According to an analysis by Shenwan Hongyuan, increasing oil prices are driving a shift in automotive consumption towards more energy-efficient and environmentally friendly vehicles, creating opportunities for the overseas expansion of Chinese new energy vehicles (NEVs). Looking back at the period surrounding the Russia-Ukraine conflict, international oil prices surged significantly, while the product competitiveness of Chinese NEVs continued to improve. Higher oil prices reduce the relative operating costs of NEVs, making them more attractive when product quality is comparable. Elevated oil prices have a clear stimulating effect on the overseas growth of Chinese NEVs. Within a relatively stable price range, the substitution effect is moderate; in a favorable range, the economic advantages of NEVs become prominent, accelerating demand release; if oil prices become excessively high, greater attention must be paid to the negative impact of cost erosion on profitability. Shenwan Hongyuan's main views are as follows:
The impact of high oil prices on the overseas expansion of Chinese NEVs: Rising oil prices promote a structural shift in auto consumption towards energy conservation and environmental protection, creating opportunities for Chinese NEVs to expand abroad. Following the first oil crisis in 1973, when OPEC announced price increases, U.S. oil prices rose by 243%. During the second oil crisis in 1978, U.S. oil prices increased by 163%. Throughout both crises, fuel-efficient and durable Japanese cars gained significant popularity in the U.S. market. The market share of Japanese vehicles in the U.S. grew from 5.7% in 1971 to 21% in 1981, with Japanese auto exports to the U.S. reaching 1.9 million units in 1979, accounting for approximately 20% of the new car market. Quantitative analysis reveals a stable substitution relationship between oil price increases and the rising market share of Japanese brands, after excluding factors related to natural product growth. Reviewing the Russia-Ukraine period, international oil prices soared dramatically, while the product strength of Chinese NEVs consistently strengthened. Higher oil prices lower the relative usage cost of NEVs, enhancing their appeal when product quality is equivalent. High oil prices clearly boost the overseas expansion of Chinese NEVs.
Infrastructure constraints: Hybrid and flash-charging 2.0 offer viable pathways amid current overseas expansion challenges Unlike the overseas expansion of Japanese brands in the past, the current overseas push for NEVs faces infrastructure constraints, as charging infrastructure abroad remains underdeveloped. Hybrid vehicles will serve as a crucial transitional step from internal combustion engine vehicles to NEVs in overseas markets, similar to the path toward cost parity between fuel and electric vehicles driven by technologies like DM-i in the domestic market. Specific technical routes include HEV, PHEV, or EREV. For the pure electric vehicle path, BYD's flash-charging 2.0 technology significantly reduces grid capacity requirements through self-equipped energy storage batteries, alleviating dependence on charging infrastructure and supporting the overseas promotion of pure electric models.
Segmented effect of oil prices: Impact on corporate profits is non-linear Rising oil prices not only stimulate NEV demand through cost advantages but also cause cost erosion in areas such as raw materials and shipping. Based on the above framework, the impact of oil prices exhibits segmented characteristics: in a relatively stable range, the substitution effect is gradual; in a positive range, the economic benefits of NEVs become more pronounced, accelerating demand release; if oil prices become too high, greater focus is needed on the adverse effects of cost erosion on profitability. Overall, the currently foreseeable high oil prices provide clear support for the overseas expansion of Chinese NEVs. If oil prices rise further into an irrational range, greater consideration should be given to macroeconomic risks rather than mid-level opportunities.
Core risks include fluctuations in raw material prices, geopolitical risks, and industry recovery falling short of expectations.
