“The Irreversible Global Trend of New Energy Vehicles!”

“In recent days, Miao Wei, a member of the National Committee of the Chinese People’s Political Consultative Conference, deputy director of the Economic Committee, and former Minister of Industry and Information Technology, spoke at the 18th China Automobile Industry Forum in 2023, stating that the Chinese automobile market’s total volume and structure are undergoing profound changes, and the development of intelligent connected vehicles will become a hallmark of successful transformation. However, there are still many issues that need careful planning regarding how smart cars will develop.

Miao Wei shared several sets of data. In 2017, China’s sales of new energy vehicles were only 770,000 units, while in 2022, the annual sales of new energy vehicles reached 6.887 million units. The penetration rate of new energy vehicles reached 28.2% in 2022, exceeding the target of 20% set for the “14th Five-Year Plan” three years in advance. It is expected that the penetration rate of new energy vehicles in the Chinese passenger car market will exceed one-third this year. Miao Wei believes that the trend of new energy vehicles replacing traditional fuel vehicles has already taken shape. The original target of surpassing 50% of new energy vehicles by 2035 may likely be achieved by no later than 2025 or 2026.

Moreover, with the rapid growth of new energy vehicles, the sales of domestic brand passenger cars reached 5.986 million units in the first half of this year, an increase of 22.4% compared to the same period last year. The market share reached 53.1%. “This is the first time we have surpassed foreign brands in domestic passenger car sales, changing the long-standing dominance of foreign car brands in the Chinese passenger car market,” Miao Wei said. “Although China’s new energy vehicles have performed well in the first half, the decisive factor lies in the competition represented by the development of intelligent vehicles in the second half.”

“The changes brought about by the unprecedented upheaval in the automotive industry are comprehensive and all-encompassing, not only in technology but also in fundamental shifts in enterprise management methods, investment and financing methods, profit models, and user usage patterns,” Miao Wei said.

Miao Wei gave examples, stating that the electronic and electrical architecture of vehicles is transitioning from decentralized ECU control to domain controllers and will further evolve toward the whole-vehicle computing platform. Software is also shifting from embedded software to full-stack software, thereby achieving the decoupling of basic software and functional software, hardware software, and the decoupling of basic software from hardware, known as ‘double decoupling.’

“Basic software is compatible with heterogeneous hardware, which could give rise to alliances like the Wintel alliance in the PC era and the Arm Android alliance in the smartphone era, creating an ecosystem for industry development. Everyone has learned about the smile curve in the manufacturing industry, which is increasingly evident in the automotive industry. In the future, profits from the manufacturing process will be the lowest among all links in the industrial chain, while profits from R&D investment, sales, and services will be the highest and will become the profit growth point for new cars in the future. Major enterprises are also building service ecosystems based on intelligent connected vehicles,” Miao Wei said. He added that the future business model for automotive companies will shift from selling hardware to selling software and from selling products to selling services.”