What has made China’s transition to EVs so successful? Brian Schneidewind from Toyota North America considers it a combination of government incentives as well as Chinese engineers’ relentless willingness to take chances, fail, and learn from their failures that has allowed Chinese manufacturers to design and build New Energy Vehicles (pure electric and plug-in hybrid vehicles) that meet the needs of Chinese consumers.

The government incentives are numerous and have played a role at every stage of NEV development. They are financial and non-financial. They work on the company and consumer level. One cannot talk about China’s success without them. Yet this willingness to move fast, make mistakes, learn from those mistakes, and improve with each iteration also characterizes Chinese engineering. There are many examples of engineers working extremely long hours to meet company goals. There are also whole institutes funded by the government and industry that only research battery technology and provide the engineers needed to put in the hard work of discovery for new technology. Is this sustainable? Will engineers burn out? There is little talk of this at this time. We will have to continue to track the progress and process of China’s battery engineering to see how successful they will be.

Batteries are still in their early stages of development, so there is so much more to learn.  We’ve seen some dramatic advances from CATL - Energy Storage Solution Provider and BYD in advanced batteries with very long range and super-fast charging capabilities, but these batteries are not in mainstream vehicles. In fact, many companies in China (and the rest of the world) are using batteries that lack long range capabilities but are safer from fires.  Will this technology suffice or will new batteries be developed that have very long range, super-fast charging, and are not prone to fires?  Many battery chemistries are being tested, so we will see if the Chinese engineering strategy will yield the breakthrough or will the breakthrough come from competitors in Korea, Japan, the US, or the EU.

One of the issues analysts wondered about was how exposed auto companies from different countries were to many of the rare earth materials trade issues that have recently surfaced. Brian Schneidewind from Toyota North America discussed this topic at our recent Propulsion Strategies for the 21st Century Conference at the University of Michigan in this clip where he tells of Japan’s long history of using these materials and finding different sources for them globally that keeps them from being too dependent on one country. The Japanese manufacturers are noted for playing the long game when it comes to technology and continuous improvement processes, and this example shows them also applying that thinking to materials critical to their success.

The Chinese government supported its companies to take this strategy to the extreme when it developed plans for the critical elements for their New Energy Vehicles (NEVs). They used a dual process for mining these minerals in China and also creating a global supply chain with countries throughout the world. They took the process a step further by developing the processing capabilities for these minerals within China, making them sometimes the only country processing them. This whole process began in the early 2010’s and coalesced in the early 2020’s, coinciding with the government’s company and consumer incentives for NEVs. China is now the leader in global NEVs and looks to expand that growth globally. They also will be talked about in classrooms for decades as examples of successful long term strategic planning at the central government level.

We’ve been following the Chinese industry since 2015, so we’ve seen the whole process play out. Of course, there were mistakes made along the way, but the strategic direction was consistent over time, much like the way Toyota understood the need for multiple sources for strategic rare earth minerals for their hybrid vehicles. 

Daniel Ronayne from DENSO spoke at our recent Propulsion Strategies for the 21st Century conference at the University of Michigan about whether his company’s customers have adapted to “China Speed”. Dan mentioned that the industry first received a jolt when Tesla condensed its product development time. But the introduction of “China Speed” has upped the ante for traditional manufacturers. As Dan mentions in this clip, suppliers have had to increase their speed to market to support their customers as well.

Our recent GERPISA conference in Shanghai, China discussed this topic about the Chinese manufacturers. One thing Chinese manufacturers have had to speed up on is the increase of their product lines. Not all the manufacturers are moving as fast as BYD, which is attacking every vehicle segment with its BEVs and especially its PHEVs. There is even a small pickup truck soon to be available in Mexico. Most other Chinese manufacturers are moving fast just to bring one or two new vehicles to market, and many of the joint venture companies are not moving as fast as BYD. They seem to have incorporated the slower product development systems of their joint venture partners.

While bringing many vehicles to market to establish your company is a net positive, we’re not sure bringing models to market that compete with your own models, especially if the previous models are only one or two years old makes sense. This system creates the need for extensive aftermarket support for unique components for each new model as well as all the nearly new models.

This strategy can also backfire at the product level. General Motors found that out when they thought they needed internal competition and created multiple brands with nearly identical components.  When they owned 50 percent market share, they could manage this, but as they began to lose market share, having all these similar brands just created more product development and manufacturing  costs for all the brands.  We’ll be tracking how the Chinese brands are responding to BYDs speed tactics as well as how US and EU brands respond to the China speed challenge through our EV Evolutions research project that tracks technology, products, and company strategies in the three regions. 

Congratulations to Haomin Fu from Kyushu University in Japan for winning GERPISA’’s Young Author’s Prize for her research on the effects of monetary and non-monetary NEV incentives in China for the years 2013 to 2022. This graphic shows the many different levers the Chinese government pulled during this period of time. Through her analysis, Haomin found that non-monetary incentives such as the construction of public charging infrastructure and especially NEV road priority on congested roads were more important to NEV buyers than the declining monetary subsidies that were offered by the central government. Contributing factors that supported NEVs also included restrictions on internal combustion vehicles and EV license plate exemptions.

Though the US is not China, US buyers will soon no longer have access to EV subsidies, though they may still have access to growing home and public charging if utilities, states, auto manufacturers, and third party charging suppliers continue their rollout of chargers. The US may be another subject for Haomin’s research! If you are interested in contacting her about her research, here’s her LinkedIn site: https://lnkd.in/g9z4QHZc

This research is an example of our continuing EV Evolutions research program that tracks EV policy, technology, and strategies across China, the US, and the EU. 

At the 33rd Annual GERPISA colloquium in Shanghai, China, Hannah Sun from London Business School presented her ongoing research on how CATL, China’s largest battery supplier, became the most powerful battery supplier in China and the world. Hannah used CATL as an example of “How Initially Less Powerful Players Gain Power in China’s Electric Vehicle Ecosystems.”  Hannah’s research points to four major strategies that helped CATL: framing technical potential (from foreign technologies), a dedicated cooperative attitude (China Speed), winning over end customer’s minds, and empowering less powerful local OEMs who had fast development cycles. Hannah also provided insight into CATL’s history and key takeaways from her research. You can contact her via LinkedIn (https://lnkd.in/gNf_jxzq) for more details on this important topic.

We’ve been following CATL as part of our EV Evolutions research program that tracks EVs across China, the US, and the EU.  

One of the many discussion topics during our recent 33rd GERPISA global automotive industry colloquium in Shanghai, China, was the alternative to exporting vehicles from China, foreign direct investment (FDI).  FDI was the main driver of acceptance of Japanese manufacturers in the 1970s and 1980s in the US, and it may also be China’s opportunity in other countries.

At the colloquium, Guendalina Anzolin, a researcher at the University of Cambridge, UK, presented her recent research on how EV-focused FDI has played out in countries from 2003 to 2024.  Her results show some very interesting network effects, but she also finds only a few new countries (Mexico and Brazil) benefiting from significant EV FDI.  It’s still early days in the transition to EVs, so this analysis will need to be extended to future time periods, but it provides important cross-country analyses over time for this important topic. Here are a couple of slides that show the fantastic detail of Guendalina’s research, where she lists all of BYD’s Brazil and other global investments.  You can reach out to Guendalina Anzolin on LinkedIn for further information.

We’ll be posting more information on LinkedIn gleaned from our attendance at the GERPISA colloquium in the coming days as part of our EV Evolutions research program. 

China describes its economy as a socialist market economy. This may be why we are reading stories about the Chinese government telling auto companies in China to stop using price wars to gain market share. The quote from the government reads, “Uncontrolled price wars among businesses are a classic example of ‘involutionary’ competition. They hinder companies’ sustained investment in research and development, ultimately affecting product quality, performance and service levels. There are no winners in price wars, and certainly no future.” It seems the government wants to keep China’s overcapacity from shrinking by not allowing underperforming companies to go out of business, which would be the case in a capitalist economy. (So far, companies are not following the government’s suggestion, but this is a recent announcement. There was also no mention of how lower prices may incent consumer vehicle purchases.)

This strategy seems to go against the government’s long term plan to reduce the number of auto manufacturers in China from around 100 to around 10. The government’s statement is telling because it shows that the auto industry plays such an important role in the economy that maintaining employment in the sector is more important than industry consolidation. It also displays the government pulling as many economic levers as possible to support its economy. But supporting unprofitable companies in the long term can lead to the problems the former Soviet Union had with its state-sponsored industries. China is nowhere near where the Soviet Union was, but it does show the challenges of managing a socialist market economy.

We’re following the EV industries in China, the US, and the EU through our EV Evolutions research program.  

China’s new energy vehicle sales for the first quarter of 2025 tells us a lot about the market. As this Top 10 Manufacturers chart shows, BYD is by far the leader in NEVs that include both pure EVs and Plug in Hybrid Vehicles.  Some recent data shows that more than half of BYD sales are PHEVs. The chart also displays GEELY selling the second most NEVs, a reasonable spot for a company that also sells many gas-powered vehicles. Of the rest of the Top 10 brands, SAIC, ChangAn, and CHERY also sell gas-powered vehicles, while Tesla, Li Auto, Leapmotor, XPENG, and HIMA Group all only sell EVs (not PHEVs).

HIMA Group is interesting because it has only recently started selling many vehicles, and also because it is based on Huawei technology that is the basis for vehicles built by a variety of manufacturers: SERES, CHERY, Baic, SAIC, and JAC, where it contributes in product planning, design, marketing, user experience, and quality control and where it provides intelligent vehicle software and hardware for the traditional automobile manufacturers.

Beyond the Top 10 Sales, there are numerous companies selling NEVs but not at these sales rates. They can include the major global manufacturers who are still developing their NEVs for China and some Chinese luxury brands like NIO.  As we near the close of the first half of 2025, we’ll see how all these companies fare. 

BYD is developing mini electric vehicles tailored for the Japanese market, where compact Kei cars are especially popular. All major Japanese manufacturers build Kei cars, but most of them are gasoline fueled. BYD already has smaller vehicles in its fleet in China, but nothing as small as a Kei car.

In China, the most popular mini EV is the Wuling Hongguang miniEV, which is part of the General Motors, Wuling Motors Indonesia, and SAIC joint venture.  In the first quarter of 2025, the Hongguang mini had sales of 87,000, and since it debuted in 2020, it has sold 1.5 million vehicles.  Its price ranges from $5K to $7K. So why isn’t BYD building its new Kei car for China? It may be because it already has small, low priced vehicles in its fleet that are selling well for around $10K.  But it may be more of a globalization play for BYD. They already sell the Dolphin, Seal, and Atto 3 in Japan, but they see the need to adapt to selling in Japan's biggest segment. Here are pictures of the different mini vehicles to see how they compare.

So, the China market has EVs across all segments minus large pickup trucks, while the Japanese market is focused more on small vehicles.  It’s a smart adaptation strategy by BYD, but it will take time to succeed in a very Japanese manufacturer-based market. 

Gotion Inc. High-Tech recently unveiled five new products, including the Jinshi (Gold Stone) battery - a step toward solid-state batteries. The Jinshi battery passed extreme safety tests such as nail penetration, thermal exposure, short-circuiting, overcharging, and compression. Gotion Inc. also completed its first fully operational all-solid-state battery experimental production line.

Gotion Inc. introduced its G-Yuan quasi-solid-state battery, designed to balance range and safety. With an energy density of 300 Wh/kg, it enables electric sedans to reach up to 1,000 kilometers. Its semi-solid-state structure acts like a nanoscale bulletproof vest, maintaining safety even when pierced by a 3mm steel needle, with no fire or explosion.

Gotion Inc. also launched the G-Xing heavy-duty truck battery pack, featuring a single-pack energy capacity of 116 kWh, 175 Wh/kg energy density, and megawatt-level ultra-fast charging. Operating between -40°C to 65°C, it includes quad-gun charging and a 1000V high-voltage platform, improving efficiency by 30% over previous models.

The company unveiled the Qianyuan Smart Storage 20 MWh system, with a 25-year lifespan and modular integrated design. It uses hybrid liquid-air cooling, AI-enabled operations and maintenance, and supports a “solar-storage same lifespan” goal.

Finally, Gotion Inc. debuted the Qichen Gen-2 battery—the world’s first LMFP (lithium manganese iron phosphate) ultra-fast charging cell - offering 850 km for EVs and over 1,500 km for hybrids.

While Gotion Inc. hasn’t made semi- or quasi-solid-state batteries available to manufacturers yet, these releases highlight its intent to challenge rivals like CATL - Energy Storage Solution Provider. Intense competition among China’s top battery makers is fueling a wave of innovation, benefiting consumers. Can U.S. firms succeed as fast followers in this global race? LFP adoption is one such strategy, but many are also exploring new lithium-ion chemistries and solid-state technologies.

Who will be first to deliver the ideal battery—balancing power, range, speed, safety, and lifespan? The answer may emerge in the next 5–10 years. 

NIO released its 2025 Chinese New Year Charging Report based on their software-defined EVs. During the holiday period, NIO users collectively drove over 620 million kilometers. Across China, more than 3,100 battery swap stations provided over 1.716 million battery swap services, marking a 44% year-over-year increase. For 12 consecutive days, daily battery swaps exceeded 100,000, with a single-day peak surpassing 136,000 swaps. On average, a vehicle completed a battery swap and resumed its journey every 0.6 seconds.

To add to NIO’s charging system, Changan, Geely, JAC, Chery, Energy Group, Anhui Transportation Holding Group, Southern Grid, Lotus, and GAC have joined NIO’s battery swap alliance.

It’s fascinating to watch this system grow, especially as it requires customers to accept whatever battery is available from a swapping station and that the battery must fit perfectly into each vehicle and match its battery management system.  The companies that are joining the NIO system must also accept these restrictions on their vehicles, which traditional auto manufacturers would have a hard time accepting, if for no other reasons than warranty issues!  We can’t help thinking that much of this is based on using only CATL batteries and battery management systems, but we can’t tell for sure.  We’ll continue our postings on charging systems as part of our EV Evolutions Research project. 

On November 28, Tesla announced it will offer free battery replacement services for owners of older Model 3 vehicles equipped with 2170 batteries. (We’re not sure if the vehicles have to be owned only by the first owners of the vehicles.)  Vehicles with these batteries began production in 2017.  This policy applies to vehicles with a battery health below 80 percent.  This policy not only supports older models of Tesla, but it also encourages owners of Tesla EVs that Tesla stands behind their batteries.  We will never know how many of Tesla’s vehicles qualify and receive replacement batteries, but one must understand that Tesla probably wouldn’t do this unless they thought they would not incur huge expenses from the replacement.  We’ll be watching to see if Tesla offers this replacement for Teslas in the US and the EU.

Because China is more advanced in their development of New Energy Vehicles, we continually find new updates on issues we in the US and the EU will have to deal with as our EV fleets grow. Insurance is one issue we will see as an important cost for consumers of EVs.  Even if EV owners have fewer claims than gas vehicle owners (which is not proven) the cost of repairs to EVs, especially battery repairs or replacement can drive premiums higher.  Some reports of minor accidents that require totalling a vehicle because of the need to replace the battery will increase insurance premiums.

In China, the China Association of Actuaries, in collaboration with China Banking and Insurance Information Technology Management Co., Ltd., released data related to claims of new energy vehicle (NEV) insurance in China for 2024. In 2024, the Chinese insurance industry underwrote 31.05 million NEVs, generating a premium income of 140.9 billion yuan ($19.6 billion) and providing a total risk coverage of 106 trillion yuan ($22.6 billion). However, the industry reported an underwriting loss of 5.7 billion yuan ($793 million), continuing a trend of consecutive losses.

The main reasons reported for the losses include:

- high repair costs

- high accident rates

- mismatch between some auto insurance prices and vehicle usage

- mismatch between some auto insurance prices and vehicle risks

Obviously, the Chinese auto insurance industry is struggling to match premiums to insurance risks.  Now that there are millions of different types of NEVs in the market and on the roads, Chinese insurance companies will be able to adjust their rates, but the rates will most likely increase.

The US and the EU will learn from their own experience with insuring EVs based on usage and technical considerations related to the cost of repairs.  What’s interesting about the Chinese situation is that the insurance companies are feeding this information back to auto manufacturers to improve the design of vehicle safety and repairs, and work together to reduce the cost of using the vehicle throughout its life cycle.  This could have a dramatic effect on how batteries are produced and protected within the vehicle.

One would expect the Chinese automakers to file a lawsuit against EU tariffs on Chinese-made vehicles.  But having BMW Group and Nissan Motor Corporation join the filing has its own logic.  On January 24, Reuters reported that BMW and Nissan, along with Chinese manufacturers, have filed a lawsuit with the Court of Justice of the European Union (CJEU) to challenge the EU's tariffs on Chinese-made electric vehicles (EVs). The litigation process in the General Court typically takes an average of 18 months, and the ruling can be appealed. So, China plays the long, uncertain game foreign manufacturers in China had to play when they brought China’s policies to the WTO, waiting years for a decision that China may or may not have accepted.

Reading between the lines is necessary to understand BMWs and Nissan’s reasoning.  Nissan manufactures in Britain, so it does not want any import duties to the EU, and BMW imports Mini’s from China.  China is also BMW’s largest market, so siding with China is a political move for them, especially if nothing comes of the case.  Two years from now some Chinese manufacturers may be producing in the EU and avoiding the tariffs.  Many Chinese suppliers are already setting up in the EU.

We’ll continue to follow the impact of the tariffs on China as well as on the EU firms in China that have been paying 25 percent tariffs for importing into China for over 10 years.  It will be interesting to see how China responds to the EU tariffs as part of our EV Evolutions research project that tracks EV products, policies, investments, and sales across the EU, the US, and China.

The General Offices of the Ministry of Commerce and seven other departments have issued a notice on facilitating the vehicle trade-in program for 2025. According to the notice, this year, individual consumers who scrap gasoline passenger vehicles registered before June 30, 2012, diesel and other fuel passenger vehicles registered before June 30, 2014, or new energy passenger vehicles registered before December 31, 2018, and purchase new energy passenger vehicles listed in the Ministry of Industry and Information Technology's Catalogue of New Energy Vehicles Exempt from Vehicle Purchase Tax Or gasoline passenger vehicles with an engine displacement of 2.0 liters or below, will be eligible for a one-time fixed subsidy.

Consumers who scrap eligible old vehicles and purchase new energy vehicles will receive a subsidy of 20,000 yuan (~$2,800), while those who scrap eligible fuel-powered vehicles and purchase gasoline vehicles with an engine displacement of 2.0 liters or below will receive a subsidy of 15,000 yuan (~$2,100). It is important to note that the scrapped vehicles must be registered under the applicant’s name before January 8, 2025.

The government is using many subsidies across the economy to increase domestic spending.  Because these subsidies support EVs and gas vehicles, they can be seen as support for consumer buying in general, rather than just EV support.

Mercedes-Benz AG recently announced the use of solar paint that can help charge an EV, providing up to 12,000 kilometers of range over a year.  The solar cell component is incredibly thin at just 5 microns—thinner than a human hair—and weighs only 50 grams per square meter, yet achieves an energy conversion efficiency of 20%. Applied to the surface area of a mid-sized SUV (approximately 11 square meters), it can generate significant power. This technology functions regardless of the vehicle's status, continuing to work even when the car is off. The energy generated can directly power the vehicle, be stored in high-voltage batteries, or even be fed back into a home's power grid through bidirectional charging if unused by the vehicle.

Sounds too good to be true, but let’s let Mercedes have the spotlight for a bit to at least talk about potential new technologies that EVs can bring to life.  We haven’t heard the last of new battery technologies as well as charging capabilities, both of which are in their teenage years.  Solar paint can be just one of many new technologies that will possibly come to market in the EV future.  This is what makes the auto industry so much fun.  Give engineers some room and funding to think outside the box, and we'll have some hits along with some misses. 

Huawei, one of the largest technology companies in China, already supports auto companies with its digital technology inside many vehicles.  Now it is advancing its support for vehicle charging.  Liu Dawei, President of Huawei Digital Energy Intelligent Charging Network Business, stated that Huawei has deployed ultra-fast charging stations in over 200 cities and along 21 major provincial highways across the country. As of the third quarter, Huawei has completed the deployment of 50,000 ultra-fast charging piles, accounting for half of the total ultra-fast charging piles nationwide.

In 2023, Huawei announced its plan to provide more than 100,000 fully liquid-cooled ultra-fast charging devices, over 700,000 public charging ports, covering 340 cities nationwide, and building more than 4,500 ultra-fast charging stations along highways by the end of 2024. The goal is to achieve "high-quality charging wherever there are roads." Huawei's fully liquid-cooled ultra-fast charging technology adopts innovative architectures and technologies such as fully liquid-cooled, fully modularized, integrated solar storage, and power pooling, with an system efficiency rating of 95.5%, with a service life exceeding 15 years. In addition, Huawei has launched the "Hundred-Thousand-Ten Thousand" action plan, aiming to deploy over 10,000 stations and 100,000 ultra-fast chargers in more than 100 cities and 1,000 counties.

China needs more chargers than in the US because of its large population, where most people do not have access to home charging.  This move by Huawei shows the power of the company in the auto industry without actually designing and building vehicles.  Besides its work in charging, it also offers networking and communications technology, ADAS and autonomous driving technology; intelligent cockpits with infotainment, voice recognition, and AI personal assistants; power electronics for EVs; V2X connectivity; cloud-based services like over-the-air updates; and software-defined vehicles through digital architectures.  It's unusual to find an automotive supplier that has so much digital investment in a vehicle, especially in future oriented technologies.  We always knew about their communications network technologies, but within the last 5 years, they’ve expanded beyond most global automotive suppliers.

Customer service for new energy vehicle (NEV) owners in China is emerging as a decisive competitive battleground, with J.D. Power’s inaugural 2025 China NEV Customer Service Index (NEV-CSI) study recording an overall satisfaction score of 775 out of 1,000. Unlike traditional patterns where higher-tier cities often lead in customer experience, the study reveals a “regional inversion”: satisfaction is lower in Tier 1 and Tier 2 cities than in Tier 3 and Tier 4, as heightened expectations in major markets make service gaps more visible. Across brand categories—premium, mass market, and domestic—scores are nearly identical, signaling that differentiation increasingly hinges on execution rather than positioning.

Mobile on-site service has become a critical growth driver, with usage rising to 32.3% of owners in 2025, up sharply from the prior year. Customers using mobile service spent an average of RMB 591 more on after-sales, highlighting its role in turning occasional maintenance into frequent, high-value touchpoints. However, other innovations such as remote diagnostics have yet to deliver; nearly 80% of users still need to visit a physical service center afterward, dragging down satisfaction. Similarly, while response times have improved, resolution rates are slipping, and fulfillment of benefits is emerging as a trust risk rather than a value-add.

Charging remains the weakest link, with satisfaction falling for a second straight year. Problem rates with brand-owned chargers have climbed above 47%, and nearly half of owners report difficulty using in-car systems or apps to locate and book charging stations. Pain points are shifting from availability to usability, underscoring the need to treat charging networks as data-driven service platforms rather than infrastructure alone.

Among brands, NIO ranks highest in both premium and domestic segments with a score of 801, while Li Auto leads the mass market category with 788. The results emphasize that service quality, seamless digital processes, and expectation management are now central to competitive differentiation. As the NEV industry enters a new phase defined less by product and more by customer experience, automakers that invest in mobile service, digital credibility, and precise resolution stand to gain long-term loyalty and market leadership.

Check out the full article here: https://www.jdpower.com/business/press-releases/china-new-energy-vehicle-customer-service-index-nev-csi-study 

China’s transition to new energy commercial vehicles (NECVs) accelerated sharply in 2024, with registrations growing by 64% to 546,000 units and overall market penetration rising from 11.3% in 2023 to 19% in 2024. While the light-duty segment continued to dominate overall volumes, accounting for 56% of registrations, the heavy-duty segment recorded the fastest growth, more than doubling year-over-year. This surge reflects not just consumer demand but also the impact of targeted policy incentives and city-level pilot programs designed to push electrification across a range of commercial applications. Urban logistics vehicles, buses, dump trucks, and tractor trucks emerged as the leading categories, with penetration rates reaching as high as 45% in logistics vehicles and 32% in buses, showing that some segments of the commercial vehicle fleet are electrifying at a pace on par with or even faster than passenger cars.

Shenzhen, Guangzhou, Chengdu, and Beijing were among the top cities driving this transformation, underscoring the role of urban hubs in advancing electrification. Together, the top 20 cities still represented about half of all NECV sales, but their overall share fell slightly from the previous year, suggesting that adoption is beginning to spread more evenly across the country. At the same time, the type of vehicles deployed varied significantly: light-duty NECVs were concentrated in urban logistics applications, while heavy-duty deployments leaned more toward buses, dump trucks, and tractors. Particularly noteworthy was the bus sector, where city buses achieved 100% electrification in 2024, even though minibuses and coaches lagged behind. In logistics, light trucks under 3.5 tonnes achieved a remarkable 59% new energy penetration—higher than the 46% penetration rate for passenger cars in China the same year.

These trends highlight both the speed and the unevenness of the NECV transition. Certain application types, such as postal vehicles and stake trucks, are electrifying rapidly, while sanitation vehicles, snow-removal fleets, and other specialized utility vehicles lag further behind. Nevertheless, the overarching trajectory is clear: strong growth across nearly every segment, supported by both national industrial policy and local pilot programs. By focusing resources on strategic vehicle categories and cities, China has created a scalable model for electrification that is beginning to move beyond its traditional strongholds and into second- and third-tier markets. This rapid progress demonstrates how a combination of central planning, targeted subsidies, and municipal implementation can reshape an entire vehicle class in less than a decade. As NECVs continue to expand, China is positioning itself not only as a leader in passenger EVs but also as the global frontrunner in commercial vehicle electrification, setting standards that other markets may look to replicate.

CATL recently announced its new Xiayao Super Hybrid Battery that offers a pure electric range of over 400 km and features 4C ultra-fast charging, allowing for a 10-minute charge that provides an additional range of over 280 km. Notably, sodium-ion battery technology has been integrated into the Xiaoyao Super Hybrid Battery, bringing three major technological innovations: 

- It pioneered the lithium-sodium AB battery system integration technology, improving low-temperature range by 5%. 

- The sodium-ion battery is used as a SOC (State of Charge) detection reference, adding more than 10 km to the pure electric range. 

- The all-temperature-range precision power calculation BMS (Battery Management System) technology enhances the overall control precision of the system by 30%.

Additionally, the Xiaoyao Super Hybrid Battery features Battery-to-Grid (B2G) technology, enabling bidirectional energy interaction between the battery and the grid. This allows car owners to earn money and generate circular economic benefits. Throughout its lifecycle, the battery can reverse-charge the grid with approximately 33,000 kWh of electricity, potentially yielding over 20,000 RMB (about $2,700)  in income.

This new battery not only shows the technological prowess of CATL as it continues to innovate its battery technology, it also shows how companies are requesting hybrid batteries in order to meet driving distance requirements that a typical EV battery cannot yet meet.  This is very similar to the new hybrid requirements for global automakers as they support the EV transition by providing plug-in hybrid vehicles to meet consumer range demands (at least until the charging infrastructure sufficiently expands).

As Chinese automakers face tariffs that go into effect this week on imported vehicles into the EU, they are deciding if they should build plants in the EU in order to avoid the tariffs.  The Japanese faced a similar decision in the 1980s in the US and the EU.  They eventually decided to build vehicles as well as import vehicles in the US and EU. One Chinese company, Leapmotor, is now part of a joint venture with Stellantis to build EVs in Europe, which is what Toyota Motor Corporation, Mazda Motor Corporation, and Mitsubishi Corporation did in the US in the 1980s.  But the Chinese government is playing a stronger role than the Japanese government once did.  They met with industry executives in early October based on a recent article in Reuters (https://lnkd.in/gDm2Xp7g.) warning companies to delay building plants in the EU while China continues negotiations with the EU. BYD already has plans to build in Hungary, and Geely is considering a plant in Poland or Spain.  The EU represented 40 percent of Chinese vehicle exports in 2023, so the government wants to continue this strategy in order to deal with overcapacity in China’s auto plants.   The Chinese government is also trying to manage where Chinese brands locate by telling companies to be “prudent” about where they locate based on how the EU countries voted on the tariff resolution.  It will be very interesting to see how the Chinese firms respond to its government’s direction.

China’s growth in New Energy Vehicles (EVs, PHEVs, and Fuel Cell Vehicles) has been fueled by a variety of government subsidies for consumers and companies, green license plates for EVs that allow drivers to enter major cities at any time (compared to gas vehicles that are limited to every other day based on the license plate number), local provincial subsidies to EV buyers and companies, extensive government support for charging stations, and no sales tax on the purchase of an NEV.  Recently the government began another subsidy the provides 20,000 yuan (about $2,700) if a buyer scraps a vehicle that meets China’s National III emission standards or below, or a new energy passenger vehicle registered before April 30, 2018, and purchases a new energy passenger vehicle included in the Ministry of Industry and Information Technology's "Directory of New Energy Vehicles Eligible for Vehicle Purchase Tax Reduction" or a fuel-powered passenger vehicle with a displacement of 2.0 liters or less.  It provides a 15,000 yuan (about $2,000) subsidy if the buyer scraps a gas-powered passenger vehicle that meets National III emission standards or below and purchases a gas-powered passenger vehicle with a displacement of 2.0 liters or less.  So, the government is focusing on not only supporting EVs, but also on improving the emissions of new gas vehicles by scrapping gas vehicles that emit more emissions.  The US tried a similar Cash for Clunkers scrappage program during the Great Recession that tended to pull forward purchases rather than creating increased vehicle sales in the long run.  But what both programs do is take older vehicles off the roads that have poorer emissions. We’ll be discussing these government strategies at our upcoming 18th Annual Inside China Automotive Conference at the University of Michigan on November 13th.

A recent article from China talked about how vehicle insurance costs are higher for EVs than for gas vehicles, but it noted that there isn’t enough claim data for insurers to accurately measure the cost of replacing or repairing EVs.  This is true also in the US, where insurers also have a limited dataset of EV claims with which to decide how much to charge. US insurers, in order to manage potential losses, tend to overestimate how much it will cost to repair an EV, as do the Chinese insurers.  This has led some EV makers like Tesla and Xiaomi Technology to self-insure their vehicles.  By tracking the driving of their vehicles, these companies gather huge amounts of driving data they use to set insurance premiums.  Because of this, everyone’s insurance rates can be different, depending on their driving patterns as well as their accidents.  These EV insurance practices may be the future of all vehicle insurance.  Drivers for some brands that self-insure may not have a choice of opting out of being tracked, and insurance companies of non-self-insured vehicles may have higher premiums for drivers who refuse to be tracked.  We’ll be tracking the effects of insurance premiums as part of our EV Evolutions research program.

As a lead in to our upcoming 17th Annual Inside China Automotive conference that will take place on November 13th at the University of Michigan, the CNN article (https://lnkd.in/gmB5uQNb)  lays out just how competitive China’s internal New Energy Vehicle (NEV) market is, and it’s crazy competitive.  When we started studying the Chinese auto market in 2005, there were no NEVs, yet 200 auto automakers building gas vehicles.  Fast forward to the 2020’s and many of those companies no longer exist, but in their place are a hundred NEV companies making EVs.  We’ll be discussing this topic and many others related to the current and future upcoming conference, while also tracking China’s, the US’s, and the EU’s EV markets through our EV Evolutions project. 

Reports from China’s Ministry of Commerce declare that China is considering placing tariffs on, among other things, vehicles imported into China that have an engine displacement over 2.5 liters.  These vehicles tend to be the larger vehicles exported to China from Germany.  What’s interesting is that the total value of these vehicles is estimated to be $18 billion, more than the total value of EVs sold in the EU in 2023.  We will be watching these retaliatory measures closely as China and the EU square off over the next few months.  The current EU tariffs are in place for 5 years, which allow EU manufacturers time to catch up to the Chinese EV manufacturers, a similar but different method from the 125 percent tariffs the US put on Chinese EVs.

When Keith Bradsher from the NY Times spoke at our Inside China conference last year, he discussed China’s vehicle trade policies and showed the numerous orders by BYD to build the largest ships ever to export their vehicles to the world.  Well, this scenario is playing out in the EU and North America.  In the EU, we’ve been tracking Chinese EV manufacturer imports, differentiated tariffs on Chinese vehicle imports, and factory building in the EU (Hungary), as well as Chinese battery supplier factory building (Germany, Hungary).  In North America, we’ve seen BYD as the most aggressive Chinese manufacturer selling PHEVs and and EVs in Mexico (including plans to build a factory in Mexico); 100 percent tariffs on Chinese EVs in the US (and a recent delay in implementing the tariffs as the government reviews 1200 comments); and in Canada the recent deal of BYD to sell discounted EVs to Uber drivers with expectations of 100K vehicle sales.  All of these issues show the aggressive export strategies of Chinese EV makers.  Not only are the vehicle manufacturers coming to the EU and North America, their supply chains will also need to develop in these regions.  Will the Chinese use the USMCA to enter the US from Canada and/or Mexico?  Will the US government amend the USMCA to deter Chinese automakers?  How are Mexico and Canada addressing China’s entrance?  How long can the US and EU keep Chinese makers and suppliers out of their countries without jeopardizing their companies in China?

Understanding the future of EVs means keeping tabs on the largest battery supplier in the world, CATL.  Though this new announcement discusses a 16 year, 2 million kilometer battery, we can be skeptical until we see it in production.  We’ve been tracking new battery technology for the past four years, and there have been numerous battery “breakthroughs” across the globe that work in the lab but not in production or on the road.  Having said that, when the largest battery supplier with the largest battery R&D budget in the world talks, we listen.  CATL’s success and its government funding supports its mission to lead China and the world in battery technology. But CATL is not alone in new battery technology development.  We expect to see real breakthroughs in batteries over the next 10 years as global companies compete to meet and exceed customer expectations concerning battery costs, safety, recharge time, lifespan, and vehicle range.

China now subsidizes the purchase of New Energy Vehicles (pure EVs, Plug-in Hybrids, and Fuel Cell vehicles) with about $1,400 if a consumer scraps a gas vehicle that is older than 2018 and purchases a New Energy Vehicle.  They only receive about a $1,000 subsidy if the vehicle they scrap has a gas engine of 2.0 liters of displacement or less.  The US tried this type of program in 2009 after the US auto companies had restructured because of bankruptcies during the Great Recession.  It was a $3 billion program that focused on scrapping older, less fuel efficient vehicles for more fuel efficient vehicles.  China has used many of the US strategies for curtailing emissions and increasing sales of NEVs, but “Cash for Clunkers” was not considered one of the best uses of $3 billion in the US.  In the US, which sold and scrapped nearly 700K vehicles in a two month period of time, the program was able to slightly reduce emissions because older vehicles were more polluting than newer vehicles, and increased the safety of the vehicles sold also because newer vehicles had more safety features than older vehicles.  It also provided a shot in the arm to the auto companies who were struggling with very low sales volumes.  The program wasn’t as successful from a fiscal policy perspective.  Many economists have studied its effects, and most report that, though it did support the auto industry in dark times, it didn’t provide the jump start the government expected after the program ended.  Most economists argued that the subsidy just pulled forward sales that buyers were going to purchase anyway, such that sales in the following months were less than expected.  We’ll see how this program plays out in China, where it is scheduled to last until the end of December, 2024, much longer than the US program.

We are tracking how automotive companies in China, the US, and the EU are setting up charging stations, sometimes on their own, sometimes with partners, as part of our EV Evolutions project.  These are new enterprises for automakers.  Historically, they haven’t ventured into owning facilities such as fueling stations, so charging stations test their organizational capabilities outside the factory and supply chain.  In China, Tesla has about 11K individual superchargers throughout China (about 22K in the US), while the Chinese companies on this slide are continuing to increase their fleet of superchargers.  Besides Tesla, the leaders are Hypercharge Networks, NIO, Zeekr Europe, and XPENG.  Noteworthy is that the largest EV maker in China, BYD, has no superchargers, obviously a business decision on their part.  Of course, superchargers are a subset of all other types of chargers, but they provide the fastest charging experience available today.  That said, improvements in charging and batteries occur monthly throughout the world.  The future of charging will be the theme of our 16th Annual Propulsion Strategies for the 21st Century conference in July.  We’re looking forward to hearing about where charging is headed over the next 5-10 years.

Automotive companies are trying to become automotive insurers in China in a move to try to offer consumers more unique options.  But in China, this process is difficult.  Getting an insurance brokerage license is not easy. The average cost of a license ranges from $2.5 million to $3.5 million, and companies are struggling to get clearance.  (Not even BYD has received one.)  Tesla recently canceled its Tesla Insurance Brokerage Company that it formed in Hong Kong.  Analysts suggest that it may go the route of purchasing an established insurance brokerage firm in order to meet its goals.  We’ve talked about the EV insurance issue in previous posts where some Chinese EV owners are finding rates higher than gas vehicles because of increased costs in accident repairs.  Can manufacturers owning their own insurance companies manage costs differently?  This will be another EV hurdle that will have to be overcome.

Late last year and early this year, NIO, which focuses on battery swapping for its vehicles in China, signed partnership agreements with China’s GEELY, Changan Automobile, JAC Motors (Anhui Jianghuai Automobile Co., Ltd.), and Chery International to continue to increase battery swapping infrastructure and platforms, develop battery swapping standards, and develop battery swapping-enabled vehicles as shown in this article from CnEVPost.  Our initial analysis of battery swapping saw challenges in standardizing batteries to fit multiple models from multiple manufacturers as well as changes to batteries over time.  We also saw manufacturers wanting to differentiate their batteries and EVs so that having a “standard” for battery swapping would be difficult to establish.

These agreements with Nio are built on the success of Nio in China where they have built battery swapping stations throughout the country to meet the needs of their buyers.  By adding major EV manufacturers to their battery-swapping standardization process, Nio is overcoming a major impediment, volume.  It also allows companies to decouple the purchase of the battery from the vehicle reducing the initial cost of an EV.  Buyers can purchase the vehicle and then pay monthly for “renting” a battery that is replaced through battery swapping within minutes (eliminating range anxiety and slow charging times).  The swapping process also allows customers to potentially upgrade or downgrade their batteries as needed in their daily usage.  But it demands that companies agree on standard interfaces for batteries and keeping a variety of batteries in stock at each station, not a simple process that we will keep watching through our EV Evolutions research program and discussing at our 16th annual Propulsion Strategies for the 21st Century conference in July that will focus on the Future of Charging.

Read the full article at: https://lnkd.in/g-uiZbVD

Lotus Tech Innovation Centre GmbH, https://lnkd.in/gdeyu2Gc, now owned by GEELY, announced some new EV charging technologies that seem to be a DC fast charger that runs on lower voltage, and also a liquid-cooled, All-in-One DC Fast Charger for charge point operators, fleets, and dealerships that allows four vehicles to charge at the same time.  It sounds like some grid upgrades will need to be made to support this new technology, but it is a good example of the continuing development of new technologies to support EVs that we have discussed.  EV technologies are still in early development stages compared to where they will be in the future, but this continuous improvement of charging capabilities is a good example of how companies are trying hard to develop improved technologies.  We’ll be discussing charging in detail at our 16th annual Propulsion Strategies for the 21st Century conference in July that will focus on EV charging.

Automotive companies are trying to become automotive insurers in China in a move to try to offer consumers more unique options.  But in China, this process is difficult.  Getting an insurance brokerage license is not easy. The average cost of a license ranges from $2.5 million to $3.5 million, and companies are struggling to get clearance.  (Not even BYD has received one.)  Tesla recently canceled its Tesla Insurance Brokerage Company that it formed in Hong Kong.  Analysts suggest that it may go the route of purchasing an established insurance brokerage firm in order to meet its goals.  We’ve talked about the EV insurance issue in previous posts where some Chinese EV owners are finding rates higher than gas vehicles because of increased costs in accident repairs.  Can manufacturers owning their own insurance companies manage costs differently?  This will be another EV hurdle that will have to be overcome.

Sometimes simple declarations from Chinese officials can provide a lot of information or lead to lots of suppositions.   Take this simple statement from Zhang Yuzhuo, director of the State-Owned Assets Supervision and Administration Commission of the State Council where he says that three major state owned auto companies are not performing as expected in the New Energy Vehicle (NEVs) initiative:  DongFeng Peugeot Citroen Automobile, FAW, and Changan Automobile.  All three of these companies seem to focus more on gas powered vehicles and not as much on NEVs, and the government wants them to improve.  The government states they will review the operations of all three companies to encourage them to improve their NEV products and market share.  What is missing from this statement is the phrase, “Or else …”  Will the government change management by moving new people into leadership roles?  This has happened in the past with a few other auto companies. It’s unlikely they will close the companies because of the many jobs connected to each company (and remember that FAW means First Auto Works, an original Chinese manufacturer founded in 1953).  It’s fascinating to see how the central government tries to manage its state-owned assets.  We may never know what happens over the next few months of “assessment”, but this statement by itself tells us a lot of how auto companies are run in China. 

Read the full article here: https://lnkd.in/eQJKmK9v

As part of our EV Evolutions Research Program, we track EV information from the US, EU, and China.  This analysis of the 2023 China NEV Brand Quality Ranking from the China Automobile Quality Network is the first official automobile quality complaint monitoring platform in China, sponsored by the State Administration for Market Regulation.  The ranking comprehensively integrates the five dimensions of complaint faults, defect risks, reliability, safety, and environmental protection of each model.  With 17 companies above the industry average and 18 companies below the average, we can see Tesla in the top group and BYD, the largest NEV automaker in the world, in the lower group.  The top group tends to have problems like cabin noise and odor, while the lower group tends to have problems with the battery and its management system. It would be great to understand the group’s methodology for combining the five factors that come from different sources. It would also be interesting to compare these results with the quality surveys performed by JD Power China, though they focus entirely on the many parts of the vehicle without ranking complaints, defect risks, safety, and environmental protection aspects. 

David Coffin and Jeff Walling from the US International Trade Commission presented their latest analyses of Chinese EV exports at last week’s Inside China Automotive Conference at the University of Michigan.  These slides show two important export stories that have changed dramatically over the past 5 years.  First, the prices of Chinese exported EVs has increased from around $5K in 2019 to over $20K in 2022, and second, China’s global share of EV battery exports has risen from around 10 percent in 2019 to 50 percent in 2022.  These metrics will probably increase in 2023, providing China with a significant lead in EVs and batteries over the next few years as the US and the EU begin building their EV and battery value chains.

William-HUA Wang and Chuanjuan WU (Connie) presented their research on BYD at our recent 16th Annual Inside China Automotive Conference at the University of Michigan.  These slides show the evolution of BYD from a maker of batteries for consumer products to a full-fledged global automaker capable of making all the internal EV components for their vehicles (including buses).  This capability has taken many years to develop, but now BYD leads as the only automaker in the world that can build all these components internally.  Vertical integration is not unique in the auto industry.  The major global automakers all have gone through periods of vertical integration over the past 100 years, especially in their early years when their supply base was not capable of developing and producing sophisticated components.  But EV components, especially batteries, are not a core competency of these manufacturers that must rely on their supply base to support them.   BYD’s path is its own creation and provides it with cost advantages that its competitors will take years to match.

Ken English, Senior Director of Automotive at RoboSense LiDAR, spoke at our Inside China Conference last week about his China-based  company that is located in Michigan.  He described the differences among LiDAR technologies and also the potential growth of the technology over the next 10 years.  These slides show the current state of LiDar suppliers globally with most of the current uptake of the technology in China but most of the LiDar companies based in the US and the EU, where manufacturers, at this point in time, seem reluctant to invest in the technology for their current vehicles.  It may be cost or the perception that LiDar is not needed for current Advanced Driver Assistance Systems (ADAS), though all the autonomous vehicles being tested in the US use LiDar.  (We await Tesla’s cameras-only autonomous vehicle.)  It will be interesting to see how the technology evolves and how it will be included into the sensor fusion safety strategies of the auto manufacturers.

At our 16th Annual Inside China Automotive Conference last week, we discussed one of the major changes taking place in the Chinese auto industry: exports.  These two slides show the major companies exporting from China, and the main countries where the exports are going during the first half of 2023.  Though there is much made of Tesla exporting from China, SAIC and Chery are the main vehicle exporters.  And though the EU is challenging China’s exports to the EU as government-supported, the main target for Chinese-made vehicles is Russia, followed by Mexico.  These are gas vehicles exported to Russia and Mexico, but the vehicles sent to the EU are primarily New Energy Vehicles -NEVs- (BEVs and PHEVs).  China began revving up exports in 2022, and this year will exceed last year’s exports.  Excess capacity in gas vehicles, and industry leadership in NEVs are the main drivers of exports.  (In August, China passed Japan as the leading exporter of vehicles).

One of the things we need to understand about the Chinese EV industry is that China measures their industry using the acronym NEV (New Energy Vehicles) that is defined as EVs, PHEVs, and Fuel cell vehicles.  Though this slide shows EVs dominating sales over PHEVs throughout the world, one company, the largest seller of NEVs, BYD, has an equal distribution of EVs and PHEVs. Some of BYD’s top models are sold as both EV and PHEV models. BYD has grown tremendously over the past year using this strategy.  In the summer of 2021 they reported they would no longer make gas vehicles.  But PHEVs also have gas engines, and they can pollute even more than pure gas engines if vehicle owners do not charge their battery regularly and drive using only gasoline.  It may be that consumers have range anxiety; hence, they purchase BYD’s PHEVs as much as their EVs to manage that anxiety.  We have two Chinese researchers presenting their recent work on BYD’s vertical integration at our 16th Annual Inside China Automotive Hybrid Conference at the University of Michigan.

Just how far ahead are the Chinese in the transition to EVs?  One measure is the number of public chargers available to EV owners.  The US aims for 500,000 by 2030, the USDOE reports about 160,000 chargers today.  As you can see from this chart, China already has over 2 million!  That’s what happens when the whole country supports the transition and the government provides significant incentives to build out the infrastructure and manufacture and sell EVs.  It’s taken China about 7 years of focused EV  infrastructure investment to reach their current state.

The US is just beginning its EV journey, and there will be a need for continuous government support to create a fully functioning EV supply chain and infrastructure. We’re seeing some major companies, even oil companies, beginning to transition their gas stations and highway service centers to include charging stations, which is a good first step.  Having the charging industry standardize on the Tesla charging interface is also a good sign.  

Does the US need 2 million chargers?  Maybe not.  Most Chinese people  in cities live in high rises with few parking spaces, so they need lots of public chargers.  In the US, nearly 70 percent of households are single family dwellings that can easily install home chargers that will make them less reliant on public chargers except for driving long distances.  Charging will be the topic for our 16th Annual Propulsion Strategies for the 21st Century conference in July, 2024, and we’ll be discussing this topic as well as others at our upcoming Inside China Automotive Conference on November 15th. 

Because China is more advanced in its development and sale of New Energy Vehicles (NEVs), we continue to see things that are normal in gas vehicles begin to appear in NEVs.  As part of our EV Evolutions research project that follows EVs in China, the US, and the EU, we’re showing some recall information on the Chinese auto industry with some specifics on NEVs.  For the first three quarters of 2023, China issued recall notices for 4.4 million vehicles of which 1.4 million are for NEVs (about 30 percent of all recalls).  The attached chart shows the major problems associated with NEV recalls for only the third quarter.  We’ll be discussing this topic and others related to the Chinese auto industry at our upcoming 16th Annual Hybrid Inside China Automotive Conference at the University of Michigan.

As part of our continuing EV Evolutions Research Program, we provide up to date information about EVs in China, the US, and the EU.  These slides show the growth of LFP batteries over NMC batteries in China.  It was only four years ago that NMC batteries dominated passenger vehicle EVs in China.  In the span of four years EV battery strategy flipped.  Though NMC batteries provided more power and range than LFP batteries, LFPs are less prone to fires, perform at higher temperatures without degradation, have a longer life cycle, accept fast-charging better than NMCs, use fewer expensive materials such as cobalt and nickel, and use a less expensive and less complex thermal management systems.  This will not be the only transition we will see in batteries over the next 10 years, but it is the most significant adjustment made by manufacturers trying to control their material costs and supply.

If anyone was uncertain about the dominance of Chinese NEV brands, especially BYD, the first half of 2023 results should dispel those doubts.  Though Tesla led NEV sales in the first half of 2023, BYD took six of the top 10 spots, while the other Chinese brands took two of the other 10 spots.  This comes as no surprise to anyone who has been following the NEV market over the past couple of years, especially since BYD announced in the spring of 2022 that they would not make any internal combustion vehicles and focus only on EVs and PHEVs.  As the only auto company that makes its own batteries, BYD has a unique position in the global transition to EVs.  It already makes EV buses that are sold throughout the world, including a plant in California, and it is now entering the EU market with EVs and PHEVs. It also offers models in Mexico.   It has different types of passenger vehicles and different price points to reach a broader NEV customer base.  How long before they begin selling in the US? 

As part of our EV Evolutions program that tracks all things EV in the US, EU, and China, we recently learned that China rolled out new NEV (New Energy Vehicle) policies that are aimed at stimulating sales (sales tax exemptions and subsidies for recycling older vehicles), improving battery technology (requiring more battery range in order to receive fuel economy credits), and making charging less expensive (making the cost of charging at charging stations the same low price as charging at home).  As the leader in New Energy Vehicles globally, China provides us with some interesting strategies for building support for NEVs while also showing where some of the pain points will be as EV purchases gain speed.

JD Power’s 2023 Initial Quality Survey (IQS) for EVs in China was recently published, and it provides some insight into the first 90 days of ownership of EVs in China.  Of the different vehicle segments covered in the consumer survey, mid-size passenger car EVs (165 problems per 100 vehicles) and mid-size SUVs (164 problems per 100 vehicles) have the lowest (best) average scores across other EV segments.  In fact, nearly all the EV segment scores are better than the 2022 IQS average scores for luxury gas vehicles (192 problems per100 vehicles) and for mass market gas vehicles (219 problems per 100 vehicles).  An interesting result we will need to keep an eye on in the future.  We’ll be discussing vehicle quality as part of our Inside China automotive conference in November.

Recent research on China’s battery capacity shows the continued growth since 2020.  As the leader in EVs, China needs as much battery capacity as possible to support the increasing number of models and sales of NEVs (pure electric, plug-in hybrid, and fuel cell vehicles).  Our analysis of the recent Shanghai auto show reports 91 different EVs displayed across 56 (!) different companies.  Though many of these vehicles are concept vehicles, it still shows the amount of enthusiasm for NEVs and the need to support them through increased battery capacity.  It will be interesting to see if the dramatic growth in capacity for 2022 will be exceeded in 2023.  If the first quarter is any indicator, 2023 may be headed in that direction.

As part of our EV Evolutions program, we provide updates on the many components of the EV value chain.  Though the data in these slides comes from CATL publications, it shows the many directions the company is taking to improve its battery technology.  Of course, not all of these will come to fruition, but they provide insight into where the company is heading technologically.  These potential improvements include faster charging, longer battery life, increased safety, new chemistries, and cold weather battery management.  All of these potential improvements are good, except that China recently provided permits for 165 new coal-fired power plants that generate the power that charges CATL batteries.  CATL has no control over this, but it shows the life cycle challenges all EVs face.