Thanks to the faster pace of opening-up and dual credit policy, the new energy market is entering a new era. Instead of being driven by favorable policies such as subsidies or license plates, its development model is shifting from policy orientation to market orientation with dramatic changes in its market structure and demands. In the future, competitiveness of products will be the key to capturing market share.
In order to better understand the demands and landscape of the new energy market, Nielsen has released the 7th annual New Energy Market White Paper, which explores the future development of China’s new energy vehicle market through in-depth survey of owners and potential consumers of new energy vehicles. In 2018, Nielsen has extended its study to cover lower tier cities, and goes deep into third tier cities for the first time, so as to get comprehensive insight into the current situation and development trend of the new energy vehicle market in China.
According to China Passenger Car Association, the sales of new energy passenger cars in China reaches 576,000 units in 2017, ranking number one in the world. Within technology categories, battery electric vehicles (BEV) take the leading position. In 2017, 468,000 units of BEV were sold in China, a 79% growth rate compared with the year before. The survey showed that from 2014 to 2017, BEV sales rose up by nearly 12 times in cities with yearly vehicle quotas, while those in cities without quotas grew by 30 times.
With rapid development of the new energy market, the availability of charging facilities becomes a main concern. In recent years, public charging facilities grew quickly, especially in Southeast China. However the current ratio of BEVs to charging stations stands at 7:1, presenting a big gap with user demand.
In 2017, nearly 30% of the owners of new energy vehicles were born in the 1990s, among whom over 51% hold a bachelor’s degree or higher, up 3% over the previous year. These young owners focus on practical functions such as riding convenience and comfort (35%), space (29%) and power performance (28%). Although vehicle appearance remains a theme, they prefer a sense of technology rather than the elegance or fashion attributed to traditional fuel vehicles. They believe such technology is reflected not only in the appearance but also in electronic devices. Hence autonomous driving and connection services are popular among new energy vehicle owners. Compared with 2017, their demands for autonomous-driving and connection increase by 5 percentage points. These owners mainly desire for more open vehicle operating systems and free access to APPs, followed by continual improvements and upgrades to operating systems.
Since 2017, BEV acceptance has surpassed plug-in hybrid electric vehicles (PHEV), and continues to rise in 2018. Nielsen's study in 2018 reveals about 37% of potential consumers will consider a BEV while 31% plan to select a PHEV. In the past three years, satisfaction of new energy vehicles has risen to 4.2 out of 5 in 2018, up by 0.2 pts compared to 2016. Compared with 2017, expectations on charging time and mile range was almost 50% higher than actual. Compared to current average of 286km of max.mile range and 7.3 hours of charging time for vehicles, the owners of new energy vehicles expect 442km and about 5 hours respectively. While new energy vehicles see faster improvements over fuel vehicles, owners expectations on battery technology and range are growing quickly as well.
Unlike owners in first and second-tier cities, vehicle owners in the third-tier cities are generally older (average 35.8 years old), most of whom are married with children (80%). Their income is relatively low, and 38% of them make below RMB10,000 per month. 82% of these owners are first-time purchasers, 40% of whom bought cars priced at less than RMB100,000. Due to low price and convenience, they tend to choose to pay in full. Over 60% of potential users in third-tier cities choose sedans, and rank comfort and convenience (43%), vehicle price (27%) and maintenance cost (27%) as key factors for vehicle purchase.
Charging methods vary among different cities. 68% of BEV owners in first tier cities enjoy private charging stations in their communities. Because of inadequate charging in third tier cities, 53% of BEV owners have to depend on power cable from homes or building power outlets.
Owners in third-tier cities are reluctant to accept new channels. Different from those in the first tier and second tier cities who rely to vehicle industry websites and social websites, they usually get information on cars from such offline channels as manufacturers' official stores (50%), introduction from relatives and friends, recommendation by sales consultants (35%), vehicle exhibitions (38%) and outdoor advertisements (18%).
In third-tier cities, vehicle owners' expectation on after-sales maintenance involves two aspects. 70% of them hope for wider service network to get more convenient repair & maintenance. Meanwhile, they demand battery services from manufacturers or distributors to settle battery problems.
Olive Zhang, Vice President, Auto Vertical, Nielsen China, said, “The driving force behind today’s new energy vehicle market will be rising competition and advancements in technology and quality. These are the rules of the new energy game in China and lower tier cities are evolving as the primary battlefields for auto-makers. As the entire industry continues to undergo a trend of consumption upgrade, new energy vehicle consumers are demanding more advanced functions and are willing to spend more on higher quality vehicles. Companies that focus their strategy of technological innovation, product and service improvement, and solving key pain points for the consumer will be well positioned to create success within today’s new energy vehicle market.”