The pace of electrification on China's roads will accelerate, with three out of five new cars powered by battery packs by 2030, according to a forecast by UBS.
The Swiss bank expects China to sell 6.6 million electric cars in 2025, about 25 per cent of all new cars, rising dramatically to 18 million, or 60 per cent, by 2030.
The forecast is more optimistic than the goal set by the Chinese government for the world's largest automotive market.
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Under Beijing's plan, 20 per cent of new cars on the streets by 2025 will be new-energy vehicles (NEVs), a tag that covers pure electric, plug-in hybrid and fuel cell cars. That would translate into about 4 million such cars on the road by then.
Last year, the Ministry of Industry and Information Technology unveiled a road map for the country's EV development, targeting half of new cars on the country's streets to be new-energy vehicles (NEVs) by 2035.
"It is a highly competitive market with an efficient supply chain," Paul Gong, a UBS analyst, said. "You get both conventional carmakers and start-ups in the market. It is a fast-moving and dynamic market.
"There are more carmakers competing in the China EV market than any other region and more EV models available in China than any other regions. [We see] active involvement by tech giants as well, either through investment, or development of software and components, or contract manufacturing."
Gong was speaking during a UBS briefing on the EV market on Tuesday evening.
He said that China's EV penetration rate remained low compared to the European Union, but the country's complete supply chain and intense competition among key players would pave the way for rapid industry growth.
Sales of NEVs grew 12 per cent to 1.17 million units in China last year, even after disruption from the Covid-19 pandemic in the first quarter.
In China, Tesla is now the runaway leader in the premium EV segment while three home-grown start-ups - NIO, Xpeng and Li Auto - are ramping up new model development to build next-generation smart cars that can compete against the US carmaker's blockbuster Model 3 and Model Y vehicles assembled at its Gigafactory 3 in Shanghai.
The Swiss bank said there is a chance that by 2040, all new cars around the world could be electric vehicles (EVs).
"Batteries will be the short-term focus as costs need to continue to come down while supply (including of raw materials) looks increasingly tight," UBS said in a research report earlier this month.
As the costs of batteries come down, carmakers will be able to achieve margin parity between traditional cars and electric-powered vehicles by 2025, UBS said.
UBS said that Tesla, the global leader at present, and Volkswagen, an established conventional carmaking giant, will become the leaders in EV production.
Tesla leads in batteries, IT hardware and software, as well as the creation of an ecosystem, while Volkswagen has the best scalable EV platform, it added.
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