China's NEV penetration to hit 40pc in 2024: CAAM

China's new energy vehicle (NEVs) penetration will likely rise to 40pc by the end of 2024, according to the China Association of Automobile Manufacturers (CAAM).

The number of users that intend to buy an NEV is already on par with those that want to purchase internal combustion engine (ICE) vehicles, CAAM said.

Nearly 30pc of users, surveyed by CAAM and domestic automotive information service DCar, intend to trade in their old vehicles for a NEV in a year. And over 60pc of car users deem it "very necessary" to trade in their old vehicles for NEVs, CAAM added.

China's NEV penetration has been increasing in the past few years, driven by the country's decarbonisation plans and supportive policies to accelerate EV development. These measures, such as boosting EV production and spurring battery technological innovations, are regarded as China's efforts to catch up with foreign competitors in the global automotive industry given its slowing development in ICE vehicles, according to industry participants.

China's NEV penetration reached 26pc of the country's total automotive sales in 2022, rising to 31.6pc in 2023, 32.8pc in March, 36pc in April and 32.4pc over January-April. It aims to raise the share of NEV in its total vehicle sales to 45pc by 2027, according to a plan issued by the government earlier this year.

But the industry is facing a slowdown in sales growth because of some challenges. CAAM estimates the country's NEV sales will rise to 11.5mn units in 2024, up by 21pc from 9.495mn in 2023. This growth is slower than the 38pc rise from 2022 to 2023.

One of the main reasons why many potential buyers have not opted to buy an NEV is because of its shorter driving range compared with gasoline cars. CAAM expects that more than 40pc of potential NEV buyers prefer to buy a hybrid car, compared with 31pc for battery EVs. Over 60pc of potential battery EV buyers want a car with more than 500km of driving range, including 20pc of buyers requiring 700-1,000km.

CAAM's report also shows that most consumers can afford and favour NEVs priced in the 100,000-200,000 yuan ($13,801-27,603) range. How to provide competitively-priced vehicles is a subject that requires long-term research from EV manufacturers, CAAM said.

China has introduced a series of new supportive measures recently to drive its NEV sales growth, including a plan to remove purchase restrictions during 2024-25. But some industry participants are not sure that this plan is applicable in major cities particularly Beijing, which has severe traffic congestion. Beijing has the largest number of motor vehicles in China, with a vehicle population of nearly 7.6mn units as of the end of 2023.

China's BEV and PHEV sales during 2022-24