enterprises in the domestic industrial chain will also face an increasingly fierce competitive environment.
Third, accelerate the leapfrog development of new energy vehicles in the mainland
1. Accelerate the localization and replacement of new energy vehicle chips
The first is to break through the key technical problems of the neck of domestic chip cards. The relevant departments of the state should give full play to the "political advantages and institutional advantages of concentrating on major events", increase the independent research and development and innovation of high-performance, large computing power and vehicle-grade chips required for new energy, further strengthen the support for major national science and technology projects, and coordinate with various departments and units and industries to promote core bottleneck technology breakthroughs in an orderly manner. The second is to grasp the window period to improve the supply capacity of domestic chips. It is recommended that the relevant departments of the state, together with upstream and downstream related industries, study and issue unified vehicle-grade chip technical specifications and standards applicable to the mainland as soon as possible, improve testing and certification capabilities, and guide chip companies to design and manufacture automotive chips that car companies can use and dare to use. Guiding foreign automotive chip companies to build factories in China and promoting the localization of foreign chip production lines will help accelerate the formation of production and supporting capabilities and quickly alleviate the domestic "core shortage". The third is to promote the "chip on the car" to strengthen the application of traction. It is recommended that the relevant departments of the state strengthen the top-level design and service guidance, improve the efficient connection between the R & D and production chain and the application chain, enhance the mutual trust and mutual recognition between chip manufacturers and vehicle enterprises, and create a good market application environment through tax reductions and financial discount policies. At the same time, chip companies are encouraged to explore exports to Russia on the basis of adhering to the principle of risk control, supplement the shortage of chips in Russia caused by the inclusion of the largest chip manufacturer Mikron in the US sanctions list, and further transform the increase in demand into R & D and production momentum.
2. Improve the ability to guarantee key raw materials
The first is to increase the investigation and development of relevant domestic resources. It is recommended that the relevant departments of the state increase the exploration of key resources such as nickel, palladium and platinum in China, extend the service life of existing mines, promote the large-scale, intensive and green development and utilization of resources, and enhance the domestic own supply capacity. The second is to deeply participate in overseas resources and international production capacity cooperation. Government departments and industry associations should strengthen guidance and assistance, encourage domestic qualified enterprises to implement the "going out" strategy, and carry out international production capacity cooperation in relevant resources by means of equity participation, acquisition, equity replacement, etc., and strive for long-term stable raw material supply channels. Guide key enterprises to continue to pay attention to the production and marketing of relevant resources in Russia, carry out feasibility analysis of cooperation in advance, and choose opportunities to participate in resource cooperation or production capacity cooperation. The third is multi-channel and multi-means import cost reduction and risk. The relevant competent departments and enterprises of the state should promptly organize monitoring and analysis of market supply and demand and price trends, expand import sources and strategic reserves in a timely manner, and avoid core resources being subject to people. It is necessary to actively explore the joint procurement, centralized procurement and third-party procurement mode with industry associations and enterprise alliances as the core, reduce the cost of raw material procurement, avoid market risks, promote the rational return of raw material prices, and offset the increase in supply chain costs as much as possible.
3. Fully grasp the overall development of the window period
First, continue to optimize the medium- and long-term development goals of the industry. At present, the market penetration rate of new energy vehicles in the mainland has basically completed the task of "by 2025, the sales of new energy vehicles and new vehicles will reach about 20% of the total sales of new vehicles" in the "New Energy Automobile Industry Development Plan 2021-2035", and the relevant national planning departments can adjust and propose higher development goals in a timely manner according to the new situation. The second is to consolidate the foundation for the development of the industry with precise incentive policies. It is recommended that the relevant departments of the state strengthen organizational leadership, increase policy support on the basis of existing work, especially do a good job in effectively connecting with subsidies, and work with enterprises to ensure the stable operation of the industrial chain supply chain. As the main body of innovation and the main body of the market, enterprises should focus on breaking through core technical problems such as power batteries and motor systems, use the window period to strive for overtaking in curves, tackle the intelligent and networked operating system of new energy vehicles, and create the core competitiveness of new energy vehicles in the mainland. The third is to actively strive for the new energy vehicle market in countries along the "Belt and Road". Mainland new energy automobile enterprises should accelerate the development and production of high-quality automotive products that meet the needs of Russia, enhance brand influence and consolidate market share. At the same time, Russia will be regarded as an important node to open up the Asian and European markets, further strengthen the production and marketing layout of new energy vehicles along the "Belt and Road", and explore ways for Europe, the United States and even the global market.
4. Continue to establish and improve the industry risk prevention and control system
First, strengthen project evaluation and risk control. For cooperation projects in progress, it is necessary to comprehensively sort out the progress of order and project implementation, conscientiously do a good job in trade risk investigation, choose favorable settlement methods and paths, make good use of policy-oriented financial tools to avoid risks, accelerate the planning of emergency plans, and take risk prevention and response measures according to the actual situation. For interested cooperation projects, it is necessary to do a good job in the whole process of risk management, including the risk assessment and due diligence screening of partners and businesses in the early stage, continuous supervision in accordance with the sanctions compliance system in the process, mastering and using the mainland blocking and countering laws, and properly responding to possible law enforcement investigations. The second is to do a good job in risk assessment and emergency response plan in a timely manner. It is necessary to proceed from the perspective of finance, trade, insurance, and law, analyze the follow-up impact of European and American sanctions on the mainland's new energy automobile industry as soon as possible, and evaluate the specific measures and practical effects of Russian and Ukrainian automobile companies in responding to military conflicts or sanctions. On this basis, combined with the current situation of the development of China's new energy automobile industry, we will study and formulate the mainland's emergency plan and countermeasures to prevent similar risks, "play a good game of chess, play a good active battle", ensure the safety of the supply chain of our new energy automobile industry chain under extreme circumstances, and comprehensively enhance the ability to resist risks.
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Produced by | China Energy News (ID:cnenergy)
Trainee Editor | Li Zemin
Editor-in-charge | Yan Zhiqiang
![Map of the Russian-Ukrainian conflict: Russian troops landed in Odessa or attacked from the north, east and south[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)