[Analysis by SMM] New Energy Vehicles' Second Growth Curve: Autobots, Transform

The new energy vehicle industry is undergoing a phase of superficial prosperity but intrinsic transition. Data from 2025 show that sales are still growing, the penetration rate is still increasing, and the industry chain scale is still expanding; however, from the perspective of industrial behavior and enterprise strategies, the growth logic has clearly changed. The normalization of price wars, the cooling of technology narratives, and the downward revision of capital return expectations do not signify industry decline but indicate that the underlying assumptions supporting the first round of rapid growth are loosening. To understand the "second growth curve" of new energy vehicles, one must first acknowledge a fact: the first growth curve is not a natural continuation but is being structurally weakened.

The essence of the first growth curve is the systematic replacement of internal combustion engine vehicles by new energy vehicles. This replacement maintained a steep slope over a long period because it simultaneously satisfied three conditions: policy-side provision of explicit or implicit price compensation; technology-side continuous improvement of core pain points (driving range, cost, reliability); and demand-side willingness to pay a premium for the "new energy attribute" or tolerate inconveniences. However, as the penetration rate enters the medium-to-high range, these three factors began to degrade simultaneously. Policy subsidies gradually phased out, and price mechanisms returned to the market; technological progress shifted from "experience leaps" to "marginal optimizations"; and consumer perception of new energy vehicles transformed from "symbols of technological advancement" to "ordinary durable goods." This means that new energy vehicles are losing their "privileged growth environment" and entering a stage of full competition with internal combustion engine vehicles and even among their peers.

At this stage, maintaining the growth slope solely by increasing the penetration rate has become significantly more difficult. This is because the remaining demand for internal combustion engine vehicles that have not been replaced often corresponds to more complex usage scenarios: long-distance, high-frequency, high-uncertainty, or extreme sensitivity to price and reliability. These demands are not impossible for new energy vehicles to cover, but doing so requires higher system costs or greater economic sacrifices. For this reason, the first growth curve has not "ended"; rather, it no longer dictates the overall pace of the industry and is beginning to give way to more complex growth mechanisms.

Against this backdrop, the second growth curve is often misunderstood as "finding new sources of sales," such as exports, emerging markets, or lower-tier markets. However, in-depth analysis reveals that these directions are more extensions of the first growth logic rather than a true "curve switch." Taking exports as an example, while the penetration rate of new energy vehicles in overseas markets is indeed lower, providing room for sales expansion, the growth essence still relies on the logic of replacing internal combustion engine vehicles and has not altered the value creation method of new energy vehicles. More importantly, exports introduced new constraint variables: trade barriers, localization costs, policy uncertainties, and exchange rate risks. These factors render export growth characterized by "high elasticity, low certainty," making it difficult to become a stable, replicable long-term growth curve.

Similarly, the downward shift in price segments and the volume expansion of low-priced car models, while constituting growth in statistical terms, do not elevate the industry's growth quality; instead, they amplify competitive intensity and profit pressure. Growth in lower-tier markets often accompanies a decline in per-unit value, compression of gross margins, and convergence of technical pathways, resulting more in a redistribution within the industry rather than an expansion of the overall value space. Such growth can delay the industry's growth slowdown but hardly constitutes the structural leap required by a "second curve."

The truly noteworthy second growth curve does not stem from "more of the same demand" but from changes in the demand function itself. In other words, the growth of new energy vehicles no longer solely depends on "to whom to sell" but increasingly depends on "why there is a need." The most intuitive manifestation of this change is the evident divergence in technical routes. In the first growth phase, the industry formed a highly unified technical direction around a single goal: longer driving range, higher energy density, and faster charging. At the current stage, the weight differences in cost, safety, life cycle, and refueling methods across various usage scenarios rapidly amplify, forcing technical routes to shift from a "unified solution" to "coexistence of multiple solutions."

The value of routes such as sodium-ion batteries, LMFP, PHEV, and extended-range lies not in whether they represent "next-generation technology" but in how they redefine the applicable boundaries of new energy vehicles under different constraints. This growth is not achieved by selling higher-specification products to existing consumers but by enabling new energy vehicles to enter demand sets previously unreachable due to economic or reliability limitations. It corresponds to the extensive expansion of the demand space rather than a linear increase in the penetration rate.

Another more concealed but potentially more significant long-term second growth path lies in the change in the per-unit value structure. When sales growth slows, the industry's growth logic often shifts from "selling more" to "each unit creating more and more stable value." Energy services, software functions, data, and full life cycle management may not become primary revenue sources in the short term, but they are altering the commercial attributes of new energy vehicles, gradually transforming them from one-time delivered hardware products into platforms for long-term services and value release. This transformation does not significantly boost the industry's short-term growth rate but can enhance its anti-cyclical capability and cash flow stability, thereby constituting a "growth curve" in another sense.

Furthermore, expanding the perspective from passenger vehicles to the system level reveals that new energy vehicles possess clearer economic logic in areas such as commercial vehicles, electrified logistics, and vehicle-grid coordination. These scenarios are far more sensitive to life cycle costs, energy efficiency, and system reliability than to the pursuit of performance limits, and they are less influenced by consumer sentiment and brand preferences. In these domains, new energy vehicles no longer rely primarily on policy incentives but are adopted due to clear economic advantages, resulting in a more solid foundation for growth.

Overall, the second growth curve for new energy vehicles is not a "re-acceleration" but more akin to an "engine swap." It is no longer driven solely by the penetration rate but is shaped by scenario diversification, shifts in value structure, and the reshaping of system constraints. While the slope of this curve may be less steep, it determines whether the industry can transition from high growth to sustainable development. The true watershed lies not in how much sales can still increase, but in whether new energy vehicles can establish a stable, self-consistent value creation logic after the depletion of policy and technological dividends.

If the first growth curve addressed "whether new energy vehicles can be accepted," the second growth curve actually answers another question: as vehicles evolve from one-time finished products into continuously evolving systems, how will the industry’s value anchor shift? In this sense, future new energy vehicles will resemble "Transformers" more than traditional vehicle products—hardware forms remain relatively stable, while functionality, experience, and capability boundaries can be continuously reconfigured.

The core of this shift lies not in flashy feature stacking but in a fundamental change in the definition of "product completeness." Traditional automotive logic follows "completion upon delivery," where most value is realized at the point of sale; new energy vehicles, however, are gradually shifting toward "delivery as just the starting point," with vehicle capabilities evolving through system upgrades, feature unlocks, and experience enhancements during use. This model has begun to emerge in intelligent cockpits, assisted driving, and energy management systems, but its true industrial significance remains largely unpriced.

When vehicles begin to gain new experiences continuously through software and system updates, much like smartphones, the competitive focus shifts from "what the vehicle offers now" to "what the vehicle can become in the future." This implies that competition among automakers is transitioning from comparing specifications of individual car models to contending over platform capabilities, software architecture, and system scalability. Whoever can deliver "perceptible changes" to users at a lower cost and higher frequency will be able to continuously create incremental value in a saturated market.

From the user side, this shift is quietly transforming the way people "engage with cars." In the past, generational upgrades meant buying a new vehicle; under the new model, upgrades increasingly occur at the system level. Advancements in assisted driving capabilities, redesigns of cabin interaction logic, optimizations in energy consumption and driving range management strategies, and even adjustments to vehicle character and driving experience can now be achieved through software. This shifts the vehicle from a "durable consumer good" toward a "long-term-use smart terminal," transforming the relationship between user and vehicle from a one-time transaction into an ongoing interaction.

Once this logic takes hold, the second growth curve for new energy vehicles will no longer rely entirely on sales volume but will instead depend on extending and deepening the lifecycle value per vehicle. Even during periods of slowing sales growth, automakers can continue to unlock value through system upgrades, feature subscriptions, and service extensions. This growth is not reflected in the traditional sense of "selling more units" but in "the same vehicle creating different value over time."

Of course, such "smartphone-like cars" are not without constraints. Unlike consumer electronics, automobiles are bound by safety requirements, regulatory frameworks, and hardware longevity, which dictate that software evolution must prioritize stability over radical disruption. This implies that the players with true potential for a second growth curve are not those merely promoting "software-defined vehicles" as a concept, but system-oriented enterprises capable of balancing safety, reliability, and sustainable iteration.

More importantly, this model has profound implications for the industry chain. As vehicle value shifts toward systems and software, the importance of batteries, electronic and electrical architecture, computing platforms, and vehicle integration capabilities will be recalibrated. Hardware is no longer just a one-time configuration but a carrier for future capability upgrades; material and structural design must not only meet initial specifications but also allow room for long-term evolution. This change is reshaping the technological choices and cost allocation logic of new energy vehicles from the ground up.

From this perspective, the second growth curve for new energy vehicles is not simply about "making cars smarter," but about transforming the "car" from a static product into a sustainably evolving system. As "car engagement" begins to revolve around experience updates—much like "using a smartphone"—the industry’s growth logic will gradually shift from being sales-driven to being driven by system capabilities and long-term value. This curve will not progress rapidly, but once it takes shape, its impact on the industry landscape may be far more profound than a single technological breakthrough.

Yang Le SMM Lithium Battery Analyst +86 13916526348