Fit/Jazz (Honda)

Recapping last year’s Battery Electric Vehicle (BEV) market performance, 2023 BEV Light Vehicle sales exceeded 1.2 million units – the first year to surpass the million-unit mark – and closed with a 7.7% market share. Tesla made up half the volume after setting an aggressive sales growth target supported by multiple price cuts throughout the year. Other automakers also reduced pricing in order to compete and took advantage of IRA federal tax incentives before new battery sourcing stipulations went into effect for 2024. The fourth quarter typically sets BEV sales records each year as dealers sell off prior year models at discounted rates and buyers can quickly benefit from tax credits early in the new year, but Q4 2023 remained flat compared with Q3, signalling a potential softening in the market. While it remains too early to say that the market is trending downward, the sales headwinds are gaining traction. After years of double-digit growth in the US BEV market, pessimism now looms over the industry with the recent sales slowdown, and automotive executives are changing their tune on future growth targets.

Many models lost tax credit eligibility on January 1st, 2024, causing further sales decline as we moved into the new year. With inflationary pressures and vehicle prices remaining high, automakers are under pressure to cut prices further and offer discounts to offset the tax credit loss. The overall auto market condition continues to deteriorate as interest rates remain elevated with relief not expected until the Fed introduces rate cuts towards the middle of the year.

Vehicle pricing will always be at the forefront of the decision-making process when purchasing a new vehicle, but the lack of sufficient US charging infrastructure is the Achilles heel holding back BEV sales for the mainstream audience. Outside of the Tesla Supercharger network, public infrastructure scale and reliability score poorly nationally. Range anxiety is now shifting to charge availability anxiety with many charge points being inoperative and the ones that do work being occupied by other plug-in vehicles. It also now seems to be a yearly occurrence that electric vehicles make the national news when freezing weather negatively impacts range and causes charging stations themselves to fail. In January, Chicago BEV owners were left stranded at public chargers waiting for days while the infrastructure thawed or having to get their vehicles towed to repair facilities. Negative stories around owning a BEV further perpetuate the belief that the technology is market-dependent and specific to a localised use case.

While dedicated electric vehicles face challenging market conditions, hybrid sales are surging. Toyota is standardising the technology on many of its new generation launches and Honda had a successful year launching new CR-V and Accord hybrid variants, applying the technology to its most popular trims. As other automakers see the buyer pool for BEVs dry up, they are now shifting their near-term strategies to push hybrids, using them as a stepping stone until a robust charging infrastructure builds out with federal funding support. We expect the hybrid surge to continue into 2024 and that they will outsell battery electric vehicles by a slim margin of 9.9% to 9.6% respectively.

As detailed above, there is an inherent risk that the BEV market will stagnate this year and remain close to an 8% share. An upside for consumers will be the likelihood of price cuts offsetting tax credit losses, further discounts on models sitting unsold on dealer lots, and rising lease penetration rates to take advantage of the tax credits. Still, with the market leader Tesla between growth periods, prioritising 4680 cell output and its next-gen low-cost vehicle launch in 2025, the onus to make a statement this year will be on other automakers.

(GlobalData blog on March 13, 2024)

On March 7, Honda announced that most all-new 2024 Honda Prologue models will qualify for the U.S. USD 7,500 EV tax credit. 

The federal tax credit applies to purchases of all 2024 Prologues built at GM’s Ramos Arizpe plant after February 26, 2024, and all 2024 Prologues that are leased.

The Prologue arrives at Honda U.S. dealerships in the coming weeks, with a 296-mile EPA range rating.

Two-wheel drive models are powered by a front-mounted single motor with 212 hp and 236 lb-ft of torque.

The Prologue Elite features standard all-wheel drive (available on EX and Touring) with an additional motor in the rear for a combined 288 hp and 333 lb-ft of torque.

Prologue's 85 kWh lithium-ion battery pack is designed to recharge 65 miles of range in about 10 minutes using DC fast charging with rates up to 150 kW.

Honda offers a combination of public charging credits for EVgo and Electrify America stations, charging equipment and a home installation credit to fit each buyer's preferences.

(Honda press release on March 6, 2024)

Despite Thailand Light Vehicle (LV) sales falling by 9% YoY in 2023, Chinese automakers’ sales rocketed by 104% YoY (this is not a typo, they really rose by over 100%!) Also, Chinese brands’ market share of the Thai LV market jumped from 5% of the total in 2022 to 11% in 2023.

This outstanding Chinese sales performance was the result of:

1. The penetration of new Chinese players BYD and Neta.
2. Thailand’s direct cash subsidy under the EV 3.0 policy of up to THB 150,000 towards the purchase of a Battery Electric Vehicle (BEV).
3. The introduction of Chinese BEV models while Japanese carmakers still lack this technology and up to the end of 2023 offered very few BEV models on the Thai market, with low sales.

We expect Chinese brands to continue to increase their sales and share of Thailand’s market in the near term because:

1. New Chinese players including GAC AION, ChangAn’s Deepal and Chery will arrive in 2024.
2. The Thai government announced the second phase of the cash subsidy (EV 3.5) with less benefit than the first EV 3.0 program. The rates are THB 100,000 in 2024 -2025, THB 75,000 in 2026 and THB 50,000 in 2027. The subsidy amount is less important to Chinese players due to their low-cost production methods.

However, the ongoing rise in Chinese brand sales and market share is in doubt in the long term for several reasons.

Firstly, Chinese brand sales so far have been largely driven by BEV models, with volumes inflated by the Thai cash subsidy incentive and by early adopters. If we exclude BEV models from the Chinese automakers’ sales, total Chinese brand sales in 2023 would have dropped by 37% YoY. That’s worse than the overall market performance (-9% YoY) and that of Japanese carmakers (-17% YoY). So, the declining cash subsidy and falling numbers of early adopters could negatively impact Chinese BEV sales in the country.

Secondly, Japanese carmakers are re-inventing their product line-ups by bringing forward their BEV model schedules. Honda will begin to produce and sell its first BEV model in Thailand in 2024. Mazda Thailand will transition from ICE to BEV and is set to launch mainstream BEV models and invest in battery production around 2028-2030. So, the forthcoming Japanese BEV models will pose a threat to Chinese carmakers. But we should not forget that BEV technology is a challenge for Japanese brands and that Chinese brands have a considerable head start.

Thirdly, the quality of both the Chinese products themselves and their aftersales service has not been proven so far in the Thai market whereas buyers have full trust in Japanese automakers’ quality standards. Good looks and clever design can create a solid market for Chinese brands, but quality and service will lead to repeat purchases, brand loyalty and customer retention.

And according to Chinese carmaker managers that we have met, Chinese brands that dedicate themselves only to BEVs will encounter obstacles in the medium term since BEV demand will continue to increase but it will not be the leading propulsion type in Thailand. At the same time, the number of players is likely now growing faster than demand.

As such, it is too early to state with confidence that Chinese carmakers will continue to gain share in the Thai car market. One may say “Don’t count your chickens before they’re hatched.”

(GlobalData blog on March 5, 2024)