China needs stronger gov’t push to meet EV goals following disappointing sales: UOB

Made in China electric cars will likely continue to gain a wider audience overseas.

The Chinese government has to lay out stronger stimulus measures to prop up sales of electric vehicles (EV) and reach its target for the year after sales fell sharply in early July, according to UOB Kay Hian.

UOB analyst Ken Lee has maintained his “underweight” rating on China’s auto sector on expectations of declining car sales and heightened price wars in the combustion engine segment. Lee said the EV market will remain buoyant, however, as sales are expected to deliver a faster compound annual growth rate of 30% between 2023 and 2025.

“We keep our estimates for China’s 2023 (passenger vehicle) wholesale shipment and passenger EV wholesale shipment at 23.8m units (1% yoy growth) and 8.5m units (30% yoy growth) respectively… based on the expected increase in policy stimulus and burgeoning export,” he said in a note dated 14 July.

“We believe the government will need to put forth stronger stimulus measures to boost EV sales in China and achieve their target,” he added.

Overall passenger vehicle wholesale shipment fell by 9% from a year ago to 337,000 units recorded in 1-9 July, Lee said citing data from China Passenger Car Association. Of which, EV wholesale shipment came in lower than expected with 115,000 units in wholesale shipment, down 30% year on year during the same period.

Retail sales also disappointed with all-passenger car shipment slipping by 7% from the year prior while EV sales fell 13%. Despite the dip, EV penetration rate still topped records at 36.9% in terms of retail sales back home, while made in China electric cars continued to gain popularity abroad.

Lee sees electric car exports to reach 1.2m units and account for 14% of the projected EV wholesale shipment for the entire 2023. This, following a strong start with a 160% surge in export volume for the first half of the year at 534,000 units.

Reduced battery material prices are expected to benefit firms involved in the midstream portion of the EV supply chain like battery cell and module manufacturing, as well as those in the downstream, such as car assembly lines.

The brokerage firm picked BYD as among the outperformers in the Chinese auto sector considering the Shenzhen-based car maker’s position to ride on the EV market's exponential growth.

EV manufacturer Li Auto Inc., and battery maker Contemporary Amperex Technology Co., (CATL) are also poised to benefit from the sector’s boom.

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