A Brief Analysis of Reasons behind Cyclical Change in Sales of New Energy Vehicles

SHANGHAI, Apr 6 (SMM) - Cyclical change is an outstanding feature of new energy vehicle (NEV) production and sales in view of the annual data. For example, the NEV sales in the final quarter of a year usually surpass those in the other three quarters, which is also called the tail-end market, or, the NEV sales often surge at the end of each quarter. What are the explanations for all this?

SMM found that at specific moments, that is, the end of a year or the end of a quarter, major NEV companies, struggling to reach their sales goals set at the beginning of the year to maintain stock price stability and to boost investor confidence, tend to spare no efforts to stoke end-user demand to boost their sales.

The first approach is direct sales promotions, including discounts, price reductions, and the introduction of insurance subsidies. To be frank, these promotional measures really attract consumers and have a positive impact on sales. A good example is Tesla’s launching multiple promotions in the fourth quarter of 2022.

On September 16, 2022, Tesla announced that buyers of made-in-China Tesla Model 3 and Model Y delivered between September 16 and September 30, 2022, who chose to purchase Tesla in-store insurance that included compulsory liability insurance of vehicle traffic accident and vehicle damage insurance, are entitled to an insurance subsidy of 8,000 yuan. In short, they can enjoy a price reduction of 8,000 yuan directly when making the final payment.

In October, Tesla also trimmed the prices of Model 3 and Model Y sold in mainland China by 14,000-18,000 yuan and 20,000-37,000 yuan respectively.

Next, the sales of NEV are under the impact of NEV subsidies.

In recent years, China's national NEV subsidies have continued to decline. Usually, the subsidies will take effect on the first day and be cancelled on the last day of a year. Therefore, subsidies will differ greatly between consumers who purchase NEVs in December and in the next January. In addition to the state subsidies, some local NEV stimulus policies will also come to an end at the year-end.

In this context, some consumers who have intended to purchase cars in January and February of the second year will be propelled to purchase in advance in the final quarter of the current year.

The third factor may be a little different from the above two.

In fact, for car companies, sales are made when the car is delivered to the downstream buyers, whether they are end consumers or downstream dealers. According to SMM survey, car makers usually provide commission or quarterly/annual subsidies to dealers.

And at the critical moments, such as the last month in a quarter, namely March, June, September and December, or year-end, the commission and subsidies will be expanded. In exchange, dealers need to pick up cars to help auto makers complete their sales target.

Since car makers have the upper hand in bargaining, dealers usually find it difficult to reject this kind of deals and have no choice but to build up their inventory. That is why sometimes the inventory of dealers and the NEV sales both trend higher at the year-end.

However, the high sales for this reason do not reflect the growing purchases of consumers.

Of course, changes in the production schedules of some car companies will also lead to changes in sales.

For example, Tesla is usually concentrated on the production of NEVs for export in the first half of each quarter, but these sales are not included in the domestic sales. As a result, Tesla’s domestic sales usually wane at the beginning of each quarter, and then explode in the middle and late quarters.