Category: China EV Market Insight

Chinese consumers’ intent to buy NEVs rises for 6th consecutive year, JD Power study shows

Post author By Phate Zhang/CnEVPost
Post date May 12, 2023

Chinese consumers' intent to buy NEVs continues to rise, further squeezing the share of the fuel vehicle market, according to JD Power.

China passenger NEV retail drops 3.6% MoM to 527,000 in Apr, CPCA data show-CnEVPost

Among Chinese consumers who intend to buy a new vehicle in the next six months, the share of those considering new energy vehicles (NEVs) reached 33 percent, up 6 percentage points from 27 percent in 2022, for the sixth consecutive year of increases, according to a study by US market research firm JD Power.

JD Power released the figures in its China New Vehicle Intender Study (NVIS) yesterday, saying the long-term trend toward NEVs is becoming clearer.

Retail sales of new energy passenger vehicles in China were 527,000 units in April, contributing 32.3 percent of all passenger vehicle sales of 1.63 million units, according to data released by the China Passenger Car Association (CPCA) on May 9.

For comparison, the ratio was 27.1 percent in April last year and only 7.3 percent in January 2021.

In 2023, Chinese consumers' intent to buy NEVs continues to rise, further squeezing the share of the fuel vehicle market, according to JD Power. Intended buyers are consumers who plan to purchase a vehicle in the next six months.

The percentage of consumers considering new energy SUVs has increased significantly, from 11 percent last year to 16 percent this year, and is already on par with new energy sedans, according to JD Power.

Among the new energy models favored most by consumers, luxury plug-in hybrid SUVs and midsize all-electric SUVs saw the largest potential consumer growth, increasing by 6 percent and 5.5 percent, respectively.

The percentage of consumers considering purchasing compact pure electric sedans and mid-size pure electric sedans declined significantly, by 7.5 percent and 5.4 percent respectively.

Going forward, there is a significant trend of consumption upgrading alongside rising penetration of NEVs, according to JD Power.

Data released by the CPCA earlier this week also showed the trend, with retail sales of mini-electric vehicle specialist SAIC-GM-Wuling down 15.9 percent year-on-year in January-April and budget EV maker Neta down 14 percent year-on-year in the period.

Tesla, which is targeting the higher-end market, saw retail sales in China increase 61.5 percent year-on-year during January to April, with Li Auto (NASDAQ: LI) up 118.1 percent and NIO (NYSE: NIO) up 22.2 percent. All three of these companies' sales were dominated by SUVs.

Among other findings, JD Power said more than half of consumers prefer to buy local brands in China, with new car-making brands, in particular, more popular.

For the second year in a row, the percentage of people considering buying a local brand vehicle exceeded 50 percent. For Japanese brands the proportion slipped to 12 percent from 15 percent last year, while German brands rose to 17 percent from 13 percent.

Potential consumers with higher education and higher budgets are more receptive to battery swap and battery leasing sales models, JD Power said.

Potential consumers with adequate budgets are more willing to pay for the battery swap model and also have a stronger willingness to buy NEVs, according to the study.

BMW, Audi and Mercedes-Benz had the highest luxury brand influence scores in the JD Power study, scoring 683, 680 and 661 out of a total of 1,000 points, respectively.

NIO ranked 10th with a score of 607, the highest score among local Chinese luxury brands and higher than Porsche's 605.

HiPhi and IM Motors are the other two brands that made it into this luxury brand ranking, with scores of 549 and 542, respectively.

In the mainstream brand influence score, BYD ranked first with 678 points, Tesla 11th with 634 points, XPeng 15th with 631 points, and Li Auto in 34th place with 598 points.

Full CPCA rankings: Top-selling models and automakers in China in Apr

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Tags Li Auto, Neta, Tesla, XPeng

China China EV Market Insight Electric eMobility eV Insights

NEV demand in China expected to pick up in Q2, analysts say

Post author By Lei Kang/CnEVPost
Post date May 10, 2023

Demand for NEVs is expected to pick up in the second quarter as lithium carbonate prices stabilize, according to analysts at CITIC Securities.

NEV demand in China expected to pick up in Q2, analysts say-CnEVPost

Chinese consumers' wait-and-see sentiment when it comes to buying new energy vehicles (NEVs) is expected to ease significantly in the second quarter, which will facilitate a recovery in demand for the sector, local analysts said.

In the first quarter, China's overall NEV sales growth slowed as demand was overdrawn before subsidies for NEV purchases were withdrawn late last year, coupled with strong consumer wait-and-see sentiment, said CITIC Securities analyst Yuan Jiancong's team in a research note today.

For consumers, the sharp drop in lithium carbonate prices and price cuts by automakers have fueled their wait-and-see, according to the team.

In the second quarter, demand for NEVs is expected to pick up as lithium carbonate prices stabilize, the team said.

China's state subsidy for NEV purchases expired at the end of last year. To take advantage of the subsidy, some consumers who had planned to buy vehicles in 2023 may have advanced their purchase plans, leading to weak NEV sales in the first quarter.

Retail NEV sales in China were about 1.32 million units in the first quarter, up 23.72 percent year-on-year, but down 26.62 percent from the fourth quarter, according to the China Passenger Car Association (CPCA).

In addition to the withdrawal of subsidies, the price of lithium carbonate, a key raw material for batteries, has continued to fall since the end of last year, with some electric vehicle companies beginning to cut prices and subsequently seeing a price war across the auto industry.

As of April 21, the price of battery-grade lithium carbonate had not seen a single-day gain this year, falling 65 percent from the beginning of the year.

After that, the price of lithium carbonate has largely stabilized, and as of today, battery grade lithium carbonate has risen for the eighth day in a row.

($1 = RMB 6.9266)

Battery grade lithium carbonate up RMB 4,000 per ton

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China China EV Market Insight Earnings Electric eMobility eV Li Auto Research Note

Li Auto Q1 earnings preview: Shifting to higher gear

Post author By Phate Zhang/CnEVPost
Post date May 4, 2023

With sales near the low end of guidance, Li Auto's performance in the first quarter is expected to be somewhat mixed, but the outlook for delivery in the second quarter will be robust, according to Edison Yu's team. | Li Auto US | Li Auto HK

Li Auto Q1 earnings preview: Shifting to higher gear-CnEVPost

(Image credit: CnEVPost)

Li Auto (NASDAQ: LI) will report its unaudited financial results for the first quarter on Wednesday, May 10, before the US markets open. As usual, Deutsche Bank analyst Edison Yu's team provided their preview.

Li Auto continues to be the best-performing Chinese electric vehicle stock this year, which is well deserved, though it is expected to have a somewhat mixed quarter as sales approached the lower end of the original outlook, Yu's team said in a research note sent to investors today.

The automaker's management team took advantage of strong initial orders from customers in the premium SUV segment to quickly increase deliveries of new models, the team noted.

Yu's team expects a robust delivery outlook for Li Auto in the second quarter, supported by wide availability of the Li L7 and lower-priced versions of the Li L7 and Li L8.

"Positioning-wise, Li Auto remains the clear favorite in the group and likely stays there unless evidence of softening demand emerges later in the year," the team wrote.

First-quarter earnings preview

Yu's team expects Li Auto to report revenue of RMB 17.7 billion yuan in the first quarter, with a gross margin of 20.7 percent and adjusted earnings per share of 0.40.

The team's model assumes an increase in operating expenses relative to the fourth quarter.

This compares to the current analyst consensus estimates of RMB 18.9 billion, 20.5 percent and 0.49, respectively, in a Bloomberg survey.

Yu's team expects Li Auto's vehicle margin to increase by just 50 basis points sequentially, as average selling prices come under some pressure.

Li Auto delivered a record 52,584 vehicles in the first quarter, near the lower end of its previously provided guidance range of 52,000 to 55,000 vehicles.

Its revenue guidance for the first quarter was RMB 17.45 billion to RMB 18.45 billion, implying year-on-year growth of 82.5 percent to 93 percent.

Li Auto Q1 earnings preview: Shifting to higher gear-CnEVPost

Gearing up for big second quarter

For second-quarter delivery guidance, Yu's team expects Li Auto's management to target around 75,000 units, supported by deliveries of the Li L7 throughout the quarter and wide availability of the cheaper Air versions of the Li L7 and Li L8.

Li Auto launched the Li L7, its first five-seat SUV, on February 8.

The Li L7 is the least expensive in its product array, with Pro as well as Max versions starting at RMB 339,800 and 379,800 respectively. The Li L7 is available in a lower-priced Air version, starting at RMB 319,800.

Deliveries of the Li L7 Pro and the Li L7 Max began on March 11, and deliveries of the Li L7Air began in late April.

Li Auto is also offering an Air version of the Li L8, with a starting price of RMB 339,800. The Li L8 was previously available in Pro and Max versions with starting prices of RMB 359,800 and RMB 399,800, respectively.

Li Auto's other model, the flagship Li L9, is currently available only in the Max version, with a starting price of RMB 459,800.

Compared to NIO (NYSE: NIO), Li Auto has launched its latest model very efficiently, capturing the initial wave of demand, which is very important in a highly competitive market driven increasingly by product cycles, Yu's team said.

In terms of gross margin, the team expects improvement on a sequential basis as production scales up and battery input costs fall.

Li Auto CFO is conservatively aiming for a gross margin of above 20 percent, given battery costs and a volatile macro backdrop, Yu's team noted, adding that they see 22 percent-23 percent as more realistic, with further upside dependent on battery input costs and average selling prices.

The real test for the company will come later this year, when it will struggle to maintain demand momentum with its three relatively large EREV SUVs in the face of increased competition, the team said.

Some cannibalization will naturally occur among Li Auto's models, but that will likely be offset by share gains from legacy foreign brands, Yu's team said.

The Li L9 sales have already dropped from 10,582 units in December to 5,831 units in March. Since September, foreign brands have lost about 7 percentage points of market share in the premium SUV segment, the team said.

The slow recovery in Chinese auto sales in recent months is something Yu's team attributes to customers prioritizing spending elsewhere after the Covid reopening and recognizing that car prices could fall further, and therefore not rushing to buy.

China's car sales have been slow to recover in recent months, and Yu's team attributes that to customers prioritizing spending elsewhere after the Covid reopening and recognizing that car prices could fall further and therefore not rushing to buy.

In terms of positioning, Li Auto remains the most popular of the Chinese EV startups and is likely to stay there unless there are signs of softening demand or a decline in execution, the team said.

Li Auto CEO predicts China NEV penetration to exceed 80% by Dec 2025

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China China EV Market Insight Electric eMobility eV EV Data Insights Monthly Data Nio Research Note

Deutsche Bank on Apr China EV sales: Li Auto shines while NIO struggles

Post author By Phate Zhang/CnEVPost
Post date May 2, 2023

Edison Yu's team continues to expect most automakers to be aggressive, as market share is a top priority.

China's major electric vehicle (EV) makers announced their April deliveries yesterday, and Deutsche Bank analyst Edison Yu's team provided their take, as usual.

"April sales were generally better than feared for most OEMs we track with the exception of NIO who is struggling at the moment from both weak demand for its sedans and a major production platform transition for its SUVs," the team said in a note sent to investors yesterday.

Li Auto continues to impress, setting a monthly delivery record and showing continued strong traction for its three models in the premium SUV segment, the team said.

As a backdrop, Li Auto delivered a record 25,681 vehicles in April, surpassing the 20,000-delivery mark for the second consecutive month.

NIO deliveries fell further to 6,658 in April as the product switch continued. XPeng delivered 7,079 vehicles in April, essentially unchanged from March, and the company appears to be on the cusp of emerging from the mire of weak sales that lasted about one year.

Here is the full text of Yu's team's note.

April sales were generally better than feared for most OEMs we track with the exception of NIO who is struggling at the moment from both weak demand for its sedans and a major production platform transition for its SUVs.

Li Auto continues to impress, setting a record for monthly deliveries, demonstrating continued robust traction in the premium SUV segment with its 3 models.

XPeng's volume held in about flat MoM as new P7i ramps up.

Overall, we continue to expect most OEMs to be aggressive as market share is the #1 priority. Although there were no big price cuts announced at the Shanghai Auto Show, our view is that there is likely another wave of price cuts to come as industry demand remains soft.

Moreover, the price of lithium carbonate has dropped dramatically this year which provides more cushion on the gross margin side.

April OEM recap

Li Auto delivered 25,681 vehicles (+23% MoM, +516% YoY), beating our forecast and setting a new monthly record. This includes >10,000 units of the L7 in its first full month of deliveries (vs. 7,702 in March).

XPeng delivered 7,079 vehicles (+17% MoM; -55% YoY), slightly below our expectations. The P7i mid-cycle face-lift should help volume in May/June as management expressed confidence in the order book.

XPeng officially revealed the G6 at the Shanghai Auto Show last month and this will be the most important product for the company this year to grow sales (double current monthly sales by end of 3Q), set for late June deliveries.

NIO delivered only 6,658 vehicles (-36% MoM, +31% YoY), below our forecast. Demand for ET5 and ES7 appear to be getting weaker sequentially while the rest of the portfolio is undergoing a platform transition (except for ET7 getting an interior upgrade this month).

Deliveries of the new EC7 began on 4/28, a few weeks earlier than anticipated, suggesting operational execution is on track. The new ES6 is expected to begin deliveries toward end of May (NIO's best selling SUV model).

Zeekr delivered sales of 8,101 vehicles (+22% MoM; +279% YoY). The average order value for 001 shooting break sedan is 336k RMB and 009 luxury MPV is 527k. Zeekr's upcoming X model is expected to garner higher relative volumes with starting price of just 190k (deliver in June, targeting 40,000 units for 2023).