The new policy subsidy policy is introduced, and the cost reduction of new energy vehicles is the key

Clear policy orientation, new energy vehicle sales will continue to grow

In February 2018, the Ministry of Finance issued a new subsidy policy for new energy vehicles in 2018. The new subsidy standards and technical requirements were announced in the notice, and the transition period was set before June 11. According to the data of the “New Energy Vehicle Industry Market Prospect and Investment Strategic Planning Analysis Report” released by the Prospective Industry Research Institute, the industry in the first quarter of 2018 ushered in a market, and the production and sales volume of new energy vehicles in March was 67,900. 67,800 vehicles, up 105.0% and 117.4% respectively, are expected to continue to grow at a high rate in the second quarter. On April 1, 2018, China's auto industry double point policy will be officially implemented, covering the largest part of the domestic passenger car production enterprises (annual production of more than 30,000 vehicles) and imported passenger car supply enterprises. The double-point system will force passenger car manufacturers to increase the development of energy-saving fuel vehicles and new energy vehicles. It is expected that more and more new energy vehicles will be introduced to the market in the second half of 2018, and new energy vehicles will be produced and sold in 2020. The goal of 2 million vehicles is expected to be achieved smoothly.

Monthly sales of new energy vehicles and year-on-year growth in March 2017-2018 (vehicle)

The new policy subsidy policy is introduced, and the cost reduction of new energy vehicles is the key

Policy subsidies have changed and new energy auto companies are facing challenges

In 2017, the net profit of listed companies of new energy vehicles generally decreased significantly from the previous year. According to the report of the Prospective Industry Research Institute, due to the multiple factors such as the subsidy of new energy vehicles and the large provision of bad debts of accounts receivable by some auto companies, the overall performance of the new energy auto sector in 2017 was weak, Ankai Bus. The net profit of Haima Automobile, Foton Motor, Zhongtong Bus, Jianghuai Automobile and Great Wall Motor all fell by more than 50%. Many new energy vehicle manufacturers such as Ankai Bus and Haima Automobile even suffered losses in 2017. With the subsidy funds for new energy auto companies in place in 2016 and 2017, the cash flow and net profit indicators of related companies will be significantly improved.

In recent years, the threshold for subsidy policy has gradually increased. Due to various factors, the completion rate of passenger car subsidies in 2016 was poor. In the models declared in 2017, some models of many car companies such as BAIC and BYD did not pass the subsidy because they did not access the national regulatory platform. Since 2018, the momentum of China's new energy vehicle development is still relatively good, but as subsidies decline, the profits of car companies will also be affected.

Policy impact, there is an urgent need to reduce costs

It is worth noting that although new energy vehicles have made progress in terms of technology and cruising range, they still have immature places, which is mainly the unpredictability of policies.

Under the role of policy baton, high cruising range has become an important direction for the development of various car companies. The subsidy policy has more support for models with a cruising range of more than 300km. Therefore, the cruising range of new energy vehicles has been effectively improved in recent years. At present, the models of most enterprises can generally reach 300km.

For enterprises, facing subsidies and reducing costs is the most critical.

As new energy auto companies need a lot of money in the initial stage of manufacturing costs, procurement costs, mold opening, etc., the state gives certain policy subsidies to support. However, in order to better promote the healthy development of the new energy automobile industry, the subsidy policy must be gradually reduced in a limited time.

On the other hand, new energy vehicles are much more expensive than fuel vehicles, mainly because of higher battery costs. 50% of the cost of electric vehicles purchased by customers comes from batteries. The value of this battery is 20% to 30% in the life cycle of 3 to 5 years. After the end of the usage period, the battery is worth about 10%. That is to say, only about 30% is used, and 70% of the battery cost is wasted. From this space, the separation of the value of the vehicle power or the change of the battery usage mode can also greatly reduce the cost of the car.

Although new energy subsidies will be cancelled after 2020, the country's support for new energy vehicles will continue. For example, new car purchase tax incentives will tend to new energy vehicles. Non-cash subsidies cannot be ignored, including the switch to a restricted city license. Local subsidies are best placed in the use of new energy vehicles and in the construction of public charging piles.

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