■ Long-term Growth Strategy
Apple International <2788> takes a cautious stance to achieve stable growth in the domestic market, which is expected to continue to shrink in the future, and at the same time, focuses its management resources on the overseas market, especially Southeast Asia, where the used car distribution market continues to grow. In the used car export business, it adopts a growth strategy to expand performance by partially supplementing the supply shortage of Japanese manufacturers that cannot be resolved even after Corona, and meets consumer needs. Additionally, in the Southeast Asian automotive market, it avoids risks based on changes in the market, as described later, and develops its business.
1. Status of Global EV Shift (1) Trends in the global electric vehicle (EV) market
The International Energy Agency (IEA) announced that the global sales of new EVs (passenger cars) in 2022 (totaling BEVs and plug-in hybrid vehicles (PHEVs)) exceeded 10 million units for the first time, a 55% increase from the previous year, reaching 10.2 million units. By region, China increased by 80% compared to the previous year to 5.9 million units, Europe increased by 15% to 2.6 million units, and the United States increased by 55% to 990,000 units. China accounted for nearly 60% of the total. The proportion of EVs in new car sales in the same year was 29% in China, 21% in Europe, and 8% in the United States.
(2) Status of high-speed charger installation in the world
About 90% of the installation of high-speed chargers (output of over 220 kW) in the world is concentrated in China, with 760,000 units. In China, there were 2.72 million public chargers at the end of 2023. The industry group in China expects a 40% increase in 2024. In February 2024, Huawei, a major Chinese communication equipment company, announced plans to install 100,000 rapid chargers for EVs at service areas along highways and national roads in the country by the end of 2024. The chargers to be installed will be rapid chargers with a maximum output of 250 kW and ultra-rapid chargers with a maximum output of 600 kW. The group company has developed a completely liquid-cooled ultra-rapid charger with a maximum output of 600 kW. For an EV with a vehicle-mounted battery of 80 kWh and a cruising range of 600 kilometers, it can theoretically be fully charged in about 8 minutes. However, the actual charging time may vary depending on the battery level and temperature, but it is at the highest level in the world. With the improvement in the performance of EV vehicle-mounted batteries, it has become possible to develop ultra-rapid chargers. Tesla's rapid charger, Supercharger, installed in China has a maximum output of only 250 kW. Although there are more than 11,000 installations in China, they are mainly for Tesla vehicles. Huawei's rapid charger is compatible with all EVs, including Tesla vehicles.
According to a market research company in the UK, global EV sales in 2023 increased by 31% from the previous year to 13.6 million units. Of these, 9.5 million units were BEVs and 4.1 million units were PHEVs. The regional growth rate of BEVs was 50% in the United States and Canada, 27% in Europe, and 15% in China. As of December, a record high of 1.5 million units was recorded. A growth of about 30% is also expected in 2024.
The increase in the world's EV sales was mainly driven by Chinese manufacturers. The China Association of Automobile Manufacturers announced that the number of exported vehicles in 2023 increased by 57.9% YoY to 4.91 million units. In the same year, Japan's vehicle exports increased by the same 16.0% to 4.42 million units. Although Japan's export volume increased for the first time in two years due to the recovery of production due to the easing of semiconductor shortages and the depreciation of the yen, China took the position of having the most vehicle exports. From the fact that China's export volume was 1 million units in 2020, it has increased to less than five times in three years. A quarter of the export volume in 2023 will be New Energy Vehicles (NEVs), such as EVs. The Association expects the number of exported vehicles in 2024 to increase to 5.5 million units, up 12% YoY from the previous year. Chinese manufacturers are hurrying to secure large automotive dedicated ships because the transportation capacity of car carrier ships is bottlenecked. The first large automotive dedicated RORO ship in China with 7,000 parking spaces started operating in Shanghai in December 2023. RORO ships have a faster running speed than container ships, and the required time to reach the destination is shorter. As vehicles are loaded on their own wheels, cargo handling time can be greatly reduced. Transshipment and other operations are unnecessary, and composite integrated transportation on land and sea is possible. BYD plans to secure eight automotive dedicated ships, including an automotive ship that started operating in January 2024, within the next two years.
Since 2009, the Chinese government has implemented NEV promotion measures. As a national strategy, efforts have been made to expand energy-saving vehicles and NEVs as a driving force for the high-level manufacturing of the automobile industry and new economic growth, etc. Efforts have been made to strengthen the development of materials, such as cathode material, anode material, separator, electrolyte, and other major components that constitute the power battery, necessary for improving the performance of batteries, and to expand production scale through the construction of battery industry clusters, and to cultivate core companies for battery manufacturers for automotive use and four major components. Companies were encouraged to secure mineral resources, such as lithium, nickel, cobalt, platinum, which are essential for NEVs and car battery manufacturing. NEV promotion measures included the payment of subsidies for the construction of charging facilities, subsidies to purchasers, exemptions from vehicle acquisition taxes, gradually expanding public institutions' procurement of NEVs, and introduction of a system to manage the average fuel consumption of automobile manufacturers, among other measures.
In the Chinese EV market, about 300 companies are struggling, and excessive price competition is developing. The production volume of automobiles in China in 2023 was 30.16 million units, up 11.6% YoY, and sales were 30.09 million units, up 12.0% YoY. Although consumption is sluggish due to the real estate downturns in China, overproduction will create export pressure.
(2) Reviewing the EV shift in Europe and the United States
In Europe and the United States, plans to ban the sale of gasoline and diesel vehicles are being reviewed. The European Union had a policy of banning the sale of engine vehicles until 2035. In response to requests from Germany, Italy, and Central and Eastern European countries, they agreed that engine vehicles using synthetic fuels "e-fuels" will be allowed to be sold as new vehicles even after 2035. The UK extended its plan to ban the sale of gasoline and diesel vehicles from 2030 to 2035.
The U.S. Environmental Protection Agency (EPA) announced a regulatory proposal in April 2023 to require an average 56% reduction in carbon dioxide (CO2) emissions from passenger cars and trucks by 2032 compared to 2026. According to this proposal, the percentage of EVs in new car sales is estimated to increase to 60% by 2030 and to 67% by 2032. The United Automobile Workers union (UAW) requested to slow down the pace of regulatory tightening, and major automakers also found it difficult to achieve the targets. Therefore, it is expected that the EV ratio in 2030 will be below 60%, which was the initial proposal.
In Europe and the United States, where the automobile industry is their key industry, they are increasingly aware of the expansion of exports of Chinese-made EVs in a short period and are taking regulatory measures. The French government will exclude EVs produced using coal-fired power generation from the application of the EV purchase subsidy system from 2024. Even French makers' products produced in China will be excluded from the subsidy. EU-made EVs and French-made EVs using power from nuclear power and renewable energy sources will receive substantial purchase subsidies. The Biden administration is looking to favor domestic EVs under Inflation Reduction Act (IRA). The Trump administration also placed priority on protecting the domestic market.
(Authored by FISCO Guest Analyst Ken Segawa)