Consumers’ demand for new energy vehicle is shifting from policy driven to individual needs driven; gasoline-electric hybrid cars have more demands and large potential in the future five years; New energy vehicle owners are young, highly educated, middle-class
Driven by the government’s subsidies, sales of new energy vehicles saw explosive growth last year, this momentum have been maintained in the first half this year. Statistics from China Association of Automobile Manufacturers shows that about 126,000 new energy vehicles were sold in the first five months in 2016, up 134.1% year-on-year. However, according to Nielsen’s latest report, sales growth of new energy car might slow down in latter half this year, as the government cut subsidies and reduced car-purchasing quotas in big cities.
The report also found that with Chinese consumers’ rising awareness of environmental protection and more diversified choices of products, consumer demand for new energy vehicle are shifting from policy-driven to individual demand-driven. At the meantime, gasoline-electric-hybrid vehicles are most sought after among all types of new energy cars.
In order to provide companies with insights of new energy vehicle market and help auto manufacturers make wise decisions in production, sales and marketing, Nielsen and China Association of Automobile Manufacturers jointly released “2016 Chinese Automobile Consumers White Paper”, which offers car dealers and industry experts comprehensive understanding of the landscape and development trend of China’s new energy car industry.
Consumers have showed stronger interest in buying new energy cars year-by-year. According to Nielsen’s report, 14% potential car owners will consider pure electric vehicles, up to 22% will consider plug-in hybrid cars. Consumers’ increasing acceptance of new energy vehicles and awareness of environmental protection will become the driving force of future sales increase.
For those who are actually considering buying new energy vehicles, the most popular type is gasoline-electric hybrid car (50%), followed by plug-in hybrid cars and pure electric cars. This is because gasoline-electric hybrid cars can save car owners the trouble of charging and limited range while still being environmental friendly.
However, the sales situation of gas-electric hybrid cars does not look very good currently, as only about 20,000 were sold during the first four months in 2016, due to the lack of encouraging policies, limited product models and insufficient promotion. However, Nielsen believes that gasoline-electric hybrid cars will dominate the future new energy vehicle market as more types of gas-electric hybrid cars, especially SUV will be launched.
“Both pure electric and hybrid cars are important, but the latter will be the driving force for sales growth within a short period, while pure electric cars, limited by the lack of infrastructure and other factors, still need more time to thrive. But we surely will realize that in the future,” said Dong Yang, vice-president and secretary general of China Association of Automobile Manufacturers.
Besides, larger and more expensive electric cars are becoming popular. Last year, 63% sold pure electric cars are small and compact cars that only cost 50,000 to 80,000 RMB with subsidies. However, research shows that 51% and 53% potential new energy vehicle owners are considering buying medium and large-sized cars. In the future, middle and high-end cars, as well as SUV are going to have larger share in the market.
In terms of purchase motivation, Nielsen found that 42% potential owners consider new energy vehicles for environmental protection reasons, such as low emission. More than 40% for the reason of cost saving, while only 30% for government subsidies. From this we can see that environmental protection has surpassed price and subsidies to become the main driving force for new energy vehicle purchase. According to Nielsen, nearly 33% consumers believe that “new energy vehicles are the future”, thus more consumers will choose them.
However, we can’t ignore the impact of government subsidies. Nearly 50% respondents said that subsidies still matter a lot. A quarter of the consumers will still consider new energy vehicles without subsidies with smart internet services or creative functional design; another 25% respondents don’t think subsidies matter. High security and enough charging infrastructures will raise consumers’ willingness to buy new energy vehicles. Most new energy vehicle dealers believe that, with the development of technology, the cost of new energy vehicles will reduce thus reduced subsidies will not affect vehicle price very much.
Current new energy vehicle owners are mainly middle-level and senior staff in the company or white collars. Most of them are the post-70s generation and have higher income than average potential buyers. More than half of (52%) the current owners aged from 31 to 40, the average is 35. The average monthly household income of 87% of them are higher than 10,000 RMB, the average is 30,000 RMB, much higher than that of potential buyers.
Among those potential new energy vehicle owners, post-80s account for more than 50%. Most of them are considering buying their first car. What’s more, Nielsen found that more women are considering buying new energy vehicles, as 32% potential owners are female. More than 70% of the potential owners are married and have children; 74% have a bachelor degree and their average monthly household income is higher than 10,000 RMB. These young people, with higher education and income, will become the consumer base for new energy vehicles.
Further analysis found that customers who are willing to buy gas-electric hybrid cars are younger. They earn more and females account for larger percentage. However, pure electric car buyers usually live in first-tier cities and like to lead the fashion.
People from different tiers of cities have different preferences for new energy vehicles. More first-tier city consumers consider purchasing less popular car types like coupe/sports car and MPV; five-seat and seven-seat SUV are more popular in second tier cities; most consumers in third or fourth tier cities still prefer traditional
In terms of different types of new energy vehicles, customers who prefer plug-in hybrid cars also prefer sedans; those who prefer gas-electric hybrid cars tend to choose SUV while pure electric car lovers would like to buy hatchbacks.
In recent years, not only traditional auto manufacturers are entering new energy vehicle market, many internet companies also invested a lot in this industry. According to Nielsen, customers are quite open to new energy vehicles made by internet companies. Nearly 60% people who consider buying new energy vehicles will consider domestic internet-company-made cars, while more than 50% look forward to cars produced by international internet companies.
The diverse and customized demands for new energy vehicles show that, Chinese consumers are becoming more rational and open in terms of car purchase. This brings a challenge to auto manufactures: whether they should stick to simplicity and pursue a super car that can provide super experience, or meet consumers’ diverse demands and provide multiple choices. This question used to trouble the mobile market and now it is auto’s turn to face it.
“In my opinion, a successful product should be ‘relevant, long-live and unique’ to customers. It’s time for new energy vehicle companies to be creative. I believe that the need for competitive and quality products will only be growing,” said Yan Xuan, the president of Nielsen Greater China.
This January, five ministries released New Energy Vehicle Charging Infrastructure Incentives. After that, more and more new energy vehicle companies shift their focus from the eight cities that have car-purchase restrictions to heavily polluted regions as well as the central region. Where are the major markets for new energy vehicles in the future?
Based on 31 factors including population density, economic growth, citizen income, expenditure, housing, car ownership etc, Nielsen predicted the potential of 286 cities in the next 10 years, among which five kinds of cities have impressive car ownership and demands thus would be the most promising market for new energy vehicles and smart vehicles. These five kinds include mega cities (Beijing, Chongqing, Guangzhou, Shanghai, Shenzhen, Tianjin), developed cities (Quanzhou, Suzhou, Ningbo and other 18 cities), satellite cities (Jinhua, Zhuhai, Yangzhou and other 8 cities), industrialized cities (Zhengzhou, Hefei, Dongying and other 27 cities) and region international cities (Kunming, Harbin, Nanning and other 6 cities). All together there are 79 cities in these five groups, including large and medium sized developed cities as well as third and fourth tier cities with geographical advantages. These cities still need to build retail and service networks in many areas.
In the future, diverse sales channels will be used in different levels of cities, including 4S stores, satellite stores, online stores and auto show etc. There will also be diverse solutions for charging.
The most widely used way is to build charging pile at the community or use charging wire. Current car owners also hope to build charging piles at companies, shopping malls and super markets. For hybrid car owners, they hope that the charging spots should be within 24 minutes by car from their home, while pure electric car owners hope the distance should be within 10 minutes by car.