China’s New Conscious Consumer - Case Study: the Growth of Electric Cars in China
When the economy was still in retreat due to Covid-19, agile and digitally savvy players were able to identify new business opportunities to gain share. The epidemic triggered a flight to quality among consumers keen to ensure they obtain safe and healthy products, profiting companies that offer such benefits. We nicknamed these people “China's new conscious consumers”.
China's conscious consumers are characterised by their careful spending habits for products that address immediate safety, reliability, and quality concerns.
Much of the growth in sales of electric cars seen during the pandemic reflects these themes and shows how consumers have been persuaded to purchase luxury items that understand their concerns.
Read our short case study below that explains the significance:
Case Study: The growth in the electric car market in China
The growth in sales of electric cars during the pandemic in China can be attributed to consumers who fit our criteria for a conscious consumer - the consumer who seeks out quality and safety in brands that provide reassurance in a polluted and unreliable world.
Industry reforms have increased the availability of electric cars while incentives to purchase have provided a clear rationale of value for money combined with environmental benefits that reduce poor air quality. The threat of Covid loomed large over conscious consumers, who were looking for ways to improve their overall health, and who found one solution in electric vehicles.
For context, over the last decade, electric cars were promoted as the environmentally friendly and sustainable solution for China to improve air quality and thus public health. The government provided subsidies to motivate Chinese manufacturers to enter the electric vehicle market while consumers were attracted by credit and other incentives. Today, according to The International Energy Agency, Chinese consumers buy more than half the world's new electric cars, and global leaders like Tesla are particularly popular with Chinese consumers due to their careful market positioning.
The Financial Times listed Tesla as the number one performing company in the world in 2020 with several Chinese electric car companies such as BYD, Xpeng and Nio, not far behind.
Electric Vehicles Take the Spotlight at 2020 Beijing Auto Show, September 2020, photo: SG Auto
Don't know these Chinese companies? Here is a brief intro:
BYD is a Chinese electric carmaker whose market value increased by 359% in 2020, according to the FT, maintaining the Warren Buffett-backed group’s coveted spot as one of the top selling luxury electric vehicle companies. They recovered rapidly from a coronavirus-induced slump in sales after the July release of the “Han” line of luxury electric sedans, a competitor to Tesla’s popular Model 3. It is the first BYD model to use the company’s recently developed “blade” battery, a smaller and more energy-dense power pack, and since deliveries began in August sales have increased every month.
Xpeng Inc is a China-based smart electric car maker with backing from Alibaba. The company’s primary products are a sport utility vehicle named G3 and a four-door sports sedan named P7. Xpeng Inc also provides a range of services to the clients, including a supercharging service, maintenance, ride-hailing and vehicle leasing services. In January 2021, they announced a new autonomous driving feature which allows the P7 sedan to automatically change lanes, speed up or slow down, overtake cars and enter and exit highways, rivalling Tesla’s Autopilot.
Nio, Inc., backed by Tencent and listed on the New York Stock Exchange, design, manufacture, and sell smart connected premium electric vehicles. Although on the brink of collapse in early 2020 - with further setbacks related to the pandemic - NIO managed to turn the corner and has now become the world’s 4th most valuable automaker. CNBC reported that shares in the company surged more than 1,400% over the last 12 months, and its pre-subsidy prices are in direct competition with Tesla’s locally-made Model 3. NIO’s share of the luxury Chinese market is set to continue growing.
Tesla CEO Elon Musk attends the groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai, east China on January 7, 2019. File photo: Xinhua
Much of Tesla's share price growth is boosted by strong demand from China and global subsidies for electric vehicles which have made them more desirable. In a research report from Wedbush Securities, an American Investment Firm, analyst Dan Ives forecast that electric vehicles, which make up about 3% of global auto sales today could reach 5% by the end of 2021 and 10% by 2025. He also noted that by 2022, around 40% of Tesla’s sales could come from China, followed by Europe then the US.
In China, a basic locally-made Tesla Model 3 sedan costs about USD$38,500 (GBP £28,043) after subsidies, about a third less than one shipped from the US. This makes it an affordable alternative to popular European petrol cars in China.
With the market expanding and success across the board, Tesla and other local companies will continue to benefit by being a “conscious” choice product in China. The prestigious nature of electric cars and forward thinking approach to solving immediate environmental concerns has galvanised the industry.
If you would like to know more, please get in touch with us at info@singinggrass.com.
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Singing Grass is a business consultancy advising on access and development strategies for the Chinese market. We develop bespoke programmes for clients in the cultural and lifestyle sectors to connect them to new markets and maximise their potential in China.
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