This resulted in China regaining its dominance in the global EV market with an overall share of 53%. A massive jump in China’s EV penetration rate from 6% in 2020 to 13% in 2021 is reflective of facilitatory role of the government, adaptability of consumers and a diverse product offering from OEMs.
What differentiates China’s EV market from the others?
In 2021, China recorded the strongest growth in the EV market with around 3.2 million EVs sold. This was an increase of 2 million EV units compared to 2020 which was more than the combined increase of all other regions taken together.
China has come a long way from being regarded as a technological backwater to a hub.
The latest addition to its rising technological prowess is the domestic production of electric vehicles, something that could be regarded as coming organically to American, European or Japanese automakers with their long history of manufacturing cars. However, many homegrown start-ups contributed to EVs sold in China last year, of which the three listed start-ups – XPeng Motors, NIO Inc. and Li Auto Inc. – accounted for nearly 60%.
These companies and many others are giving a stiff competition to western automakers in the EV market in China. Their product offering is unique and differentiated. Supported by internet giants, these start-ups have equipped their EV models with the state of the art EV intelligence systems, converting cars into smart devices on wheels. Some of these start-ups are known to employ more tech gurus than car engineers. They have adopted avant-garde sales & marketing strategies and ditched the dealership model to connect with their customer-base to create a community of consumers who promote their products by word of mouth. With a variety of choice, the EV space is becoming crowded, benefiting consumers the most.
The Chinese EV consumer profile and behavior is notable and distinct from other parts of the world.
- Many Chinese customers can easily adapt to EVs because they have no prior car ownership experience and therefore there is no ‘switching cost’ involved. In contrast, the consumers in the western countries have years of experience driving internal combustion engine cars which makes them slow to change their behavior.
- Chinese consumers are price sensitive and OEMs have responded by offering EVs at various price points.
- These consumers are keen to adopt the latest digital architecture and intelligent functions EVs are equipped with.
- Many enthusiastic Gen Z and millennial buyers take their latest acquisition to another level by personalizing their EVs as a mark of self-expression.
For example, the highly popular and bestselling EV model, Wuling Hongguang MINI EV, is a micro car and lends itself to trendy aftersales transformation. The cult status of Wuling MINI in China shows that there is more than one way to move towards electrification and how automakers need to take the pulse of their consumers.
Undoubtedly, innovative EV start-ups and digitally driven consumers are driving a transformational change towards electrification that was envisioned and initiated by the Chinese government.