Covid led to lower-than-expected retail growth in the Chinese auto market, with traditional ICE vehicles performing worse than expected while NEVs performing better than expected.

2022 saw a lot of black swan events for the Chinese auto market, deflating many expectations. At the same time, however, there were some developments that exceeded expectations.

In an article today, the China Passenger Car Association (CPCA) summarized some of the things that exceeded expectations in the Chinese auto market in 2022, both good and bad.

Here are the main points of the article, with CnEVPost adjusting the order of items.

Wholesale sales of new energy passenger vehicles in China reached 728,000 units in November, up 70.2 percent year-on-year and up 7.7 percent from October.

Against the backdrop of China halving of the purchase tax on traditional internal combustion engine (ICE) vehicles to 5 percent in the second half of the year, the performance of the new energy vehicle (NEV) market was not only unaffected but continued to improve sequentially, which exceeded expectations.

From January to November, wholesale sales of new energy passenger vehicles in China were 5.74 million units, up 105 percent year-on-year.

In 2021, the NEV sales volume was 3.31 million units, up 183 percent year-on-year. The performance of the Chinese new energy passenger vehicle market continued to be strong in 2022.

New energy passenger vehicle sales jumped in November compared to the same month last year, while ICE vehicles plummeted year-on-year, allowing NEVs to see a high penetration rate of 36 percent.

In the past two years, some international automakers are resolutely transforming to NEVs, and some of them are quickly giving up their original advantages in the plug-in hybrid vehicle (PHEV) market and pushing full steam ahead in the pure electric vehicle market.

They originally hoped to rely on the international brand effect and expected to bring a certain share of sales, but the actual performance was lower than expected.

This reflects the fact that the comprehensive advantages of China's local industry chain have been established, and international brands relying on overseas R&D capabilities cannot keep up with the development speed of the Chinese market.

Automakers, including BYD, accelerated their transition to NEVs in 2022, and their strong growth exceeded expectations.

BYD, in particular, has made leaps and bounds with its PHEV models, with monthly sales of the Song exceeding 60,000 units, bringing an impact on ICE vehicles from joint venture brands.

BYD's performance significantly exceeded expectations and led to a significant increase in the importance of the PHEV market for more car companies.

PHEV models are transitional models, but they are exceeding expectations. Currently, in the Chinese market, international automakers are marginalized in the segment, while local automakers are seeing explosive growth in PHEV offerings.

This is partly due to the policy support that PHEVs have over ICE vehicles, which do not have the same right on the road or in purchases.

In Beijing, for example, it has become nearly impossible for residents to obtain ICE vehicle licenses. In Shanghai, it is not easy for even wealthy people to obtain ICE license plates at an auction that cost about RMB 100,000 ($14,360).

It is significant that Shanghai will stop giving free license plates to PHEVs in 2023. License plates in Beijing and Shanghai are worth more than RMB 100,000, so the policies associated with them greatly impact the NEV market.

Despite the policy support ICE vehicles received in the second half of the year, their sales performance in 2022 was dismal due to the severely impaired purchasing power of the general public.

This resulted in NEV models leading the 2022 passenger car sales list, led by the Wuling Hongguang Mini, Tesla Model Y, and BYD Song in January-November.

At the premium end of the market, Nio is performing well in markets with prices above RMB 400,000 and is already ahead of joint venture brands.

The leading models in this market are mainly Nio ES7, Nio ET7, Nio ES8, Hongqi HS9, and models from Mercedes-Benz and Cadillac. The Nio ET7, ES7 and Cadillac Lyriq started well after their launch.

While some cities have gone into lockdown in the past two years due to the Covid outbreak, the impact of Shanghai's move in March-April on production and sales was beyond expectations.

Since the auto parts chain around Shanghai is the core of China's supply, the Covid outbreak in Shanghai led to production disruptions for car companies in most of China.

Auto retail sales were also severely impacted at the time, with Chinese passenger car production of only 990,000 units in April, lower than expectations.

Some provinces and cities, including Guangdong, even considered abandoning Shanghai's supply chain and establishing a Pearl River Delta auto industry system to guard against losses due to uncertainties in Shanghai.

China's passenger vehicle retail sales were 1.65 million units in November, down 9.2 percent year-on-year and down 10 percent from October, the first time since 2008 that the September-November peak season saw a sequential decline.

The decline against the backdrop of the impending expiration of the ICE vehicle purchase tax incentive is a complete change from the normal pattern, which is due to the disruption brought about by the Covid epidemic.

The Covid outbreak control in November resulted in a large number of regions in China generally seeing a dramatic decline in sales and disruptions in market operations in some core regions.

Dealers closed stores on a large scale while consumers were unable to go out, which had a significant impact on car deliveries.

China's auto market saw an unusual monthly trend during the traditional September-November sales season, a huge loss that exceeded expectations.

China's domestic auto retail performance was subdued in 2022, but exports soared.

From January to November, exports of vehicles from China reached a level of 3 million, up 50 percent year-on-year. This is a further strong growth on top of the big increase in exports in 2021, reflecting the increased world competitiveness of China's auto industry.

China's auto exports declined sharply in 2013-2015 due to the world economic downturn, but export growth gradually stabilized in 2016-2020, with current export volumes averaging 100,000-150,000 units per month.

In 2020, exports from China were 1.09 million units, down 13 percent year-on-year.

In 2021, exports from China reached 2.19 million units. This is due to the lack of supply in overseas markets hit by the Covid epidemic, providing room for Chinese car exports.

China's local automakers are generally performing strongly as they achieve a full leap forward in 2022.

Major car companies including BYD, Geely, Changan, Chery, Great Wall, SAIC Passenger Vehicle, and GAC Passenger Vehicle are performing well.