China's new energy vehicle industry is still facing multiple challenges

On July 3, 2023, China's 20 million new energy vehicles rolled off the assembly line was held in Guangzhou GAC Aion, which also marked a new level in the development of new energy vehicles in China.

Judging from the sales volume in the past 10 years, China's new energy vehicle market has experienced a rapid development process from scratch and from small to large. Since 2013, the market has gradually entered a period of large-scale demonstration and promotion, and new energy vehicles have undergone 10 years of market testing, with sales reaching 6.887 million units in 2022 from less than 20,000 units in 2013, showing an exponential rise, ranking first in the world for many consecutive years.

Judging from the data released by the Passenger Association, from February to November 2023, China's monthly sales of new energy vehicles are higher than the same period last year, and the overall market performance is significantly better than last year. From the perspective of the proportion of monthly sales of fuel vehicles and new energy vehicles, even after the vigorous price reduction of fuel vehicles in March 2023, the new energy vehicle market has not been significantly affected, and the market share can still remain above 30%, with a good development momentum.

Summing up the experience, it is not difficult to find that the rapid development of China's new energy vehicle industry benefits from the joint influence of many factors.

First, policy-driven. As early as 2002, China's "Tenth Five-Year Plan" national high-tech research and development plan has established the "three vertical and three horizontal" new energy vehicle layout, pointing out that electric vehicles and fuel cell vehicles are an important part of new energy vehicles. In 2012, the State Council issued the "Energy-saving and New Energy Vehicle Industry Development Plan (2012-2020)", which established pure electric drive as the main strategic direction for the development of new energy vehicles and the transformation of the automobile industry, which opened the prelude to the rapid development of new energy vehicles.

The second is cost-driven. In addition to the continuous introduction of policy assistance, cost control is another key factor for new energy vehicles to be recognized by the market. In the production process of new energy vehicles, the cost of the core component - power battery accounts for about 40% of the total cost of the vehicle, and the decline of battery cost is very important to the decline of vehicle prices. It is estimated that in the nearly 30 years since lithium-ion batteries were introduced to commercial applications, their costs have dropped by 97%, due to increased R&D and large-scale production. In the application of electric vehicles, taking the battery produced by a leading domestic enterprise as an example, public information shows that from 2015 to 2021, the production cost of its power battery has dropped from 1.33 yuan/watt-hour to 0.74 yuan/watt-hour, a decrease of 44.36%. Taking a car with an electric capacity of 60 kWh as an example, its production cost has been reduced by 79,800 yuan in six years. Although the price of mineral resources has risen in 2022, resulting in an increase in the cost of battery materials, its production cost has still decreased by nearly 25% compared to 2015. The sharp drop in cost has greatly promoted the development of the new energy vehicle industry.

The third is technological improvement. In 2016, the mass energy density of power battery cells was generally lower than 200 Wh/kg, the system mass energy density was about 100 Wh/kg, and the cruising range of pure electric vehicles hovered around 200 kilometers. However, by 2023, the mass energy density of power battery cells has increased to 350 Wh/kg, and the system mass energy density has exceeded 250 Wh/kg. Pure electric vehicles with a range of 500 km are gradually becoming mainstream, and the number of models with a range of more than 600 km is also increasing, increasing the range by as much as 2.5 times compared to the previous one. At the same time, the average power consumption has also dropped from 15.73 kWh/100 km in 2016 to 12.35 kWh/100 km in 2022, a decrease of 23.7%, and the power consumption of some small pure electric vehicles is as low as 8 kWh/100 km. The long range greatly alleviates the user's range anxiety, the low energy consumption reduces the cost of use, and the rapid improvement of the technical level makes electric vehicles continue to be recognized by the market.

Fourth, intelligent development empowerment. The intelligent new track integrates digital and other technologies, and is developing in the direction of a large terminal integrating transportation, communication, entertainment, office, social networking and other functions. In this field, new energy vehicles take the new type of "battery, motor, and electronic control" as the core, and compared with fuel vehicles, they have the advantages of faster control response, meeting high-power power demand, and more adapting to the development of new architecture.

In particular, the proposal of the "dual carbon" goal has accelerated the "departure" of fuel vehicles, which account for more than 80% of the total vehicle emissions, and the promotion and use of new energy vehicles have become a key means of low-carbon transformation in the transportation sector.

There is no doubt that in the context of carbon reduction, the global automotive industry is developing in the direction of low-carbon, informatization and intelligence. China continues to increase policy support. In November 2020, the General Office of the State Council issued the "New Energy Vehicle Industry Development Plan (2021-2035)", proposing that by 2025, the sales of new energy vehicles will reach about 20% of the total sales of new vehicles, and highly autonomous vehicles will be commercialized in limited areas and specific scenarios. By 2035, pure electric vehicles will become the mainstream of new sales vehicles, and public vehicles will be fully electrified. At the same time, the "Energy Saving and New Energy Vehicle Technology Roadmap 2.0" issued by the Ministry of Industry and Information Technology also proposes that by 2035, the total carbon emissions will be reduced by more than 20% from the peak, and new energy vehicles and hybrid vehicles will each account for 50% of new car sales, and the automobile industry will realize the transformation of electrification. In February 2023, eight departments, including the Ministry of Industry and Information Technology and the Ministry of Transport, jointly issued the Notice on Organizing and Carrying out the Pilot Work of the Pilot Zone for the Comprehensive Electrification of Vehicles in the Public Domain. The introduction of these policies will further promote the rapid development of the new energy vehicle industry.

However, despite the many benefits, we still need to clearly see the current problems faced by the development of the new energy vehicle industry, especially the constraints behind pure electric vehicles.

First, critical mineral resources are limited. Upstream mineral resources, such as lithium, cobalt, nickel and other metal resources, as the key raw materials of power batteries, have less reserves in China, heavily rely on foreign imports, and there are potential supply safety hazards.

Second, the charging infrastructure is inadequate. At present, there are still problems such as insufficient number of charging piles, uneven regional distribution, and inconsistent technical standards, which restrict the development of new energy vehicles to a certain extent. At the same time, a large number of charging piles are connected in a disorderly manner, which will also change the load structure and characteristics of the distribution network, increase the difficulty of control of the power grid, and require system analysis and overall layout.

Thirdly, security needs to be improved. Safety has always been one of the most concerned issues for consumers, which plays a decisive role in the development of the new energy vehicle industry. The solution of safety depends on the advancement of battery material technology. Although solid-state batteries are expected to completely solve the safety problem, from the perspective of technological development, it is still in the early research stage, and it remains to be seen whether mass production can be achieved.

In addition, the effect of carbon reduction is controversial. As a well-known expert in the industry said: "In the context of 'dual carbon', whether electric vehicles can truly reduce carbon depends on the source of electricity." Only when electricity is converted from traditional coal-fired power generation to new energy generation on a large scale can electric vehicles be called real carbon reduction. ”

Finally, there is uncertainty about the competitive relationship with fuel vehicles. Although many countries have proposed a ban on the sale of fuel vehicles, fuel vehicles are still the main body of market sales in the short term. If the development of electric vehicle technology does not meet expectations, the economy of fuel vehicles continues to improve, and the development space of new energy vehicles will still be squeezed.

Author Affilications:Research Center for Low Carbon Strategy, Dalian Institute of Chemical Physics, Chinese Academy of Sciences