As I’ve discussed many times recently, China’s NEV penetration rate is rapidly approaching 50% recently. It hit 50% in a weekly registration for the first time in June. In May, it hit 47% in NEV penetration for the full month as seen below
As we can see, NEV penetration surpassed 30% in February of 2023 and has been over that mark since. It first reached 40% in March and has been steadily climbing since
The biggest reason for this change is the rapidly increasing PHEV adoption thanks to BYD’s “Electric is cheaper than gas” campaign
The first round of 2024 Honor models like to PHEV % increasing to 18.4%. The most recent release of Qin L and Seal 06 DM-i pushed that up to 21.4% in June. As production of these two models rise and other DM 5.0 models get introduced, this PHEV climb will only continue (likely hitting 25% penetration sometime this year). We are also likely getting close to the limit for many ICE dealers, who are losing too much money selling ICE vehicles and have to close their stores instead of continued heavy discounting of inventory on hand.
While this has been happening, it seems like the EV growth has stopped in Europe despite more affordable prices (from lower battery costs). This most recent chart shows that BEV adoption has actually dropped from 2023 to first five months of this year while PHEV has increased but from a very low base
Similar to China, Europe is also favoring more hybrids and PHEVs, but ICE cars remain over 75% of the market. Due to these factors, China is by far the world’s largest NEV market. You can see China as the red line, Europe as the blue line and North America as the orange line.
So, why has Europe stopped electrifying while China has continued? Is it because EVs are too expensive? That’s unlikely, since battery and chip prices have never been lower. For the first time, BEV prices are competitive with ICE prices. Is it due to lack of charging network? While that maybe the case in North America, that might not be the issue in Europe where cities are closer and charging stations are more plentiful. So, what is the reason for NEVs losing their appeals?
Well, I think big shifts like electrifying the passenger vehicle market will naturally take many years. While the demand for BEVs seemed to be bottomless in 2022, that was likely due to a small group of drivers that wanted go with the more environmental choice. This was never close to being the majority of the driving public. It takes time for consumers to transition their preference from the familiar ICE cars to NEVs. Once that initial group of drivers all got their BEVs, the penetration rate flatlined even though BEV prices are more competitive than ever.
BYD realized that in order to win market share vs incumbent ICE products, it had to provide cars that are not only better, but also cheaper. That’s what it did with Qin+ earlier this year and Qin L recently. You cannot quickly electrify a market vs strong incumbent without a broad portfolio of products that are priced attractively. Getting to 15 to 25% NEV penetration doesn’t seem too difficult. Going beyond that would need a very large charging network as well as converting large section of driving public to trying out something new and different.
I wonder why you think this is more a lack of consumer preferences than government policy. You are right that sticker prices are going down, but I would say the real factor is how governments have restricted or pulled subsidies for EVs. In reality in some countries the cost of buying an EV is going up.
Germany the biggest market in the EU pulled all subsidies in December 2023. Another country pulling all subsidies is Sweden which lowered sales. France restricted subsidies to exclude cars produced in China.
Including inflation and higher interest rates in to the equation EVs have possibly lost on pricing in many EU markets. I would also say lack of charging infrastructure is a big factor rather than consumer preferences. Compare the development of EV sales in Norway, Denmark and Sweden and you could see different patterns depending on government policies on subsidies and infrastructure rather than consumer preferences.
Interesting trends. Unlike either US, and I suspect much less than China, EU was traumatized by recent spikes in electricity cost. Here's the wholesale spot prices ... https://ember-climate.org/data/data-tools/europe-power-prices/ ... bearing in mind (1) that most trade is not done on the day-ahead commodities exchange whose prices are shown here so it's exaggerated, but still... (2) consumers are buffered against this also by their governments, though a commercial charging station network perhaps not