China’s auto electrification story not all about BEVs
Plug-in hybrids are expected to maintain material market share over the coming decade
The threat to legacy automakers from Chinese EVs is no secret. They are already making waves in their domestic market, while OEMs and policymakers across the globe are exercised with how to defend themselves from an impending onslaught of low-cost Chinese imports.
Yet, Chinese consumers are not yet as all-in on fully electric vehicles as you may have been led to believe. While BEVs make up the lion’s share of new electric vehicle (NEV) sales in China, plug-in hybrids (PHEVs) are also an important segment in the world’s largest auto market.
About 2.1mn BEVs were sold in China the first half of this year, while almost 1mn PHEVs were snapped up in the same period, according to China Passenger Car Association data. The biggest-selling automaker in China, BYD, sold more hybrids in the first half of 2023 than BEVs (631,351 vs. 616,810).
“Battery price has been a barrier to growing consumer demand for electric vehicles due to its impact on the overall vehicle price,” says Florian Eichinger, director of global powertrain forecasting at consultancy S&P Global Mobility. “That led automakers to utilise plug-in hybrid technology — which has smaller battery capacities installed than battery-electric vehicles — to keep costs down while also offering relatively good fuel efficiency.”
While S&P Global Mobility sees BEV dominance growing for the rest of the decade, demand for PHEVs is expected to remain steady.
BEV market share will grow from about 25pc of all passenger vehicles sold in China this year to 58pc in 2030, S&P Global Mobility forecasts show. PHEV share will expand slightly from 10pc to 11pc in the same period, it predicts.
While this may come as welcome news to Japanese automakers, such as Toyota, that have kept faith in hybrid technology and been slower than some to invest in BEVs, they are not likely to be beneficiaries because of their focus on full hybrids, according to Eichinger.
“In contrast to Japanese brands that have dominated the full-hybrid (non-plug-in) market with the Honda IMMD and Toyota THS, mainland Chinese domestic brands have now come to the fore, achieving robust growth of the hybrid market share with their advanced dedicated plug-in-hybrid technology,” he says.
Toyota reported a 26pc decline in China profits amid better-than-expected Q2 results that were helped by a weaker yen and strong sales in the US. The competitive environment in China is becoming “increasingly severe” due to the rise of local brands, it says.
“For the medium term, PHEV technology is expected to be a bridging solution for BEVs, while BEVs remain mostly expensive and charging options are limited to certain consumers, or specific areas,” says Eichinger.
“The long-term trend, however, is in battery-electric vehicles. And while established automakers have taken a more gradual approach to introducing BEVs, new entrants have focused mainly on battery-electric technology.”