Sandalwood insight: China Passenger Car Sector 2023 Review and 2024 Outlook

2023 Review

Sandalwood Auto Insurance data showed in 2023 a total of 21.6m passenger cars were delivered in China, +10% y/y compared to 19.6m units in 2022.

Looking into monthly deliveries: 2023 started with a weak Jan due to the hangover effect from the year-end sales push last year, as well as the impact of the Spring Festival. However, it stepped up month by month and stabilized at a robust level from Jun to Nov, then picked up notably in Dec on a strong year-end sales push, finishing at a decent y/y growth.
By energy type, 7.3m New Energy Vehicles (NEV) were delivered in 2023, +44% y/y, vs. Internal Combustion Engine (ICE)’s -2% y/y in 2023, i.e. the growth in the passenger car sector is now purely from NEVs, while ICEs start to decline.

The NEV penetration rate in 2023 reached 34%, increasing from 26% in 2022, with the highest point at 39% in Nov.

Within NEV, Plug-in Hybrid Electric Vehicle (PHEV) and Extended Range Electric Vehicle (EREV) well outperformed Battery Electric Vehicle (BEV), thanks to their lower bases and advantage in relieving range anxiety.
Tier 1 cities had the highest NEV penetration rate but a slowing growth rate, while the penetration rate in Tier 2 and below cities grew faster.

Self-developed brands improved their market share in the past two years, also driven by the NEV transformation.

In 2023, international ICE brands are the market share losers, especially Japanese/European/American mid-range brands lost the most, i.e. Volkswagen, Toyota, Honda, Nissan, and Buick.
On the other hand, winners are mainly domestic NEV players, e.g. BYD surpassed Volkswagen to be the No.1 in China passenger car market. This is the first time that a self-develop brand reached that position - a milestone of the rise of NEV.

*BYD includes BYD, Denza, Yangwang, and Fang Cheng Bao brands.

**Chery includes Chery and Chery EV.

Within the NEV sector

Outperforming brands include BYD*, Aion, Li Auto, and Changan Deepal; they grew faster than overall sector and took more shares from the market in 2023.
Underperforming brands include Wuling, Changan, Volkswagen, Xpeng, Leapmotor, Chery**, and Neta; they grew slower than overall sector and lost shares to competitors.
Other key brands like Tesla, Geometry, Nio, Zeeker, Aito overall grew with the NEV market.

2024 Outlook

Considering the high base in 2023, we anticipate the overall passenger vehicles to grow +3-5% y/y to 22.2-22.6m units, and the penetration rate of NEV in 2024 to further improve to 40-42%. This implies the growth of NEV deliveries in 2024 to slow down to +21-30% y/y.

The competitive landscape in 2024 is expected to become more intense due to the ongoing price war. The major players will place more emphasis on intelligence, with the further involvement of Huawei and the entry of Xiaomi. Amidst intensified competition in the NEV sector and weak consumer sentiment in China, the key to standing out in the crowded market is to provide more intelligent, competitive, and affordable products.

Summary of Major NEV Players’ 2023 Target Completion Rate and 2024 Target：

If you are interested in the in-depth analysis by brands and the detailed data, please contact service@sandalwoodadvisors.com to retrieve the full report and the China Auto Insurance data.