Green targets brighten prospects for new energy powertrains in the passenger vehicle market, finds Frost & Sullivan's Mobility Team
SHANGHAI, July 19, 2016 /PRNewswire/ -- China is the largest passenger vehicle market in the world in terms of both production and sales volumes. Original equipment manufacturers (OEMs) are looking to harness the potential of this vast market by rolling out new and improved powertrains. While upgraded fuel powertrains will enjoy high uptake due to better transmission efficiency and superior internal combustion, new energy powertrains will have the Chinese government's backing in the form of subsidies and incentives. For instance, the government is heavily promoting electric and hybrid passenger vehicles in order to reduce sulfur levels and achieve environmental targets. These new energy passenger vehicles are already exempt from driving and purchase restrictions all through the country.
New analysis from Frost & Sullivan, Strategic Analysis of Chinese OEM Powertrain Strategies (http://www.frost.com/sublib/display-report.do?id=P8EC-01-00-00-00&src=PR), finds that the market sold 21.2 million units in 2015 and expects sales to touch 31.5 million in 2022, at a compound annual growth rate of 5.9 percent. Among the three powertrain segments of gasoline, diesel and new energy solutions, gasoline is the most dominant with 98.8 percent of the market share. However, this is likely to decline to 96.8 percent by 2022 due to the rise of new energy powertrains. The diesel segment will grow at 0.3 percent, mostly due to the rapid growth of SUVs.
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"The demand for powertrains in China will increase with road network expansion and infrastructure enhancement across city, suburban and rural areas, stimulating greater passenger vehicle utilization," said Frost & Sullivan Mobility Research Analyst Ming Lih Chan. "However, heavy reliance on component supply from international component manufacturers will hinder OEMs' ability to meet this huge demand."
The production gaps across automotive stamping, welding, painting and final assembly activities also slow down powertrain production to some extent. Furthermore, the automatic assembly lines of Chinese OEMs do not measure up to international standards and the domestic designs are less competitive than their global counterparts.
Some of the technology and production shortcomings can be resolved through joint ventures between domestic and international OEMs. Collaborations that involve sharing vehicle technology, assembly techniques, material resources and supply chain management will enhance Chinese OEMs' technology competitiveness and value-added service offerings. Both Chinese and international OEMs are focusing on lowering passenger vehicle cost by reducing the costs of key components and through lightweighting.
"Meanwhile, Chinese OEMs are hoping to compete head-on against international OEMs on the strength of long guarantee periods and aftersales 4S service packages," noted Chang. "For instance, for new energy vehicles, they provide guarantee packages that include life-time battery cell guarantee, free electricity charging at 4S dealer retails, and complete vehicle quality checks for up to six years. They also use marketing tools diligently to fuel market opportunities and sales."
Strategic Analysis of Chinese OEM Powertrain Strategies is part of the Automotive & Transportation (http://ww2.frost.com/research/industry/automotive-transportation) Growth Partnership Service program. Frost & Sullivan's related studies include: Global Market for Premium High Performance Cars, Global Analysis of Electric Traction Motor Technologies for Electric and Hybrid Vehicles, Mild and Full Hybrid Vehicles in North America and Europe, Powertrain and Electric Vehicle Market: Future Implications, and External Factors Pressurize the EU for Passenger Car CO2 Reduction. All studies included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
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