New energy vehicles are becoming an unavoidable trend in the future of the automotive industry, both domestically and globally. This is no longer a debate but a widely accepted reality. The growth of new energy vehicles has been significantly supported by government policies, including subsidies that have played a crucial role in promoting electric vehicle adoption. However, as these subsidies gradually phase out, the competitive advantage of domestic brands may face serious challenges.
In recent years, foreign automakers have not actively invested in China’s new energy market. One reason is that the sector was still in its early stages, with a relatively small market size. Additionally, the presence of purchase subsidies for electric vehicles weakened the traditional edge that foreign brands had in the fuel vehicle segment.
But it's important to recognize that the shift toward new energy vehicles is an international consensus. Countries like the United States, the European Union, and Japan have all introduced national strategies to support this transition. Major foreign automakers have also been continuously investing in R&D for electric vehicle technologies, from battery systems to powertrain components.
Take Toyota, for example. It not only leads in hybrid technology but also holds strong positions in fuel cell and lithium battery innovation. Its expertise extends to key subcomponents such as inverters, rotors, electrodes, diaphragms, electrolytes, and PCUs. Toyota plans to launch a fully electric vehicle by 2025, and its modular platform for new energy vehicles will be rolled out in 2018.
By the end of 2017, Toyota adjusted its strategy to embrace the new energy trend more aggressively. It announced that it would stop selling conventional internal combustion engines by 2025. Alongside hybrids and hydrogen fuel cells, it will introduce its first pure electric vehicle. Collaborating with companies like Panasonic, Mazda, and Denso, Toyota aims to develop advanced battery and electric vehicle technologies. A plan to launch its first electric car in China by 2020 signals a growing threat to domestic brands.
Volkswagen is also making significant moves. It has pledged to invest 20 billion euros in new energy vehicle research and development by 2030. Its MEB electric vehicle platform, designed around battery layout, is set to be built in China by 2020. FAW Volkswagen and Shanghai Volkswagen will share the production of new energy models, indicating a major push into the Chinese market.
The double-points policy is forcing foreign automakers to accelerate their new energy vehicle launches in China. As foreign brands update their strategies, the next few years—especially around 2020—will see a surge in new energy product introductions, leading to intense competition by 2025.
While many foreign brands are moving quickly, some are still cautious. Mercedes-Benz and BMW aim for 15%-25% of their sales to come from new energy vehicles by 2025, which is considered aggressive. However, others, like smart, believe that the pace of electrification is still too slow.
It's also worth noting that the global new energy vehicle market is still in its early stages, and the long-term outlook remains uncertain. A gradual and pragmatic approach could help brands navigate both fuel and electric vehicle markets effectively.
From this, two clear trends emerge: most foreign brands are expected to have between 10 to 40 new energy models available in China by 2020. By 2025, hybrid vehicles—including plug-in hybrids—will play a major role in the competition. Toyota, Honda, and Ford are particularly optimistic about the competitiveness of hybrid technology, which is a challenge for domestic brands.
Between 2009 and 2017, China provided nearly 200 billion yuan in subsidies for new energy vehicles. An additional 200 billion is expected over the next three years. These funds have given a strong boost to domestic electric vehicle brands. However, 2020 marks the complete withdrawal of subsidies, which could become a turning point for foreign automakers to re-enter the Chinese market.
Are domestic brands ready? There are still three years to prepare. The coming years will test their ability to compete on a global scale.
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