As new energy vehicles become increasingly accepted by the public, their penetration rate continues to rise.

China's new energy passenger car sales reached 187,316 units in May, accounting for about 12 percent of all passenger car sales that month, according to the final version of data recently released by the China Passenger Car Association (CPCA).

China's new energy passenger vehicle penetration rate rose to record high of 12% in May-CnEVPost

(Source: the CPCA)

The percentage increased by 1 percentage point from April to a record high, China Industrial Securities said in a research report released on Sunday, adding that June sales of new energy passenger cars in China are expected to reach a record high.

China's new energy passenger vehicle penetration rate rose to record high of 12% in May-CnEVPost

(Graphic by CnEVPost)

The continued increase in sales of premium electric models so far this year, while traditional fuel vehicles have been more severely affected by chip shortages, has allowed new energy passenger car penetration to rise rapidly, the report said.

China-made Tesla sold 22,000 units in China in May, including nearly 13,000 Model Y units. "We expect the new Model Y to be powered by CATL's lithium iron phosphate batteries, which could be launched soon, with prices likely to drop to below RMB 300,000 ($46,800). This implies steady-state annual sales of 360,000 units of Model Y, further hitting the midsize luxury fuel SUV market," the report said.

The contribution of cities with license plate quota restrictions to new energy passenger vehicle insurance registrations fell by one percentage point to 30 percent in May, according to China Industrial Securities, implying accelerated penetration of new energy passenger vehicles into second- and third-tier cities.

The marginal weakening of the impact from policy guidance and the continued improvement in the competitiveness of electric vehicles indicate that demand is dominating the market, the report said.

In addition, Beijing has issued 32,000 electric vehicle license plate quotas for households, which the report believes is expected to expand local demand.

China Industrial Securities expects China's new energy passenger vehicle sales to reach 205,000 units in June and 600,000- 620,000 units in the second quarter, and raised its full-year new energy passenger vehicle sales forecast to 2.4 million units.

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