Winning in China's electric vehicle market is no longer just about getting the cheapest prices. Despite the new US tariffs, the Chinese electric vehicle industry is already moving into a new phase of competition that is no longer focused on sticker prices alone, many in the industry say. This is good news for profit margins. But it also puts pressure on companies to make sure they're spending on developing features that consumers want. Sometimes this can be as simple as installing a sunroof, benefiting glaziers in the process. More than 80% of Chinese consumers surveyed by JP Morgan last month said they would prefer an electric car with a panoramic sunroof — and a majority are willing to pay more than 600 yuan ($84.50) for one. Untapped Market When it comes to these expanded panels, the market is largely untapped. Only about 12% of cars worldwide, including conventional gas-powered vehicles, have a panoramic sunroof, JPMorgan analysts said in a report last week, citing late 2023 figures from Fuyao Glass. Hong Kong-listed Fuyao, a major supplier of automotive glass, is one of JPMorgan's top picks to tap into China's growing electric vehicle market. Panoramic sunroofs account for about 7% of Fuyao's total revenue in 2023, the report said. JP Morgan and its survey partner surveyed more than 2,500 consumers in China in mid-April who had recently purchased or were planning to purchase a new electric vehicle. “We believe that Chinese EV competition has moved from primarily focusing on ‘price’ to increasingly now focusing on ‘content,’” JP Morgan said, “and surprisingly, our survey results indicate that customers are willing to pay for content.” This matches the results of a survey conducted by consulting firm AlixPartners that found that American and European consumers are more price sensitive than Chinese consumers when it comes to purchasing an electric vehicle. “We don't interpret that to mean Chinese consumers aren't price sensitive,” said Stephen Dyer, co-head of Greater China Business at consultancy AlixPartners, and the Asian leader in its automotive and industrial practice. “We interpret that to mean there are literally hundreds of options for Chinese consumers at affordable prices. They're well priced,” he said in late April, noting that Chinese consumers place twice as much importance on tech features as American respondents. This interest was on full display at the Beijing auto show late last month, where nearly every EV maker emphasized its driver-assistance and in-car entertainment capabilities. But the core underlying technology for electric cars remains the battery. About 70% of respondents to the JPMorgan survey said they would be willing to pay a premium for a desirable brand of battery, especially one that offers supercharging. “This is positive for CATL, which is now one to 1.5 years ahead of its peers in launching an ultra-fast charging battery,” the analysts said. Shenzhen-listed Chinese battery giant Contemporary Amperex Technology is one of JPMorgan's top Chinese EV supply chain players. Hybrid cars are so popular It is certain that not every Chinese car buyer is ready to switch to pure electric cars just yet. A recent JPMorgan survey showed a significant increase this year in the number of respondents who prefer a hybrid-powered car over a battery-only car. About 44% of those surveyed said they would prefer to buy a hybrid or a car with a gas tank to extend the battery's driving range. This is up from 27% in 2023 and 24% in 2022, the report said. In terms of an automotive brand, BYD has ranked as the No. 1 brand preferred by consumers over the past three years, the report said. The battery maker and electric vehicle giant produces hybrids and battery-electric vehicles only — one of JPMorgan's best in the sector. BYD lost some brand recognition compared to last year's results, with newcomer Xiaomi taking second place. Geely, Huawei's AiTo brand and Li Auto were among the brands that saw significant increases in customer appreciation, the JPMorgan report said. Tesla has seen a slight decline in its brand strength. However, the survey found that the Tesla Model 3 was the most popular battery-only car in the 200,000 yuan to 300,000 yuan price range. The majority of JPMorgan survey respondents set aside at least 300,000 yuan to purchase their cars, with the range of 300,000 yuan to 400,000 yuan being the most common. Last week, Chinese electric car company Nio released a new car in a lower price range of just over 200,000 yuan. While the new Onvo L60 SUV is about $4,000 cheaper than the Tesla Model Y, the car is slightly more expensive than Xiaomi's new SU7 electric sedan. Nio CEO William Li told reporters on Thursday that he expects China's electric vehicle price war to be mostly over, with the bulk of the cuts already in place. — CNBC's Michael Bloom contributed to this report.
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China's hot electric vehicle market is no longer focused on low prices. Stocks to watch
