Carmakers Race to Extend EV Range

"Having no range anxiety is one of the greatest advantages of extended-range models. In our store, customers who buy the extended-range version of the Zero Run C16 are more than those who buy the pure electric version," Sun Fei (a pseudonym), the sales manager of a Zero Run car dealership in Hefei, recently told a reporter from China Business News.

As Sun Fei described, with the advantage of no range anxiety, extended-range models are increasingly gaining consumer attention. Under the strong demand from users, many car companies are "turning" to the extended-range camp. The reporter noticed that, in addition to new car manufacturers, recently, Hyundai, Ford, and several other multinational car companies have also revealed that they are developing extended-range models, such as Hyundai Motor's statement at the "2024 CEO Investor Day" event, planning to launch a brand new EREV (extended-range) model.

"In the new energy vehicle market, we expect that by 2030, plug-in hybrid electric vehicles and extended-range electric vehicles combined are expected to account for about 60% of the total demand for new energy vehicles in China, almost doubling from 34% in 2023," J.P. Morgan Securities believes.

Nevertheless, many industry insiders are cautious about the market prospects of extended-range models. Zhang Hong, a member of the expert committee of the China Automobile Circulation Association, told the reporter that the prospects of extended-range vehicles depend on market demand. For joint venture car companies and the multinational giants behind them entering the extended-range race, "the main battlefield in the future may lie in the fields of solid-state batteries and hydrogen energy."

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Extended-range model sales surge

Public information shows that extended-range models belong to the plug-in hybrid category, which is an electric vehicle equipped with a range extender, composed of an engine + generator + controller. When the on-board rechargeable energy storage system cannot meet the driving range requirements, the range extender is turned on to provide electrical energy for the power system, which can extend the driving range.

Retail penetration data of new energy vehicles in August shows a penetration rate of 48.9%, an increase of 13.3 percentage points from 35.6% in August 2023. Among them, the wholesale sales volume of pure electric vehicles was 592,000, a year-on-year increase of 6.6%, and the wholesale volume of extended-range models was 115,000, a year-on-year increase of 109%, with extended-range model sales far exceeding pure electric.

Further analysis reveals that the sales volume of extended-range models has maintained a relatively fast growth rate in recent years. Data from the China Association of Automobile Manufacturers shows that the growth rate of extended-range models from 2021 to 2023 was 206%, 116%, and 173%, respectively. In 2023, the sales volume of extended-range vehicles reached 627,000 units, with a market share of 2.9%.

As the competition in the new energy vehicle market becomes increasingly fierce, the strong sales growth momentum of extended-range models is attracting more and more car companies to enter the market.

In June of this year, media reports stated that the first extended-range model of Zhiji Automobile, a subsidiary of SAIC Group, will be an SUV model. The new car is planned to be released in the first quarter of next year and will compete with the Ideal L7. It is reported that the extended-range project of Zhiji Automobile was established in the second half of 2023.Journalists have observed that before the reported development of an extended-range SUV, Zhiji Automobile had already hinted at this on multiple occasions. On October 12, 2023, in a media interview following the launch of the Zhiji LS6, senior executives of Zhiji Automobile stated: "In the next 3-5 years, extended-range and a small portion of plug-in hybrids will have a very obvious market opportunity window, especially for mid-to-large size MPVs or SUVs. We are also planning our route in the field of hybrid technology."

In December 2023, Liu Tao, the co-CEO of Zhiji Automobile, further stated: "We believe that extended-range products will have market potential over the next 3-5 years or even 5-8 years." He revealed that Zhiji Automobile plans to launch its own extended-range product solution around 2025, and the project has already been initiated.

Similarly, outside of Zhiji Automobile, Ji氪 Automobile may also enter the extended-range field. In July of this year, at a media communication meeting following the launch of the new Ji氪009, when asked about considering an extended-range route in the future, An Conghui, President of Geely Holding Group and CEO of Ji氪 Intelligent Technology, frankly said: "Developing extended-range hybrids is too easy for Ji氪." He also indicated that they would not rule out developing the aforementioned models in the future. "But for now, we must focus on pure electric. We must do well in the luxury, pure electric segment."

The reporter found that currently, brands such as Ji氪, Avista, and Zhiji are planning to launch extended-range models. Under these circumstances, among the previously bustling new car forces, only NIO is still adhering to the pure electric route.

"Extended-range and plug-in hybrid models are indeed selling well now," said Li Bin, founder, chairman, and CEO of NIO, in a recent interview, but NIO and the LeDao brand still insist on pure electric. "When Tesla starts making extended-range models, we will consider it. So NIO and LeDao will only do pure electric, that's for sure."

"In the future, as new players continue to enter, the extended-range market will accelerate its penetration into the mainstream market," research institution IHS Markit believes that the extended-range camp is continuously expanding. "From a brand perspective, brands like AITO and Li will leverage the leading advantages of extended-range products to maintain continuous sales growth; brands like Shenlan and Zero Run are expected to see a significant increase in sales with the help of extended-range models."

Multinational companies plan to launch extended-range models. "The biggest topic at our board meeting this time was to agree to hand over all hybrid models to SAIC Volkswagen, using SAIC Volkswagen as a platform to work with Volkswagen AG and SAIC to jointly develop hybrid models that meet the Chinese market, including PHEV and extended-range products." During the 2024 (18th) Beijing International Automobile Exhibition, senior executives of SAIC Volkswagen further stated, "We will launch extended-range products and long-range PHEVs to the market, and they will be based on an electric vehicle architecture."

On June 27 of this year, Volkswagen Group, SAIC Group, Volkswagen (China) Investment Co., Ltd., Volkswagen (China) Technology Co., Ltd., and SAIC Volkswagen signed several technical cooperation agreements related to new product projects of SAIC Volkswagen in Shanghai.Journalists have noted that SAIC Volkswagen has signed a series of new energy technology cooperation agreements, including agreements to develop three plug-in hybrid models and two pure electric models in China. Both Chinese and German parties are jointly "technologically empowering" the joint venture, with the expectation that from 2026 onwards, the collaboratively developed plug-in hybrid models and pure electric models will be successively launched into the market.

In addition to joint venture automakers, several multinational automotive giants have recently disclosed plans to introduce extended-range models.

On August 28th, Hyundai Motor held the "2024 CEO Investor Day" event in Seoul, South Korea, announcing its new medium to long-term strategy "Hyundai Way." Specifically, Hyundai Motor will lead the automotive industry with the competitiveness of its electric and hybrid vehicles. Moreover, Hyundai Motor also plans to invest an average of over 12 trillion won (approximately 63.72 billion yuan) per year over the next decade.

However, compared to the grand plans and huge investments, the information about Hyundai Motor's entry into the extended-range field has attracted more attention from the outside world.

Hyundai Motor stated that it is developing a brand-new extended-range electric vehicle model that combines the advantages of both fuel vehicles and electric vehicles. In Hyundai Motor's view, extended-range models are a key bridge to achieving electrification. They not only provide the same responsive driving experience as electric vehicles, offering consumers a natural transition to electric vehicle usage, but also make the price more competitive than electric vehicles by optimizing battery capacity.

Also in August, according to multiple media reports, Ford Motor canceled its previous plan for a pure electric three-row SUV and changed it to a hybrid vehicle. Ford Motor CEO Jim Farley stated that after canceling the originally planned three-row pure electric SUV, the company is considering using extended-range technology for this new model.

It is worth noting the reasons why multinational automakers currently favor extended-range vehicles.

"Whether it is new energy vehicles or fuel vehicles, the largest consumer market in the world is currently in China," said Zhang Hong. For multinational automakers, the importance of the Chinese market is irreplaceable. "Therefore, to maintain a competitive advantage in the Chinese market, paying attention to changes in the Chinese market and meeting the needs of the Chinese market are the top priorities for multinational automakers in planning their market paths and product line layouts."

Can it solve the automakers' "urgent needs"?

"From a single vehicle perspective, extended-range electric vehicles have a certain value," said former Volkswagen China CEO Stephan Wöllenstein in 2020. However, from the perspective of the entire country and the planet, it is a bad solution. "The ultimate goal of developing electric vehicles is to reduce carbon emissions, but if it is done by burning fossil fuels to generate electricity, there is no need to do so at all."Feng Si Han's views on range-extending technology have sparked widespread attention in the industry. The debate on whether range-extending technology is an "obsolete technology" has also been ongoing. However, as the sales of range-extended models continue to rise and more automakers increase their investment, the debate over the obsolescence of range-extending technology seems to be gradually fading away.

"The growth trend of the pure electric vehicle market is slowing down, showing signs of saturation, and automakers need to find new sales breakthroughs," Zhang Hong said bluntly to the reporter. Range-extended models, due to their relatively simple structure and lower cost compared to plug-in hybrid models, will be favored by automakers.

"Currently, the prices of range-extended models from domestic brands are generally accepted by the market, with good sales, and some automakers have turned losses into profits, which is also the main reason for the popularity of range-extended vehicles," Zhang Hong said. Public information shows that since Ideal Automobile, many automakers such as Wenjie and Zero Run have bet on range-extending, and sales have achieved breakthroughs.

"We believe that it is highly likely that the growth rate of pure electric vehicle sales will be under pressure throughout 2024, and the main increase in new energy passenger cars will come from plug-in hybrids (including range-extending). With a price of 200,000 yuan as the dividing line, the main theme of the economy-type new energy passenger car throughout the year is to accelerate the replacement of oil cars with cost-effective means," Ping An Securities Research Report once believed, "It is inevitable that the profits of relevant automakers will be under pressure."

At present, many automakers, including joint ventures, are under sales pressure and choose to bet on range-extended models. Can this solve the "urgent need" of automakers?

In Zhang Hong's view, whether the range-extended vehicles launched by various automakers can increase sales still depends on market demand and their own product competitiveness. "In urban areas and along highways, due to the complete charging facilities, range-extended vehicles may not be needed. However, for remote rural areas, mountainous areas in the southwest and northwest, or desert areas, especially for the vast consumer groups who love self-driving tours, range-extended vehicles may be a good choice."