August Electric Vehicle Price War Shows Significant Results, Consumers Rush In | Insight Research

As the last month before the booming market of "Golden September and Silver October" in the automotive industry, August has done a great job in heating up sales, attracting more cautious car buyers to enter the market.

In August, the overall production and sales of passenger vehicles in China showed an upward trend, with a production volume of 2.257 million vehicles, a year-on-year increase of 5.3% and a month-on-month increase of 7%; the retail sales volume of passenger vehicles reached 1.938 million vehicles, a year-on-year increase of 2.2% and a month-on-month increase of 8.5%.

Among them, the growth of new energy vehicles is particularly impressive. In August, the production volume of new energy vehicles reached 789,000 vehicles, a year-on-year increase of 20.1% and a month-on-month increase of 3.4%; the retail sales volume reached 716,000 vehicles, a year-on-year increase of 34.5% and a month-on-month increase of 11.8%. The penetration rate of new energy vehicles reached 37.3%, a year-on-year increase of 9 percentage points. In early August, Tesla, Leapmotor, Xpeng, and Chery New Energy, among other new energy vehicle companies, reduced their prices. In addition to demonstrating the increasingly frequent price wars that are squeezing the profit margins of new energy vehicle companies, the substantial discounts have also attracted many consumers to make purchases.

1. The slowing pure electric market and the thriving plug-in hybrid market

Specifically, although pure electric passenger vehicles still dominate sales, with sales reaching 551,000 vehicles in August, accounting for 69% of new energy vehicles, the year-on-year growth rate has dropped to a low of 11.8%, just one step away from single-digit growth, and the month-on-month growth rate is only 11%.

Considering the speed and intensity of the introduction of new pure electric vehicle models by domestic automakers, it is difficult for the market to replicate the high growth seen before. In the short term, maintaining high sales growth still relies on plug-in hybrid passenger vehicles.

Compared to the sluggish growth of pure electric passenger vehicle sales, plug-in hybrid passenger vehicle sales continue to maintain high growth. In August, sales of plug-in hybrid passenger vehicles reached 248,000 vehicles, not only accounting for an increased share of 31% from the same period last year, but also maintaining a high year-on-year growth rate of 73.6%. Huawei Research believes that the sustained high growth of the plug-in hybrid market is inseparable from the high attention given by many new energy vehicle companies this year. Unlike last year, when BYD dominated the plug-in hybrid market and the overall model range was limited, this year's purchase tax exemption policy for new energy vehicles includes plug-in hybrid models, completely solving the worries of plug-in hybrid vehicle companies. Therefore, this year will be a year of explosive growth for the plug-in hybrid market.

Many plug-in hybrid models have shown a hot-selling effect upon their launch, such as the Leapmotor C11, Haval Big Dog DHT-PHEV, and WEY Blue Mountain DHT-PHEV in the first quarter, the Deep Blue S7, Galaxy L7, and Song Plus DM-i Champion Edition in the second quarter, as well as the Dolphin DM-I and Geely Galaxy L7 in the second half of the year, all of which have entered the plug-in hybrid race one after another.The addition of numerous plug-in hybrid models has indeed played a role in igniting the market, even putting pressure on BYD, the leader in plug-in hybrid sales. BYD's market share in the plug-in hybrid field has continuously declined, dropping from 66% in the first quarter to 59% in the second quarter, and now to around 55%.

2. The second wave of price wars in August

In August of this year, more than 10 new energy vehicle companies including Tesla, NIO, XPeng, Li Auto, and Jidu announced price reductions, heralding a new round of price wars.

The overall effect of the price reductions has been quite significant. Apart from NIO and XPeng, which had just achieved record-high sales last month, other new automakers have basically achieved positive growth in both month-on-month and year-on-year sales in August. In particular, Li Auto, which had been observing the price wars, achieved a simultaneous delivery of over 10,000 units for its L9, L8, and L7 models for the first time, with a year-on-year growth rate of 660%. This is also due to Li Auto's first price reduction, and the promotional effect may continue until September. As the initiator of the price war, Tesla once again tasted the sweetness. Tesla's sales in August reached 84,000 units, a significant increase of 31% compared to the previous month. Although Tesla's Shanghai Gigafactory is already undergoing production line upgrades in preparation for the official launch of the refreshed Model 3, some consumers are still in a wait-and-see attitude. However, Tesla's substantial price reduction has once again stabilized its sales level before the launch of the updated model.

In the future, with the official launch of the refreshed Model 3 in the fourth quarter, Tesla is expected to recreate the peak it achieved six years ago. Production determines the glorious moment of sales.

Of course, not reducing prices does not necessarily mean facing a decline in sales. BYD, which did not announce price reductions in August, still maintained sales growth, with sales reaching 274,000 units, a year-on-year increase of 56.9% and a month-on-month increase of 4.7%.

However, it is worth noting that BYD, which dominated the plug-in hybrid market last year, has experienced a significant decline in the growth rate of plug-in hybrid sales. From January to August this year, BYD's cumulative sales of plug-in hybrid vehicles reached 886,000 units, a year-on-year growth rate that dropped significantly from 335% to 81.9%, and even lower than the growth rate of pure electric vehicle sales.

3. The pressure on car sales in the "Golden September and Silver October" period is not significant

According to the latest "Work Plan for Stabilizing the Growth of the Automobile Industry (2023-2024)" issued by the Ministry of Industry and Information Technology and six other departments, the total annual automobile sales this year is expected to reach around 27 million units, an increase of about 3% compared to the previous year. Among them, the sales target for new energy vehicles is around 9 million units, with a year-on-year growth rate of about 30%.This means that in the next four months of the peak season for the automotive market, in order to achieve the aforementioned sales target, it will only require the sale of approximately 3.2 million new energy vehicles.

Looking at historical sales data, these four months are indeed the most booming period for the domestic automotive market throughout the year. The proportion of total sales of new energy vehicles during the "Golden September and Silver October" peak season in 2022 and 2021 can reach 40%-50% of the annual total, and the monthly sales of new energy vehicles are also at a high level throughout the year.

Based on the target of 9 million units and a 45% proportion, the sales in the next four months are expected to reach approximately 4 million units, fully meeting the requirements of the sales target.

In conclusion, with the official launch of the refreshed version of Tesla Model 3 in the fourth quarter, as well as the further fermentation of sales promotion brought by the second round of price wars in the new energy vehicle market during the peak season, the market may already start to anticipate a hot "Golden September and Silver October" for the automotive market this year.