What Lies Ahead for New Energy Vehicles in 2025?

2024 has been a sprint year for new energy vehicles (NEVs), witnessing a robust surge in both retention and retail volumes along with a strengthening market share. The acceleration of electric vehicles (EVs) and Plug-in Hybrid Electric Vehicles (PHEVs) is paving the way for a transformative era in the automobile sector.

According to the China Association of Automobile Manufacturers, NEV production and sales in China both surpassed 12 million units in 2024. Specifically, production reached 12.888 million units, and sales hit 12.866 million units, reflecting year-on-year growth rates of 34.4% and 35.5%, respectively. NEV sales accounted for 40.9% of total new car sales, continuing to be a vital growth engine for the Chinese automobile industry. At a recent State Council routine policy briefing, Zhao Chenxin, Deputy Director of the National Development and Reform Commission, noted that the penetration rate of new energy passenger vehicles exceeded 50% for seven consecutive months starting June 2024.

Driving Forces Behind NEV Dominance

The remarkable growth of over 12 million units in both production and sales begs the question: Why are NEVs advancing so rapidly? Industry experts highlight advancements in battery technology as a key driver of this swift progress. The introduction of high-energy-density lithium iron phosphate batteries has significantly reduced costs while enhancing safety and longevity. Diverse battery developments cater to varied needs, with increased ranges meeting daily travel requirements for more consumers.

Policy support has further accelerated NEV development. Both national and local policies have been implemented to promote industrial transformation, encourage consumption, and facilitate the shift from traditional to energy-efficient vehicles. In 2024, over 6.6 million old cars were replaced with NEVs or energy-efficient models, with more than 60% involving NEVs.

Infrastructure developments have also alleviated consumer "range anxiety." Wang Hongzhi, Head of the National Energy Administration, stated that China has built over 12 million charging facilities, with more than 95% of highway service areas equipped with charging stations. This high-quality infrastructure supports the growth of the electric car industry and boosts consumer confidence in electric vehicle adoption.

The "dual carbon" strategy and the convergence of transportation and energy sectors also contribute to the rapid expansion of NEVs. Electric vehicles, including EVs and electric cars, are integral to achieving carbon neutrality goals. Integrating technologies from energy, transportation, and information communication fields accelerates the automotive industry's shift towards sustainability and low-carbon solutions.

Growth Opportunities for NEVs in 2025

Even with strong growth in 2024, industry experts argue that NEVs will not entirely replace traditional cars just yet. While NEVs make up 8.90% of China's total car volume, they still represent a minority compared to traditional vehicles.

Experts predict sustained NEV growth in 2025, although domestic passenger vehicle penetration may stabilize, maintaining similar rates as in 2024. Nevertheless, new growth points are emerging, notably with NEV heavy trucks and buses. The export of NEVs, including electric vehicles and Plug-in Hybrid Electric Vehicles, is also expected to grow.

Heavy trucks powered by new energy sources show promise as a growth segment. The "2024-2025 Energy Conservation and Carbon Reduction Action Plan" calls for accelerated scrapping and renewal of old trucks, promotion of zero-emission heavy trucks, and reducing carbon intensity in the transportation sector by 2025. NEV heavy trucks, particularly pure electric variants, are essential for achieving these goals.

Despite range limitations and charging challenges, pure electric heavy trucks are effective for medium and short hauls. Trials in regions such as Beijing-Tianjin-Hebei and Chengdu-Chongqing, where zero-emission freight corridors are under development, are spearheading long-haul applications.

Infrastructure developments also support the push for long-haul pure electric heavy trucks. A 2023 government directive highlighted the need for high-power charging technology for new facilities. Local authorities are encouraged to focus on charging infrastructure for these trucks, facilitating efficient operation and advancing technologies like ultra-fast charging.

New energy buses may also see significant breakthroughs in 2025. Policy changes include increased subsidies for NEV buses and battery replacements, incentivizing cities to replace aging buses and out-of-warranty batteries with new energy alternatives.