After a powerful start in Q1 2023, China’s EV market unexpectedly hit a speed bump in April and May, leaving the outlook for June uncertain. The entire supply chain is now pondering: What triggered this sudden change? Will our clients move forward with their orders or hesitate? How should we handle the accumulated inventory prepared for the anticipated surge in demand from clients? Where did all the optimism vanish? (Fortunately, Zemiro isn’t troubled by inventory as we had foreseen the market cooling down in 2023.)
The most plausible reason behind this downturn lies in the overall cooling of the economy, inevitably impacting the EV market. In fact, this slowdown has been gradually unfolding for some time now. Despite official data indicating a positive outlook, conversations with friends, clients, and partners reveal a common experience of dwindling revenues, reduced profits, increased layoffs, and diminished earnings. The cooling economy is evident.
This economic downturn directly translates into weakened consumer spending, with major purchases like cars being among the first to bear the brunt. The growing inclination to save money further confirms this trend.
In the commercial vehicle sector, reduced consumer spending leads to a decrease in logistics demand, which consequently affects the demand for commercial vehicles, contributing to the overall sluggish growth.
A fascinating situation arises when we examine the traditional fuel-powered and electric vehicle segments more closely. The imminent implementation of the new China 6 emission standards implies that the majority of existing fuel-powered logistic vehicles that fail to meet the requirements will be prohibited from sale. As a result, there is a strong push to clear the existing inventory through aggressive promotions and discounts.
In contrast, the supply shortages caused by COVID-19 lockdowns in previous years resulted in a significant price surge for batteries, chips, and other components in the electric vehicle supply chain. Although prices have started to decline in 2023, they still remain higher than pre-pandemic levels.
Consequently, in comparison to promotional offers in fuel-powered sectors, the prices of EV, with similar specifications, can be twice as high as their fuel-powered counterparts.
This unexpected turn of events led to a rebound in fuel-powered vehicle sales, which had been in decline, while the growth momentum for EV abruptly halted. It seems like the two markets are engaged in a complex game of give and take.
Nevertheless, as the automatic adjustment of supply and demand will eventually bring prices back to a reasonable range, new energy vehicles will continue to maintain a relatively rapid growth rate, albeit potentially slower than before. After all, the electrification trend in China is irreversible.
In passenger vehicle segments, consumers firmly believe in the future of electric cars, having developed a deep affection for the driving experience and the convenience and entertainment provided by their smart features. Furthermore, the government’s determination in environmental protection and carbon reduction has further convinced people that EV are more in line with the trend.
Of course, price is the primary factor, considering that the cost of electric passenger vehicles in China is already very close to that of fuel-powered vehicles. This achievement is not easy and is the result of the enormous Chinese market and the collective efforts of countless diligent enterprises over many years. This outcome is of profound significance and will also change the global automotive industry. Therefore, the trend towards electrification is irreversible, and a minor setback will not hinder the progress of electrification.
In specific commercial vehicle segments, especially in urban logistics, although EV are more expensive at purchase than fuel-powered, they are more economically viable over the entire lifecycle, resulting from lower fuel and maintenance costs.
EV Users in China benefit from an incredibly affordable and abundant electricity supply, thanks to the country’s robust power grid infrastructure. Every year, a growing number of fast charging stations are being constructed to meet the increasing demand.
The economic advantage of electric logistic vehicles was already evident before the pandemic struck, signifying that as costs stabilize and continue to decrease, EV will regain their market competitiveness.
At Zemiro, we recognize the significance of cost for electric vehicle original equipment manufacturers (OEMs). That’s why we consistently adhere to the philosophy of designing and manufacturing power electronics that prioritize performance and cost optimization.
Our aim is to contribute to the continuous advancement of electrification and environmental purification.
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