China's auto industry will become increasingly "green", S&P Global Ratings said in a Chinese report as cited by Wind Information on Aug. 4.
The report said government support, model variety and improved infrastructure will drive new energy vehicle sales higher, giving China a chance to meet its goal of making new energy vehicle sales reach one-fifth of all vehicle sales by 2025.
In the next year or two, China's new energy vehicle market will likely remain dominated by local brands, considering that nine of the top 10 electric vehicle companies are currently local companies, the report said.
But in the next three to five years, the industry landscape may change: the entry of new players will intensify competition, while the focus of industry development will gradually shift from electrification to self-driving, smart cockpits and network connectivity.
The automakers under review are largely dependent on the technology and platforms of joint venture parties, who have yet to make a push in the new energy vehicle sector, the report said.
S&P Global Ratings credit analyst Yuan Jie said, "The ability of the rated automakers to rise to the occasion in the new energy track over the next three to five years will be an increasingly important consideration in our rating analysis."
For dealers, the impact of new energy vehicle sales growth on their credit quality will be limited over the next 24 months due to the high profit contribution of the aftermarket business, the report said.
S&P's forecast for wholesale new energy vehicle volumes in the Chinese market has been raised to 2.4 million and 3.4 million units respectively, from the previous forecast of 2 million units in 2021 and 2.8 million units in 2022. The revised forecasts imply annual growth rates of 75 percent and 40 percent.
S&P said the penetration of new energy vehicles has risen rapidly from 5.4 percent in 2020 to 9.4 percent in the first half of 2021 and 12.7 percent in June 2021, "exceeding our expectations."