The penetration rate of new energy vehicles (NEV) in China has beat forecast this year, rising from 5% last year to 14% in August 2021. Although the likelihood is high that the penetration rate of EV in China could grow ahead of schedule to 30-35% by 2023, Chinese carmaker BYD said the future for the industry is still unpredictable, given the market's magnitude and rapid evolution, according to many different Chinese news sources.
BYD further indicated that a plugged-in hybrid electric vehicle (PHEV) is probably a better choice than a battery electric vehicle (BEV) now to replace an ICE car. Based on some estimates, around 300 million families in China are looking to purchase their first car. BYD assumed their first choice would be a PHEV. So, both PHEV and BEV can grow very fast in the country. At the beginning of this year, BYD launched three new hybrid models with its latest technology.
However, BYD's annual deliveries are projected to fall short by 160,000 units due to shortages of semiconductor and lithium batteries. To address the problem, BYD has been enhancing its presence in the semiconductor industry since 2008-2009 and has just acquired Jinan Energen Semi this year.
BYD continues to innovate battery technologies including blade battery, NMC battery, and semi-solid state battery as consumers are still worried about EV's low range.
Material prices for lithium batteries soared this year. Costs of a NEV rose by over CNY10,000 (US$1,550). BYD thinks scale production and technological innovations can bring the costs down after demand and supply reach balance. BYD has acted aggressively, like increasing inventories and rising prices, to respond to the rising costs of materials.