The status quo of the new energy auto industry, how to develop after the stubborn disease

In recent years, several countries have announced plans to phase out the sale of internal combustion engine (ICE) vehicles. Norway and the Netherlands have set a ban on the sale of pure fuel vehicles by 2025, while Germany has targeted 2030. France and the United Kingdom have set their goals for 2040. Meanwhile, China is considering following the lead of the U.S. and France, aiming to implement a similar ban by 2040. This global shift reflects a growing commitment to reducing carbon emissions and promoting sustainable transportation. China’s new energy vehicle (NEV) industry has been advancing rapidly under strong policy support. In 2017, the country produced over 129,300 NEVs, marking a record high. Compared to the same period in 2016, which saw 115,700 units, and 2015 with 54,100 units, the growth was continuous. However, the growth rate dropped significantly, from 112% in 2016 to just 13% in 2017. Despite this slowdown, the industry remains on an upward trajectory, but it faces significant challenges behind the surface. The current state of the NEV industry appears promising, but many underlying issues persist. As the saying goes, “the cure is common knowledge,” yet the problems in the sector are still prevalent. While the industry continues to grow, it carries deep-rooted issues that could hinder its long-term development. On September 27, 2017, a major policy change was introduced: the "Parallel Management Measures for the Average Fuel Consumption of Passenger Vehicle Enterprises and New Energy Vehicle Points" came into effect on April 1, 2018. This policy revised the previous draft by removing the 2018 assessment and directly requiring 20% and 12% of new energy vehicles in 2019 and 2020, respectively. This shift forced automakers to accelerate their transition toward electric vehicles. While the policy was finally implemented, the industry still struggled with deep-seated issues. The so-called “national bad roots” continued to affect progress. Addressing these problems requires reflection and proactive measures for future development. What are the lingering issues? What lessons can be learned for the future? **“Slow Motion” Under the Giant Infant Mentality** If there were a single phrase to summarize the industry's core issues, “Giant Baby Psychology” and “Reverse Development” would top the list. The term “Giant Baby Psychology” refers to a mindset where companies prefer stability over innovation, avoiding risks and sticking to familiar paths. This mentality has led many domestic automakers to adopt a wait-and-see approach rather than actively pursuing new energy vehicle development. In June 2017, the Ministry of Industry and Information Technology released a consultation draft on the “Parallel Management Measures.” It was intended to give independent brands an advantage in the new energy sector. However, many domestic manufacturers, including FAW and Dongfeng, found it difficult to meet the targets. This created a gap between policy expectations and actual implementation. Some leading automakers failed to meet their targets, prompting the introduction of the new point system in 2017. This policy change aimed to push automakers toward stricter compliance. Psychologist Wu Zhihong noted that the Chinese mindset often leans toward a “big baby mentality”—a desire for comfort and security, avoiding uncertainty and risk. Many new energy companies exhibit this tendency, preferring to stay within their comfort zones rather than embrace change. **The Pain of “Positive R&D” is Missing** While the giant baby mentality poses risks, another critical issue is the lack of genuine research and development (R&D). In traditional automotive manufacturing, core technologies such as engines and gearboxes have long been dominated by foreign companies. This has made it difficult for Chinese manufacturers to break through. In the new energy sector, however, the playing field is more level. Yet, many Chinese companies still lack enthusiasm for true innovation. Most new energy vehicles are based on traditional models without substantial improvements. Core components and key technologies remain underdeveloped, and product maturity is low. Additionally, technical resources are not well integrated, and industry collaboration is lacking. This leads to redundant construction and wasted resources. Some companies simply replace the internal combustion engine with an electric motor, without making meaningful changes to the design or performance. This approach fails to deliver the full potential of electric vehicles. Experts argue that real innovation requires more than just replacing one power source with another. It involves rethinking the entire vehicle design, from the body to the chassis, and creating a truly new model. **Foresight and Innovation** As management guru Peter Drucker once said, the spirit of entrepreneurship is key to continuous innovation. Companies that focus on creativity and adaptability can thrive in changing markets. In the new energy sector, pioneers like BYD have taken the lead by embracing innovation and building a comprehensive industrial chain. BYD has become a global leader in the new energy vehicle industry, achieving record revenues and profits. Its success stems from a focus on technological advancement and a fully integrated supply chain. From lithium battery production to vehicle manufacturing and battery recycling, BYD has built a closed-loop system that ensures quality and efficiency. Another example is Changjiang Automobile, which has pursued a positive R&D strategy from the start. Unlike traditional conversions, Changjiang focuses on designing and producing electric vehicles from the ground up. This approach results in safer, more reliable, and more user-friendly products. In 2017, Changjiang exported its first batch of electric logistics vehicles to the U.S., signaling a major milestone for the industry. With further expansion, the company is expected to play a significant role in the domestic market. As the new energy vehicle industry continues to evolve, the path forward will require addressing deep-rooted issues, fostering true innovation, and embracing the spirit of entrepreneurship. Only then can the sector reach its full potential and drive sustainable growth.

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