The insurance registrations of new-energy passenger vehicles in China are estimated to reach 580,000 units in March this year, representing a year-on-year rise of 27.19% and a month-on-month growth of 47.21%. The combined new-energy passenger vehicles insured in the first quarter of this year are predicted to be 1,265,000 units, up by 22.34% year on year from 1,034,000 units in the same period last year.
Figure 1-1: China's sales of new-energy passenger vehicles (Unit: '000 units)
Sources: Compulsory traffic insurance and Mysteel
The year-on-year growth in new-energy passenger vehicle sales in the first quarter was lower than the market had expected despite dual stimulation of local subsidies and price reductions among automakers following the phase-out of the government's NEV subsidies. An important contributor to the year-on-year decline was that the macro-economic environment influenced residents' expected income, thereby reducing their purchases of consumer discretionary. It can be seen from the sales of traditional fossil-fueled vehicles and new-energy passenger vehicles in the first quarter, with their expected year-on-year growth down by 22.7% and 13.1%, respectively.
However, the domestic new-energy passenger vehicle market remains resilient overall in terms of NEV penetration. In spite of the slowing year-on-year sales growth in Q1, the penetration rate of new-energy passenger vehicles reached a new high of 35.8% in the third week of March, indicating that the government's withdrawal of NEV subsidies had little effect on consumer acceptance of new-energy passenger vehicles.
Figure 1-2: China's weekly NEV penetration rate based on collected data of compulsory traffic insurance
Sources: Compulsory traffic insurance and Mysteel
The rapid week-on-week increases in insurance registrations of new-energy passenger vehicles in the last two weeks of March also echoed Mysteel's view of a resilient NEV market and its growing consumer acceptance. It also blew away market players' forecasts that the price cuts for traditional fossil-fueled vehicles would pose a threat to the sales of NEVs.
Figure 1-3: China's weekly insurance registrations of new-energy passenger vehicles (Unit: unit)
Sources: Compulsory traffic insurance and Mysteel
However, when comparing the insurance registration data in the first 13 weeks of 2023 with the last 13 weeks of 2022, and the data in the first 13 weeks of 2022 with the last 13 weeks of 2021 in the following two charts, it can be seen that the insurance registrations of new-energy passenger vehicles in the first 13 weeks of 2022 are basically the same as those in the last 13 weeks of 2021, while the insurance registrations this year till the end of the first quarter failed to exceed the level seen in the final 13 weeks of 2022. The comparison between Figure 1-4 and Figure 1-5 shows that the gap between actual data and market expectations is obvious, which also leads to the overestimation of demand among battery makers and material plants.
Figure 1-4: The weekly insurance registrations of new-energy passenger vehicles in 2022 and 2023 (Unit: unit)
Sources: Compulsory traffic insurance and Mysteel
Figure 1-5: The weekly insurance registrations of new-energy passenger vehicles in 2021 and 2022 (Unit: unit)
Sources: Compulsory traffic insurance and Mysteel
The macro-economic recovery to improve residents' expected income and improved product competitiveness to persistently boost NEV penetration are the two major driving forces in China's NEV market.
Due to the impact of the widely circulating COVID infections, China's NEV insurance registrations were relatively low in April and May 2022, resulting in merely 1.11 million units of new-energy passenger vehicles insured in the second quarter of 2022. The historical statistics showed that the insured volume in the second quarter was generally higher than that in the first quarter. The volume in Q2 2022 too maintained an increase of 7.35% from Q1 2022 despite the severe impact of the COVID-19 pandemic.
Figure 1-6: China's NEV market over 2021-2022 (Unit: '000 units)
Sources: Compulsory traffic insurance and Mysteel
Given the declines in prices of lithium carbonate and other raw materials in the battery link, car markers are able to cut their NEV prices by Yuan 10,000-15,000 per vehicle. With the increases seen in the last two weeks of March, China's insurance registrations of new-energy passenger vehicles are expected to reach 1.6 million in the second quarter of this year, up by 26.98% compared with the first quarter, and jumping 44.1% compared with last year.
Written by Mysteel Nonferrous Metal & New Energy Research Center
Edited by Ruby Zhang, zhangjiajing@mysteel.com; Alyssa Ren, rentingting@mysteel.com