Pure electric, plug-in hybrid, extended range, who is the future of new energy?

tech | 2024-07-29

In the article I wrote not long ago titled "The Era of 'Electricity is Cheaper than Oil', It's Time to Consider Removing the 'Privileges' of PHEVs", I proposed that before equal rights for oil and electricity, "equal rights for oil and hybrid" should first be realized for PHEV models. However, when discussing this topic, there was an underlying logic that was not explicitly stated—

Pure electric is the irreversible development direction for automotive drive methods.

Over the past decade, the fundamental reason why the United States, Europe, and our country have vigorously subsidized new energy vehicles is the assumption that electric drive is the future trend. The initial policy driving force was environmental protection and energy security, but as the advantages of new energy vehicles in terms of power, technology, and intelligence gradually become prominent, the real market demand from the consumer end has also become a driving force for car manufacturers to actively invest in the new energy market.

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In this context, both the industry and the market have generally reached a basic consensus that "pure electric is the ultimate form of the car, fuel vehicles are old products that are about to be eliminated, and PHEV plug-in hybrids and range extenders are transitional products on the way to the ultimate form." This is also the basis on which our country continues to support new energy vehicles when the United States and Europe waver.

The topic I want to discuss today is:All-electric vehicles, will they truly be the endgame for automotive propulsion?

01

The market's direction of development does not seem to be pointing directly towards pure electricity.

The reason for this thought stems from the unexpected trends that have emerged in the domestic and international automotive markets over the past year or two.

Firstly, domestically, according to data from the China Passenger Car Association, the retail volume of new energy passenger cars in May of this year reached 805,000 units, with a new energy penetration rate of 47%. Among these, the sales of BEV (Battery Electric Vehicle) models accounted for the majority, with 496,000 units sold, which is still significantly higher than the 309,000 units sold of PHEV (Plug-in Hybrid Electric Vehicle) models.However, when looking at the growth rate, the sales of BEV pure electric vehicles increased by 27.6% year-on-year, while the sales growth rate of PHEV reached 61.1%—more than double the growth rate of BEV. If this trend continues, PHEV sales could catch up with pure electric vehicles as early as next year.

Of course, China is not the only country supporting new energy vehicle models; what about the situation in the US and Europe?

Let's first look at Europe, where the data covers the EU (European Union), EFTA (European Free Trade Association), and the UK (hereinafter referred to as the European region). The total sales of new vehicles in May of this year were 1.093 million units, a year-on-year decline of 2.6%, which is close to the 1.8% decline in the domestic market in May.

However, it is quite different from the domestic market that the sales of pure electric vehicles in the European region in May were only 152,000 units, a year-on-year decrease of 10.8%, which is much higher than the overall market decline.

At the same time, the sales of PHEV in the European region in May were 73,757 units, also a year-on-year decrease of 9.6%, and the market share shrank from 7.3% in the same period last year to 6.7%.In contrast, Hybrid Electric Vehicles (HEVs) are thriving in the European region, with new car sales soaring by 15.4% to 333,000 units in May, and the market share increasing from 25.7% in the same period last year to 30.4%.

As for pure gasoline and diesel vehicles, their sales in May declined by 6.3% and 11.4%, respectively. The combined share of pure internal combustion engine (ICE) vehicles shrank from 49.3% last year to 46.8%.

In summary, according to our definition of new energy vehicles, the current status of Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) in the European market is in a state of decline, with a drop greater than that of gasoline cars, second only to the declining diesel cars. The only ones that have achieved growth, and significant growth at that, are the non-chargeable HEVs. Their share in the European region has now reached over a quarter, surpassing the combined share of BEVs and PHEVs, which is approximately 22.5%.

So, what is the situation in another giant regional market—the United States?

In May of this year, the United States saw new car sales of 1.445 million units, a year-on-year increase of 5%. However, I could not find the specific sales figures for different powertrain categories. But judging from the recently announced sales figures for Tesla in the first half of the year, Tesla's global sales have declined by 6.6% year-on-year, with sales in the U.S. market dropping by 14%. Given Tesla's situation in its home market, the plight of other new energy vehicles in the United States can also be imagined.That is to say, in the global market where the support for new energy vehicles (NEVs) is more clearly defined, China's Battery Electric Vehicles (BEVs) are still experiencing rapid growth, but the growth rate has been significantly surpassed by Plug-in Hybrid Electric Vehicles (PHEVs).

In the United States and Europe, the overall trend for BEVs is not just a slowdown in growth, but a dual decline in both sales and market share.

Under this backdrop, whether BEVs represent the ultimate form of automotive propulsion does indeed become a question worth doubting.

02

Domestic automakers are also shifting their focus towards PHEVs.

Of course, at least in the Chinese market, the momentum of growth for NEVs is very clear. However, when looking at the products in detail, it can be observed that the main players in the new energy market are gradually shifting their focus from BEVs to PHEVs, or more specifically, to range-extended models within the broader category of PHEVs.It goes without saying that the ideal of promoting range-extending power is highly valued. After the sales setback of MEGA, Li Auto directly postponed the BEV product plan originally scheduled for this year. Meanwhile, AITO, which initially focused on both pure electric and range-extending models, has shifted its focus more towards the range-extending route after its range-extending version's sales far exceeded those of the pure electric models.

Earlier on, brands like Zero Run and Nio, which initially offered only pure electric vehicles, later added range-extending versions to their existing models. Among them, Zero Run's range-extending models have become the mainstay of sales. Coupled with the influence of models C10 and C16 on Li Auto's "dad car" style, Zero Run's delivery volume in June this year has already exceeded 20,000 units, officially joining the first tier of new forces in the industry.

The shift towards the range-extending camp is not limited to pure electric vehicle manufacturers. For instance, Changan and Chery, which previously focused on plug-in hybrid (PHEV) models, now have new flagship products such as the deep blue boxy model G318, Chery's mid-to-large five-seat SUV Xing Ji Yuan ET, and AITO's latest model 07, all of which have adopted the range-extending route. Even BYD, known for its DM-i plug-in hybrid technology, has employed a range-extending power-based electric four-wheel drive on its million-yuan-level model, the Yangwang U8.

In the PHEV category, the plug-in hybrid route represented by BYD is still the mainstream. However, whether it comes to the number of new products or the growth rate in sales, range-extending products have been the main driving force behind the rapid growth of the PHEV category since 2023.And if we further refine the discussion to price, excluding Tesla, the combined sales of pure electric and plug-in hybrid vehicles from Chinese brands in the high-end segment above 250,000 yuan do not match the extended-range products led by Li Auto and AITO. The entry of brands such as Zerorun, Deep Blue, and Exeed will also further promote the growth of extended-range models in the mid-range market.

In other words, the discussion on power types is not just a competition between BEV and PHEV, but rather among three camps: pure electric, plug-in hybrid, and extended-range. Looking at the current market trends, at least for the next two to three years, pure electric will not be the absolute direction of development for the automotive category. So now we can adjust the topic:

In the short term, who will become the mainstream of new energy: pure electric, plug-in hybrid, or extended-range?

03

Is PHEV really just a transitional form of BEV?Analyzing solely from a macro sales data perspective can easily lead to misconceptions, especially when it comes to predicting power types. We need to delve into the segmented markets at different price points.

Firstly, for vehicles priced under 100,000 yuan, both plug-in hybrids and fuel vehicles still hold a significant share. However, in the category of small vehicles priced under 100,000 yuan, pure electric models have essentially monopolized the market. Fuel-powered small cars like the Polo and Fit are now negligible.

This means that the conclusion that "pure electric is the ultimate form of small commuter vehicles" can be established today.

But once we move to the compact class and above, the situation is entirely different. If a model has both pure electric and plug-in hybrid versions, the latter's sales are almost certainly going to be much higher. For family main vehicles with certain long-distance travel needs, pure electric vehicles have a certain share, but they are clearly not as popular as plug-in hybrids.

The reason is still that old topic—range anxiety. At the same price, consumers are more likely to choose a plug-in hybrid or extended-range vehicle rather than a pure electric one, not to mention that plug-in hybrids and extended-range vehicles often cost less than pure electric models with the same configuration and class.However, it is necessary to distinguish the role of plug-in hybrids, which are more about replacing previous pure fuel or HEV models. Compared to fuel vehicles, plug-in hybrids consume less fuel, and compared to HEVs, they can occasionally use pure electricity. On the basis of BYD having already reduced the prices, the purchase and usage costs of plug-in hybrids are lower than those of joint venture fuel and HEV models.

The role of range extenders is different; essentially, they provide a comprehensive solution for consumers who consider electric drive but have concerns about range—enjoying low electricity prices with daily charging and occasionally long-distance travel with the convenience of refueling. Additionally, range extender models are often cheaper than pure electric models at the same level and with the same configuration, which nicely compensates for the increased usage costs when refueling occasionally.

The most critical difference from plug-in hybrid models is that range extender models can achieve a high degree of platform and technical compatibility with pure electric vehicles. Technological advancements in pure electric vehicles, such as batteries, electric motors, and intelligence, can be almost seamlessly transferred to range extender models.

It is almost impossible to introduce plug-in hybrids on a pure electric platform, but the vast majority of pure electric platforms can be extended to include range extender versions.After significantly reducing the battery capacity and adding a fuel replenishment system, the overall system cost is often lower than that of pure electric vehicles that require large-capacity batteries, and this is reflected in the difference in car prices. In this case, it is difficult for both consumers and manufacturers to resist the advantages of range extension. The surge in sales of range-extended vehicles and the number of range-extended products in the past one or two years is precisely based on this logic.

Additionally, the green license plates available in many cities further reduce the cost of purchasing and the convenience of using PHEV (Plug-in Hybrid Electric Vehicle) models.

Speaking of which, let's return to the topic at the beginning: Is the ultimate destination of automotive power development really pure electricity? Is the PHEV route, composed of plug-in hybrids and range extenders, really just a transitional type on the way to pure electric?