Bright prospects for China’s NEV exports
- We expect China’s new energy vehicle (NEV) exports to be triple to 3.9m units in 2025F, from 1.3m units in 2023F.
- Europe and Southeast Asia remain the largest markets for Chinese NEV manufacturers outside China.
- Chinese EVs have a significant competitive technology edge, which will support their strong shipment growth in EU and SEA in the coming years .
- We reiterate our Overweight call on China’s EV sector as we expect strong NEV sales growth driven by domestic NEV penetration and export growth.
China’s NEV exports expected to reach 3.4m units in 2025F
According to China Association of Automobile Manufacturers (CAAM), China exported a total of 2.14m vehicles and 534k NEVs in 1H23. We expect total vehicle and NEV exports to reach 5.3m and 1.3m, respectively, in 2023F, up 67% and 91% yoy. We forecast China’s NEV exports to jump to 2.5m units (+94%) in 2024F and 3.9m units (+55%) in 2025F, with the help of supportive government policies for the EV market in the EU and Southeast Asia (SEA), and growing brand recognition for Chinese electric vehicles (EVs).
Made in China EVs break into Europe and Southeast Asia
Chinese EVs have been gaining significant market share in the EU, rising from c.1.1% of EU’s total EV market in 2020 to c.5.6% in 1H23 (source: European Commission, EC), thanks to the affordable price of high-quality EVs from BYD, NIO, and XPeng. We estimate Chinese EVs will continue to gain market share in the EU, reaching 15% in 2025F. We believe the EC’s investigation into Chinese government policy benefits that could lead to unfair competition should be brief due to 1) rapid rise in demand for Chinese EVs in the EU, and 2) growing recognition of Chinese-branded EVs. Meanwhile Chinese EV makers are seeing strong growth potential in Thailand, Malaysia, Vietnam, and Indonesia. These countries offer attractive incentives, leading to a boom in EV sales in 2023. According to Counterpoint (an industry market research provider), Chinese brands have captured 75% of the EV market share by sales in SEA in 1H23, a significant increase from 38% in 2022.
China’s BYD gains market share from foreign brands
BYD shipped 242k EV units overseas in 2023, accounting for c.19% of China’s total NEV shipment abroad in 2023. We estimate BYD to grow its exports further in 2024F and 2025F, with deliveries of c.500k and c.800k units, respectively, supported by its upcoming production bases in Thailand and Brazil. BYD sedans and hatchbacks are popular overseas, with the Atto 3 being the top-selling model in SEA in 1H23, according to EV Magazine.
Chinese EVs have a significant competitive technological edge
We note that China’s EV industry has a competitive edge in nearly all aspects of the EV industry value chain due to support from the Chinese government’s massive investment in its EV ecosystem in the past decade. This includes intelligent cockpit, advanced driver assistance system (ADAS), auto semiconductor, battery management system, and electricity management EIC system (battery, electric motor, and electronic control).
Reiterate Overweight on China’s smart EV sector
We reiterate Overweight on China’s smart EV sector due to the country’s sustainable NEV sales growth, driven by continued domestic NEV penetration and export growth. Our sector top picks remain BYD and Li Auto for their robust EV deliveries and EV profit margins. Strong NEV sales in China, and a drop in EV battery material prices are among the sector re-rating catalysts. Sector downside risks include a weak China economic outlook, which will affect consumer sentiment for NEVs, and fierce competition reducing EV manufacturers’ profitability.