In 2022, China's new energy vehicle (NEV) industry underwent a significant transformation, marking a pivotal year for the sector! This year, BYD made a successful comeback, surpassing Tesla, the global leader in new energy vehicles, in sales! The Chinese NEV industry has entered a moment of glory! The future landscape of new energy vehicles is expected to be rewritten! Can China evolve from a major NEV country to a powerhouse in the automotive industry?

01 The Progress of Global New Energy Industry Development

Chinese new energy vehicles have achieved a perfect comeback!

However, it is important to recognize that we have always been lagging in the automotive field. The strongest players in the automotive industry are Germany, Japan, the United States, other European countries, and South Korea.

Germany established its position in the automotive industry during the Second Industrial Revolution, with the United States following closely behind. Japan developed using its latecomer advantage, initially relying on copying European and American technology, but gradually developed its own core technologies after World War II, such as engines. Japanese car manufacturers managed to make their vehicles energy-efficient and durable, earning global acclaim.

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As for China, it also leveraged its latecomer advantage, but in the automotive field, it has been challenging to conquer core technologies. Therefore, once the NEV industry took off, China chose to change lanes to overtake!

In the field of new energy vehicles, China actually started later than Europe, America, and Japan and Korea, but it is indeed not easy for China to achieve a comeback!

Our country's NEV industry actually started from scratch, experiencing growth from small to large and from weak to strong. The history of our country's automotive development has been delayed, mainly driven by foreign investment, and this is no exception for new energy vehicles!

Speaking of the history of new energy vehicle development, it must start from abroad. The European continent, through the Industrial Revolution, was the first to enter the industrial age. In the middle of industrialization, oil crises have become increasingly prominent, becoming an issue that humanity cannot ignore. Driven by capital, pure electric vehicles have attracted more and more attention!In the field of new energy, the most outstanding development undoubtedly belongs to Tesla at present. As a company without automotive manufacturing experience, Tesla has grown from a small start-up electric vehicle company to a global automotive manufacturer in nearly 20 years, achieving what leading automakers like General Motors could not.

It must be said that Tesla's ability to integrate the industrial chain is extremely strong. By purchasing, joint development or acquisition, developing core technologies to build a moat, and opening up technology patents, Tesla has become the world's number one brand in new energy vehicles!

Especially in recent years, industrial upgrading and the iteration of new energy technology have been fermenting across the ocean, making Tesla, the leader in new energy vehicles, achieve a beautiful K-line and create a myth of a 20-fold increase in 5 years.

From 2018 to 2022, in just 5 years, Tesla's market value increased by nearly 20 times, reaching 600 billion US dollars, equivalent to more than 4.2 trillion yuan. Moreover, this is not the peak period. At its highest, Tesla's market value broke through 800 billion US dollars, equivalent to more than 5.6 trillion yuan, making Tesla the fifth-largest listed company in the United States.

It should be noted that Tesla's annual cumulative delivery volume has just passed one million, which is only a fraction compared to the tens of millions of deliveries by traditional automotive giants like Toyota. However, its market value is already more than three times that of Toyota, indicating how much the market expects from new energy vehicles!

Tesla's price-to-earnings ratio is as high as 1000 times. Is this a bubble? Why is the valuation so high?

In fact, the market today does not consider Tesla just as an automotive company but as a technology company engaged in automotive business. In the era of global new energy vehicles competing for market share and technology, domestic new car forces are not lagging behind.

02 The counter-attack path of China's new energy vehicles

Against the backdrop of the vigorous development of new energy outside, we, who were already lagging in the automotive field, have placed our bets on the new energy vehicle industry!

Since China officially launched the "863" plan for electric vehicles in 2001, the industry has gone through three development stages: strategic planning period (2001-2008), introduction period (2009-2015), and growth period (2016 to the present).Currently, new energy vehicles (NEVs) have become one of the strategic emerging industries. The higher-ups have indicated that the development of NEVs is the inevitable path for China to transition from a major car-producing country to a powerhouse in the automotive industry.

From 2021 to 2035, China's core NEVs should reach an internationally advanced level. By 2025, the proportion of NEV sales in China's new car market should reach 25%, and the proportion of new or updated NEVs in the public sector should reach 80%.

This significant plan clarifies the direction for the development of the NEV industry over the next 15 years, and the NEV industry chain is expected to usher in significant opportunities!

Looking at the direction of key documents, 2020 has become the inaugural year of significant changes on the supply side of NEVs. The popular models from automakers such as BYD, NIO, XPeng, and Li Auto have further increased the penetration rate of NEVs, propelling the industry from the germination phase into the growth cycle. China's NEV industry has moved from the introduction phase to the growth phase!

In 2010, the sales of NEVs in China were only 8,159 units, not even reaching ten thousand. In 2021, global NEV sales were approximately 6.75 million units, a year-on-year increase of 1.08 times, and the market penetration rate significantly increased to around 8%.

China and the European Union are the main markets for global NEVs. In 2021, NEV sales in China and the EU were 3.52 million and 2.3 million units, respectively, accounting for over 80% of global sales.

In the first half of 2022, China's NEV sales reached 2.6 million units, a year-on-year increase of 1.2 times, and the stock of NEVs exceeded 10 million units.

In addition to technological innovation and industrial policy support, one advantage of the rapid development of China's NEVs is the vast market of our country. China has become one of the most important car markets. Under the trend of consumption upgrading, the core rule of the future market pattern change will be the stronger getting stronger, which has also contributed to the growth of our new energy enterprises!

Since the end of 2019, domestic NEVs in China have ushered in development opportunities!

The market value of CATL, the leader in power batteries, once increased by 8 times, reaching a peak market value of over 100 billion yuan. BYD, a leading NEV automaker with advanced technology strength and vehicle layout, also saw its market value increase by 6 times, reaching a peak market value of over 100 billion yuan. This is a rare achievement for Chinese technology companies.Among listed companies in China, aside from financial, insurance, and oil giants, only CATL (Contemporary Amperex Technology Co., Limited) and BYD have reached the trillion-yuan mark, and this is largely due to China's support for the new energy industry!

Especially for BYD, its sales volume has skyrocketed this year. In the second quarter, BYD overtook Tesla to become the champion in sales of new energy vehicles in China. By October, the sales gap widened further, with BYD selling as high as 210,000 vehicles in October, leading Tesla by 150,000 units. In comparison, Tesla's sales were less than one-third of BYD's. Undoubtedly, domestic new energy vehicles have ushered in a highlight moment!

Additionally, the mainstream independent brand, Changan Automobile, has also begun to enter the new energy vehicle market. Although its market share is not significant, it is highly favored in the capital market, and its market value continues to rise.

New forces in car manufacturing, such as NIO, Xpeng Motors, and Li Auto, which have gone public abroad, are also heating up. In the new energy vehicle industry, leading suppliers of lithium primary batteries and lithium-ion batteries have undoubtedly become big winners!

The development of the new energy industry has also brought significant support to our country's economy. In fact, our country's economic industry is primarily the automotive market, not the real estate market. Therefore, we have seen multiple measures to stimulate car consumption!

During the downturn of the real estate market, the prosperity of the automotive market is like stepping on the brakes for the economic downturn.

03 There is still greater potential in China's new energy industry.

Over the years, after experiencing rapid growth, China's new energy industry actually has even more momentum, of course, this is based on further technological innovation!

We say that BYD's sales have surpassed Tesla and have reached the top global sales position. In the first ten months of this year, BYD has delivered approximately 1.4 million vehicles, while Tesla has delivered about 910,000. However, we must understand that while sales have surpassed, sales revenue may not necessarily follow suit!

It is known that BYD competes on cost-performance ratio, while Tesla's models are almost all mid-to-high-end. Additionally, when it comes to vehicle performance, most people would still choose Tesla. Why? Because the technology is more cutting-edge, of course, BYD's new models are not bad either!Of course, under the pressure of sales, Tesla has initiated price reductions, which is clearly an attempt to increase market share. After the price drop, consumers with intentions to purchase vehicles will increase their willingness to buy Tesla, ultimately boosting sales. This is what people often say: as long as Tesla lowers its prices, they are willing to buy!

Therefore, BYD is indeed excellent and growing rapidly, but relatively speaking, there is still much room for improvement at BYD.

From a market value perspective, BYD's peak market value of trillions is still a significant gap from Tesla's 5 billion market value. Even when combining the market values of CATL, BYD, NIO, XPeng, Li Auto, and Changan Automobile, they do not match a single Tesla, indicating a large potential for future growth!

Looking at the future landscape, the electrification of automobiles has shifted from a low-barrier subsidy phase to a high-end development incentive phase, with new forces like Tesla and BYD continuously strengthening.

Internet and semiconductor technology giants are crossing over into the automotive industry, reshaping the competitive landscape and reconstructing the core value chain. The core value of the future automotive industry will no longer be engines, bodies, and chassis, but batteries, chips, in-vehicle systems, and data. Some automakers that cannot master core technologies will gradually be marginalized or even reduced to contract manufacturers.

Thus, we need technological innovation to accelerate our pace in overtaking new energy sources!

Driven by Tesla's 5 billion market value, it is not surprising that several trillion market value leaders have emerged domestically, with BYD and CATL already joining the trillion club!

So, can more Chinese companies also be among the world's forefront in this new energy revolution, becoming the next Tesla or even surpassing Tesla, and taking on the mission of China's high-end and intelligent manufacturing? The possibility is quite significant!

Moreover, this year, new energy vehicles have become the growth "engine" of China's automotive market. Policy-wise, China has been stimulating the consumption of new energy vehicles. The recent Central Economic Work Conference highlighted new energy vehicles in the consumer field, and the exemption policy for new energy vehicle purchase tax has been extended. In addition, there are more incentives, such as subsidies for rural car purchases!

China has the world's largest consumer market, which is our advantage. Moreover, Russian media have reported that the era of cheap oil has come to an end. With rising oil prices, more consumers are choosing new energy vehicles. Since our country mainly relies on imported oil, the popularization of new energy vehicles is also beneficial to our energy security!Moreover, our new energy vehicles are not only popular domestically but also gaining traction internationally. Therefore, from this perspective, the market prospects for our new energy vehicles are vast. We have already taken the lead in the market, and in the future, we must focus on technology to also achieve a leading position in automotive industry technology!

From being a major new energy vehicle country to becoming a strong new energy vehicle nation!