[SMM Analysis] the government work report highlights the need for patience in promoting new energy vehicles under the impact of the recession.

SMM5: at 9: 00 a.m. on May 22, the third session of the 13th National people's Congress opened in the Great Hall of the people in Beijing. Premier Li Keqiang of the State Council delivered a report on the work of the government. As a pillar industry of China's national economy, the automobile industry has been mentioned many times in this report, and Premier Li Keqiang pointed out the direction of the development of the automobile industry from a macro-economic perspective.

In this year's government work report, the prime minister mentioned that he will focus on supporting "two new and one heavy" construction that not only promotes consumption to benefit the people's livelihood, but also adjusts the structure to increase stamina, strengthen the construction of new infrastructure, develop a new generation of information networks, expand 5G applications, build charging piles, promote new energy vehicles, stimulate new consumer demand, and promote industrial upgrading.

On the one hand, due to the poor macroeconomic environment in 2019, and on the other hand, there is a large decline in subsidies for new energy vehicles in 2019, which has had a certain impact on the new energy vehicle industry. Data show that since the subsidies declined in June last year (the end of the transition period), the production and sales of new energy vehicles in China have declined year on year. Due to the impact of the Xinguan pneumonia epidemic this year, a total of 53000 vehicles were sold in the first quarter, a decrease of 56.4 percent. At the same time, when the market was full of expectations for April, it did not erupt.

Moderate policies escort the "products" of the national strategy

On April 23 this year, the Ministry of Finance, in conjunction with the Ministry of Industry and Information Technology, the Ministry of Science and Technology and the National Development and Reform Commission, formally issued the Circular on improving the Financial subsidy Policy for the Promotion and Application of New Energy vehicles (hereinafter referred to as the notice). At this point, the executive meeting of the State Council clearly decided to extend the policy of subsidies for the purchase of new energy vehicles and exemption from purchase tax for two years.

At the same time, the development of new energy vehicles was not mentioned in the government work report only when the market situation was bad in the past two years. In the government reports over the past decade or so, it will be highlighted in the report documents. New energy vehicles are regarded as an important part of the national energy substitution. In today's complex environment of the world oil market, energy substitution is an important part of the national strategy. The development of new energy vehicles is of great significance, and the new energy vehicle market is also considered to be a promising industry for a long time in the future.

Among them, in 2018, the government work report mentioned the full liberalization of the general manufacturing industry and the expansion of telecommunications, health care, education, pension, new energy vehicles and other fields. Promote the development of integrated circuits, fifth-generation mobile communications, aircraft engines, new energy vehicles, new materials and other industries. We will extend the preferential policy for the purchase of new energy vehicles for another three years, and completely abolish the policy of restricting the relocation of used cars. In the context of subsidizing the deterioration of the environment, the government still actively releases favorable policies, which shows the government's determination to promote new energy vehicles.

The wave of new energy requires more market participation, not just China.

The problems of energy substitution and environmental protection also seem to be the problems that human beings need to face together. Not only China has made great efforts to promote the use of new energy vehicles, Europe and the United States and other established developed countries have gradually realized and promoted the use of clean energy-powered vehicles after years of transfer of their own high-energy industries. It is reported that the European Union is considering a number of policies to encourage car companies to produce clean energy vehicles and invest in electric vehicle infrastructure. The latest incentives include a proposal to establish an EU-wide clean car procurement mechanism, which is expected to reach 20 billion euros in the next two years, and a planned direction of 40 billion to 60 billion euros for clean car investment in powertrain. The European Union is prepared to double its investment in charging systems to build 2 million public charging piles by 2025; and plans to exempt zero-emission models from value-added tax.

At the same time, consumers in countries with low oil prices in the United States have also begun to fall in love with new energy vehicles like Tesla. With the acceptance of the market, Tesla's cumulative sales have recently exceeded 1 million. It is of great significance for a new automobile manufacturing enterprise that has been established for more than a decade, which means that the market recognizes new energy vehicles, and the rapid growth of sales also indicates the great potential of the consumer market.

In the United States, even companies like GM, which are keen to produce and use high-engine cars, are beginning to realize the importance of switching to new energy vehicles, perhaps for corporate transformation, but new energy has become a big trend. Recently, it has been reported that GM will start construction of a battery plant in LG Chemical in Lodstown, Ohio. The factory, with an investment of US $2.3 billion, will use batteries supplied by the new factory from the 2022 GMC HUMMER EV electric full-size pickup to the new Chevrolet Bolt. It is expected to start production in 2022, and the planned annual production capacity is 30GWh.After 2023, the production capacity will reach its peak. Japan and South Korea battery enterprises to compete in Europe and the United States, but also for the future domestic battery enterprises to go abroad to provide experience.

Under the long-term planning, the new energy vehicle market needs to wait patiently.

Earlier, the "Development Plan of New Energy vehicle Industry (2021-2035)" (draft for soliciting opinions) drafted by the Ministry of Industry and Information Technology and relevant departments mentioned that in 2025, new vehicle sales of new energy vehicles in China will account for about 25%. With the adjustment of the macro-economy, the rotation of the industry cycle, and the continuous consolidation of China's export-oriented trade in the global position, the production and sales of new energy vehicles are expected to improve in the future.

With the deepening of the development of the Internet industry, self-driving cars are expected to achieve rapid growth. On May 22nd, IDC released the IDC Global Intelligent Network Automobile Forecast report, predicting that the annual compound growth rate of intelligent network-connected vehicle shipments in the next five years will be 16.8%, and the intelligent network-connected automobile market will usher in rapid development. Among them, the shipments of vehicles that can be connected to three-party service platforms and Global Intelligent Network vehicles equipped with embedded mobile networks reached 51.1 million in 2019, an increase of 45.4 percent over the same period last year. IDC predicts that global smart car shipments will further increase to 76.3 million by 2023, an annual growth rate of 9.3%.

In the plan drafted by the Ministry of Industry and Information Technology, it is estimated that the proportion of new car sales of intelligent network-connected cars will reach 30% from 2021 to 2035, and highly self-driving intelligent network-connected vehicles will be commercialized in limited areas and specific scenarios.

At present, with the development of technology, consumers' demand and requirements for the mileage of new energy vehicles are getting higher and higher, and mileage anxiety is expected to be alleviated gradually in the future. According to the current domestic situation, Honeycomb Energy recently released a L6 thin sheet cobalt-free long-cell lithium battery with an energy density of 240Wh/kg (590Wh/L). The new car is expected to achieve a range of 880km (officially unspecified standard, presumed as NEDC standard), and the product is expected to be launched to the market in the second half of next year. And this figure also far exceeds the mileage of the existing models in the market, and it still has a great advantage if it can be launched on time. The increase of battery energy density will correspondingly promote the production and operation of enterprises in the upper reaches of the industrial chain. According to SMM, the demand for lithium-ion batteries in China's new energy vehicle industry will exceed 380Gwh by 2025. The mutual promotion of technology between industrial chains not only brings benefits to the short-term production and operation of enterprises, but also promotes the strength and sustainable development of enterprises in the industry in the long run.

Although macroeconomic development has encountered varying degrees of difficulties in recent years, the government is still actively promoting the development of the industry, and new energy vehicles will still be optimistic in the future. The outbreak of this epidemic has directly promoted the early arrival of the global economic recession. at present, the domestic epidemic has basically been brought under control, but there is still great uncertainty. With the continuous implementation of the policy of expanding domestic demand to stimulate new vitality of infrastructure, the domestic economy has been improving for a long time, and the new energy vehicle industry with strong policy support is expected to usher in a new inflection point.

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