[SMM Analysis] Three Underlying Logics to Understand the 2026 New Energy Vehicle Market

If you have looked at the car sales charts over the past two years, you would have noticed a striking change: the once-dominant joint-venture internal combustion engine vehicles are being replaced by a string of unfamiliar domestic NEV names. In April this year, the domestic retail penetration rate of passenger NEVs surpassed the 60% mark for the first time. Against the backdrop that over 6 out of every 10 new cars sold are now electrified, the shift from ICE vehicles to NEVs is likely becoming the broader industry trend.

But behind the excitement, ordinary people are more confused: with prices falling again and again, is it that technology has lost its value, or is competition just too fierce? With all the talk of "smart driving" and "800V", which features are truly practical and which are gimmicks?

To answer these questions, you don't need to understand complex battery chemistry formulas, nor do you need to study financial reports. We just need to refocus on three fundamental industry logics. Once these three points are clarified, the broad trend will become clear.

Logic 1: Why Cars Must Be Electrified

Many people attribute the widespread adoption of NEVs to "policy subsidies" or "license plate advantages". These did indeed provide an early boost to the industry, but now, the more fundamental reason isa dual drive from energy security and experience upgrades.

From a national perspective, China's dependence on foreign oil has long exceeded 70%, while electricity comes from diverse sources (coal, hydropower, wind, solar, nuclear). Replacing imported oil with self-sufficient electricity is a strategic choice for a mature industrial power. Therefore, electrification is not a passing fad but a set direction spanning decades.

In terms of user experience, electric drive delivers a level of smoothness, quietness, and instant response that internal combustion engine vehicles in the same price range struggle to match. This experiential gap, rooted in the drivetrain, means that many people find it hard to go back to driving an ICE vehicle once they have driven an NEV.

So, electrification is no longer a question of "whether or not", but rather "how fast versus how slow".

Logic 2: Why Are Cars Getting Cheaper?

People often ask: "Do these price cuts mean quality is being compromised?" But in reality, the decline in prices is essentially a natural outcome of the industry chain's maturity. The main reasons include the following:

• Raw material price normalization:Spot lithium carbonate prices fell from a peak of nearly 600,000 yuan per mt in 2022 to around 150,000 yuan per mt currently, directly contributing to lower battery costs;

• Process innovation:The popularization of integrated die-casting has reduced auto body manufacturing time by over 50%;

• Economies of scale:Annual sales of passenger NEVs in China have already reached the 10-million-unit level, significantly diluting the high R&D costs.

Just like LCD TVs, which fell from tens of thousands to thousands, not because quality worsened but because the industry mastered large-scale manufacturing. A pragmatic judgment is that the era of buying a good car at a bargain price has indeed begun. From the current industry situation, producers are locked in fierce competition, and for consumers who are about to buy a new car, whether to seize the opportunity to "take advantage" of NEVs should depend on their own driving radius.

Logic 3: Why All the Talk About "Intelligence"?

Electrification first answers the question of "where does the power come from", but intelligence redefines the "user experience". This is the most fundamental difference between NEVs and internal combustion engine vehicles.

The core value of traditional ICE vehicles—engine, transmission, chassis—is set at the factory (except for hardware modifications) with little room for subsequent changes. Today's smart NEVs, however, are shifting their core value towardsoftware and data iteration. After purchase, the car can be upgraded over the network to optimize driving range logic, improve driver assistance, and even change the entire in-car interface—something unimaginable before.

As for driver assistance, the situation in 2026 is already quite clear. The penetration rate of Level 2 driver assistance in NEVs exceeds 50%, and the installation rate for Level 2+ has risen to nearly 30%. Driver assistance has become a standard feature in NEVs.

In specific scenarios:

Highway NOA is already very mature. In the 100,000-150,000 yuan price range, there are over 70 models equipped with highway pilot assist, and some mainstream brands have completed multiple rounds of OTA upgrades. After setting a destination on the highway, the system can autonomously change lanes, overtake, and navigate on/off ramps, and this experience is now quite stable.

Urban NOA has also been rapidly rolling out over the past two years. A few years ago, it was only available on models priced above 300,000 yuan, but now, some NEV model in the 140,000-yuan range can run urban NOA. One brand has even equipped an 110,000-yuan model with urban NOA.

To be honest, though urban NOA is rapidly popularizing, the actual number of users isn't as high as one might think. Data shows that the activation rate for urban NOA is less than 30%—many people have the feature in their cars but rarely use it daily. On one hand, urban road conditions are indeed complex, and the system occasionally still hesitates or requires human takeover; on the other hand, it shows that there is still some way to go from "having this feature" to "truly integrating it into everyday driving scenarios."

Here's a car-buying tip: test how responsive the infotainment system is, whether it can handle multiple tasks simultaneously, how accurate the navigation is, and how well the voice recognition understands natural speech. These fundamental experiences that you'll use every day are the key factors in determining whether the car is "worth it" for you.

Summary

Looking back at these three logics:

Automotive electrification is driven by energy structure and physical experience, making it an irresistible trend. Price declines are a natural outcome of industry maturity, so we should treat them rationally. Intelligence is the major direction of value shift, but we need to distinguish between what already delivers qualitative improvements to the driving and riding experience now and what still needs time to mature.

Technology is still advancing, and the market is still changing. But by returning to your true needs—how convenient is charging, how many kilometers do you commute daily, what is your car purchase budget—the answer is often clearer than you think.

SMM New Energy Research, Lithium Battery End-User Analyst, Fu Linqi

021-51558494