S&P Global Auto: Challenges and Breakthroughs in the Era of New Energy Boom

From a penetration rate of 6.4% in 2020, China's new energy vehicles surged to 44.3% in the first half of 2025. Meanwhile, Thailand ambitiously declared its goal to become the global electric vehicle production hub by 2030, and Australia imposed a penalty of $100 per gram of carbon dioxide to force automakers to transition... The global new energy vehicle industry is experiencing unprecedented rapid development.

Under the dual impetus of policy dividends and market enthusiasm, the industry has shown a vigorous momentum; however, both the Chinese and overseas markets face numerous challenges that need to be addressed in their development layouts. S&P Global Automotive, integrating the policies of various countries and the current state of the industrial chain, has outlined key directions for industrial development.

China: Significant Advantages in Industrial Chains, Multiple Challenges to Address

The rise of China's new energy vehicle industry is a prime example of dual-driven growth by policy and market forces. Looking back at its development, the launch of the "Ten Cities, Thousand Vehicles" program in 2009 marked the starting point of industry cultivation, and after the inclusion of new energy vehicles into the seven strategic emerging industries in the 12th Five-Year Plan, the policy support system gradually took shape.

Wang Liang, the Director of Powertrain Forecasting for Asia-Pacific at S&P Global Mobility, pointed out that over the past decade or so, the policy toolbox, including tax exemptions for the purchase of new energy vehicles and ships, the opening of access to electric passenger cars, subsidies for new energy vehicles, and the current trade-in policy, collectively form a "booster" for industry development. More strategically significant is the successive introduction of the "Energy-saving and New Energy Vehicle Industry Development Plan (2012-2020)" and the "New Energy Vehicle Industry Development Plan (2021-2035)," which not only clarified the technical roadmap but also set systematic development requirements for various segments of the industry chain such as batteries, motors, electronic controls, and charging facilities.

The continuous efforts in policy implementation have given rise to the world's most robust new energy vehicle industry chain. Wang Liang emphasized that from the extraction and refining of upstream raw materials to the production of key components, from whole vehicle technology development to the construction of terminal infrastructure and consumer ecosystem, China has formed a "full-chain leading" pattern. In core fields such as battery anode and cathode materials, electrolytes, motors, and even integrated electric drive systems, Chinese companies dominate the industry. This industrial chain advantage directly translates into market competitiveness: in 2024, the new energy share of China's passenger car market will reach 47%, making it the largest market globally. The product matrix, ranging from pure electric to plug-in hybrid and range-extended vehicles, covers all needs across different price segments.

More iconic is that Chinese independent brands have achieved a "curve overtaking" of joint venture brands. In the era of fuel vehicles, Chinese car companies played the role of "students," but now they are exporting technology to joint venture brands in areas such as vehicle platforms and new energy drive technology, and have even become the "leading party" in autonomous driving technology collaborations.

However, the multiple challenges behind the prosperity have gradually emerged. Foremost among these is the price war and homogenized competition, which have triggered a series of chain reactions such as dealer losses, evaporation of car company market value, and pressure on the supply chain. Secondly, the weakness in brand strength has become a bottleneck for overseas expansion. Although companies like BYD, Great Wall, and Chery are accelerating their overseas layout, in the global high-end market, Chinese brands still find it difficult to compete with Tesla and BBA, with the "cost-effectiveness" label hiding the risk of insufficient premium capability. Meanwhile, the "car purchase subsidy" chaos has morphed into a vicious cycle of "subsidies for sales," fracturing the unified national market. Even more concerning is the emergence of distorted products like "zero-kilometer used cars," which expose the industry's short-term behavior under survival anxiety, severely disrupting the pricing system and brand reputation.

Overseas: Policies are being actively promoted, but the industry foundation needs to be strengthened.

The development of new energy vehicles in major overseas markets is characterized by a clear "policy-driven" approach. However, the alignment between policy implementation and industrial foundations still needs to be strengthened. S&P Global Mobility’s Automotive Planning Solutions Director, Mr. Saboni, highlighted this common challenge through his analysis of the Australian and Thai markets.

Australia's emission reduction regulations are described as "strict and severe." The New Vehicle Emission Standard (NVES), which will be implemented from 2025, requires that the average carbon dioxide emissions for category one and two vehicles be reduced from 141g/km and 210g/km in 2025 to 58g/km and 110g/km in 2029. Non-compliant companies will face a fine of $100 per gram of carbon dioxide per vehicle.

Saboni pointed out that the core objective of the regulation is to promote the introduction of low-emission models and reduce consumer usage costs, without restricting the choice of technological routes. This "outcome-oriented" policy design seems flexible, but Australia faces the issue of a hollowed-out local industry chain — lacking a complete system for the production of electric vehicle components. Car manufacturers can only rely on imports to meet standards, which not only leads to the market being monopolized by a few foreign brands but also puts consumers in a predicament of limited model choices and high maintenance costs. In the long term, emission reduction targets without local industry support may become "paper promises."

Thailand is attempting to establish itself as a "global electric vehicle production hub" through policy levers. Its goal is to achieve a 30% share of electric vehicle production by 2030, for which it has introduced the EV3.0 and EV3.5 industrial policies. Companies that commit to future production and export scales can receive sales subsidies and tariff reductions. Currently, Chinese carmakers such as MG, BYD, Great Wall, and Aion are participating in the EV3.5 project, driving the rapid expansion of Thailand's electric vehicle production capacity. However, the industry, which has been hastened by policy, has clear shortcomings: insufficient coverage of charging infrastructure, consumer acceptance of electric vehicles remains in a wait-and-see phase, and the local supply chain can only meet the demand for a small portion of components. This "production-heavy, ecosystem-light" model, combined with high global trade barriers, may lead to an awkward situation of "being able to produce, but unable to sell."

Challenges in other overseas markets are equally significant. Although Europe began developing new energy vehicles relatively early, its industrial chain is overly dependent on Chinese battery supplies, leading to persistently high costs for automakers. In the United States, the Inflation Reduction Act has promoted domestic manufacturing through subsidies, but its trade protection clauses have displeased allies and intensified the risk of supply chain fragmentation. According to S&P Global automotive experts, common issues faced by overseas markets include lagging construction of charging networks, underdeveloped local industrial chains, and high costs for consumers purchasing vehicles. These factors have created a significant gap between policy goals and market realities.

The Road to Disruption: From Scale Expansion to Value Reconstruction

Faced with complex challenges in domestic and international markets, the strategic layout of Chinese automotive companies needs to shift from a "scale-oriented" approach to "value reconstruction." Gao Tao, Co-director of Automotive Analysis at S&P Global Automotive Greater China, emphasized that the core advantage of Chinese automotive companies lies in the "new energy + industrial chain + AI" trifecta. The key to breaking the impasse is how to transform these advantages into sustainable competitiveness.

To stabilize the domestic market, it is necessary to break free from the "price war trap." Tao Ao suggests that automakers should shift from "cost competition" to "technology competition," focusing resources on core areas such as solid-state batteries, 800V high-voltage platforms, and intelligent driving. In fact, China has already formed differentiated advantages in hybrid and range-extended technologies, with plug-in hybrid models serving as a "buffer" against uncertainties in the pure electric market. At the same time, the risk of overcapacity must be guarded against by dynamically adjusting production plans and promoting flexible manufacturing to achieve supply-demand balance. At the policy level, the systematic thinking of the "New Energy Vehicle Industry Development Plan" can be referenced to guide resources toward technological innovation rather than merely pursuing production scale.

Additionally, expanding into overseas markets requires "deep localization" rather than "simple replication." Tao Gao pointed out that Chinese automakers' cost advantages and complete industrial chain form the foundation for going abroad, but the key to addressing trade barriers lies in "localized production + ecosystem co-construction." S&P Global Automotive forecasts that Chinese automakers' overseas production capacity will increase from the current approximately 1 million vehicles to over 4 million vehicles in the next decade. In this process, deep cooperation with local governments and enterprises is necessary.

In addition, Tao Gao emphasized the importance of leveraging long-term advantages in the AI field—China's advantages in AI talent reserves and electricity costs will aid in breakthroughs in intelligent driving technology, which is the core competitiveness of the future automotive industry.

S&P Global Mobility believes that from a global perspective, “coexistence and mutual benefit” within the industry chain is a long-term development trend. China’s battery technology, autonomous driving algorithms from Europe and the United States, and manufacturing cost advantages in Southeast Asia could naturally complement each other, but rising trade protectionism has intensified supply chain fragmentation. In response, Chinese automakers can break down barriers to cooperation through technology export and joint standard-setting. It should be made clear that the long-term competition in the new energy vehicle industry is not about short-term market share, but about building the right to define technology and the leadership of the ecosystem.

As policy incentives gradually fade, how can we navigate the hidden challenges behind the booming era of new energy vehicles and achieve a breakthrough? You can find more answers at the 2025 Mobility Intelligence Dialogue series hosted by S&P Global Automotive.

A series of events will be held successively in Shanghai on September 9th, Beijing on September 11th, and Guangzhou on September 16th. At that time, more than 400 senior representatives from the automotive industry (including associations, OEMs, and suppliers), who are leaders and in charge of product and market planning and strategy, will participate in the conference. Please stay tuned!