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The NEV market is booming in China. The pace of growth of the new energy vehicle (NEV) market is taking unprecedented level in China this year. By the end of July 2021, the cumulated passenger NEV sales totalized 1.3 million vehicles, the same amount sold in the entire 2020. The market penetration rate has reached 19.5 percent nationwide in September 2021, which is far higher than the 5.6 percent in 2020. Not to mention that, in tier-1 cities, like Shanghai, the share of NEV of new vehicle sales is stable above 20 percent for months now. The NEV market is clearly following an exponential growth—booming—in China.
Disruptive NEV makers change rules of the game. Significant portion of the growth comes from new players like NIO, XPeng, and Li Auto, just to name a few. These OEMs are focused on the so-called “Smart EVs”, which are fully connected, with high level of automated driving functions, and attractive designs to the affluent middle-class in China. Their customer journey is focused on direct sales through boutiques at strategic malls in top tier cities across the country. The reason for their success goes far beyond the pure electric powertrain. It has much more to do with the focus on creating unique value to the customers, while reacting fast to new technological market demands. While some traditional OEMs struggle to pick up the pace of the market and adapt their own product line-up, innovation is driven very fast in the NEV market The development cycles are typically reduced from traditional 3 to 4 years, down to 1.5 to 2 years. If technology advancement happens fast, industry investments must follow the same pace, while market uncertainties must be managed along the way. Big challenges are imposed to supplier industry. Established powertrain technology corporations are confronted with new market conditions. Those players willing to participate in the NEV industry growth must match the fast pace imposed by the leading NEV players. Not only the customer side becomes more dynamic, but also new competitors flourish every day coming from other industries attracted by the growth perspectives, as well as the apparent lower entry barriers of e-powertrain technology. Furthermore, some OEMs are still evolving in their make-or-buy strategies, which represent another challenge to suppliers, who must keep flexibility in terms of delivery scope – from supplying parts to entire systems, like the electric axle drives.Ultimately, fast customer-oriented technology advancement, along with proficient automotive mass-production capability will determine the market leaders in electrified powertrain business.
