China's electric two-wheeler industry has ushered in a bloom time

Electric two-wheeler industry has ushered in a bloom time

Electric vehicle, one of the key words of this era. When it comes to electric vehicles, the topics and emotions of public opinion are always drawn by Tesla, CATL, BYD, and Celis.
 
But what you may not have noticed is that the combined annual deliveries of all these electric car manufacturers in the Chinese market are not comparable to the two oligarchs in the adjacent track: Yadea and Emma in the field of electric two-wheelers.
 
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In 2021, the sales volume of electric two-wheelers in the Chinese market will reach 41 million units. Among them, Yadea and Emma electric vehicles dominate this market with a combined market share of nearly 50%.

Over the years, with the continuous improvement of industry concentration, the gross and net profit margins of Yadea and Emma have also been rising. How does the electric two-wheeler, the largest electric vehicle segment in China, exist? How did Yadea and Emma become oligarchs?

Double oligarchs of electric two-wheeled

After the prelude to the market economy, steel, coal, home appliances, PCs, mobile phones, vehicles, real estate and other industries basically have an industrial cycle of 10 to 20 years.

At the beginning of the cycle, companies from all walks of life compete with each other, and in the middle and early stages, a prosperous situation is achieved. After that, the competition intensifies and the market gradually begins to integrate.

Finally, driven by the policy or market choice of new industry standards (technical standards, scale standards, environmental protection standards, etc.), the industry has been cleared substantially, and a stable market pattern has finally been formed.

This industrial law is now also emerging in the electric two-wheeled vehicle industry, and has entered the final stage of clearing.

The “New National Standard” introduced in April 2019, on the one hand, is to rectify the non-standard electric vehicles in the past, and on the other hand, it also improves the production qualifications of the production side and accelerates the intensification of industry leaders.

Therefore, the duopoly pattern of “Yadea and Emma” has been continuously strengthened, and the proportion of CR2 has already risen from 20% in 2016 to nearly 50% in 2021, and it seems that there is still a further upward trend.

Manufacturing industries such as two-wheeled electric vehicles (such as assembly and OEM) often compete on cost and efficiency, so behind the competition pattern represented by the “Yadea, Emma” duopoly, there are actually two North and South seats.

The embodiment of the competition result between the city and the two industrial clusters. Yadea is from Wuxi, Jiangsu Province, which has the foundation of the motorcycle industry, and Emma is from Tianjin, where the bicycle industry is developed.

With the help of similar product genes, both places have obvious advantages in industrial synergy and large-scale production.
The duopoly pattern of Yadea and Emma is constantly strengthened

After a long-term industry price war, in fact, these two cities are constantly integrating and integrating production capacity and markets in other regions. Yadea and Emma are the “agents” of these two industrial clusters.

Today, the factories of these two “agents” have spread all over Tianjin, Jiangsu Wuxi, Zhejiang Taizhou, Chongqing, Guangxi and other key production areas, and Yadea has also set up production bases (leased workshops) in Vietnam.

At present, Yadea’s production capacity has reached 17 million units. After the successful listing, Emma will also expand its production to 14 million -17 million units in the next two years. In the future, the combined production capacity of the two may reach 70% -75% of China’s sales. (calculated based on the annual sales volume of 45 million units in China).

Characteristics of the two-wheeled electric vehicle industry

Electric two-wheelers do not have a strong soil for disruptive innovation.Compared with the disruptive innovation brought by new energy vehicles, Tesla has reduced the cost of raw materials and improved assembly efficiency through new manufacturing methods, and the margin of its scale effect has greatly exceeded that of traditional car companies;

In order to meet the market travel demand (ie low cost, high energy storage), the battery revolution of various technical routes is still in progress; The intelligent interaction iteration of the vehicle-machine system will eventually be reflected in the future application scenarios of autonomous driving.

These are the car revolutions that we can see with the naked eye and are in progress. But obviously, similar high-intensity innovation competition cannot be mapped on electric two-wheelers.

Since the first electric two-wheeled vehicle was developed in Tsinghua University in 1995, the annual sales volume is nearly 50 million and the market size is nearly 100 billion.

The production method (assembly, OEM) of electric two-wheelers has basically not changed, and the energy storage of lead-acid batteries has not changed much. Although intelligent interactive applications will become more popular in the future, it is not enough to stimulate intense market changes.

Production of electric two-wheelers

Such market characteristics are not friendly to new entrants, but are very conducive to the continued incorporation of leading companies. Since 2013, electric two-wheeled vehicles have basically entered the stock market.

Maverick electric vehicles, which are labeled as “high-end, performance-oriented, and intelligent”, entered this field in 2014, capturing a group of white-collar workers in first- and second-tier cities. And groups such as real estate agents, the limelight is no different.

After about 8 years, the data shows that NIU will sell 1.03 million units in 2021, with a market share of only 2.5% in terms of sales;

2022H1 NIU will sell about 330,000 units (down about 16% year-on-year), with revenue of 1.4 billion RMB (down 6% year-on-year). %), with a net loss of RMB 15 million (profit of RMB 86 million in the same period last year).

Comparing the performance of Yadea, Emma, ​​and No. 9 in 2022H1, they are the only companies that recorded negative growth and losses, and their market share is likely to shrink further this year.

No. 9 Company, which entered the field of electric two-wheelers in 2020, is positioned similar to NIU, and focuses on the concept of “true intelligence”, and is also welcomed by high-tier cities.

The data shows that from 2020 to 2022H1, its sales volume is about 110,000 units, 420,000 units, and 310,000 units, respectively. So far, its market share has equaled that of NIU.

However, the rapid volume of No. 9 stems from its low unit price. From 2020 to 2022H1, its unit price is about 3900RMB, 2900RMB, 3000RMB, which is lower than the same positioning of Mavericks (the unit price in the same period is 4000RMB, 3100RMB, 4200RMB respectively), as a result, the gross profit margin of Jiuhao’s electric two-wheeler business has been cut in half (about 18%, 11%, and 9% respectively in the same period).

Taking NIU and No. 9 as a reference, at least 90% of their products are lithium battery products.

Taking NIU and No. 9 as a reference, at least more than 90% of their products are lithium battery products, and they basically monopolize the high-end market of more than 6000RMB, but the high gross profit margin does not bring the high profit margin as it should be (small in 2020-2021). The gross profit rate of cattle is about 22%, the net profit rate is only 7%, and a loss is recorded in 2022H1),

The reasons may be: First, the volume of the high-end market is very limited; second, this segment has entered the stock stage; third, this market is more competitive.

This in turn also shows that in the field of overall electric two-wheelers, new small and medium-sized companies cannot escape competitors through “innovation” very well.

Because this market may not need innovative technology in the real sense, the consumer market is more concerned with the need to complete short-distance travel within a limited budget. The starting point of the policy is a reasonable balance in the dimensions of travel efficiency, traffic safety, and even public safety.

This also means that the innovation of higher performance product experience represented by lithium electrification needs to give way to cost competition (including product cost and social cost), at least in the period when lithium battery prices cannot effectively compete with lead-acid batteries, the main theme of the industry is cost-oriented.

Facing the food delivery industry and express transportation industry, if you want to improve the efficiency and safety, you can also learn about the two-wheeled vehicle battery swapping model. For details, please refer to battery swapping station business model.

Reshaping industry investment logic

According to the 6.1 million units of Yadea and the nearly 4 million units of Emma in 2022H1, the combined shipments of the two are expected to be around 25 million units in 2022.

According to the market’s estimated total annual market shipment of 45 million units, the market share of the two will exceed 50%. At the same time, recently, Yadea and Emma have surpassed the industry average data in terms of revenue, gross profit margin, net profit margin and shipment volume, showing a trend of rising volume and price.

Over 90% of the products of Yadea and Emma are equipped with lead-acid batteries, and the unit price is around 2000RMB. And in the internal business, Yadea and Emma’s electric bicycles and electric motorcycles have a shipment ratio of about 6:4, and the sales volume of electric bicycles exceeds that of electric motorcycles for the first time.

The approximate data is as follows: In 2021, Yadea’s revenue will be 27 billion RMB (39% year-on-year), the gross profit margin will be 15%, the net profit margin will be 5%, and the unit price will be close to 2000 RMB;

In 2022H1, Yadea’s revenue is 14 billion RMB (14% year-on-year), gross profit margin is 18%, net profit margin is 6.5%, and the unit price is close to 2300RMB. In 2021, Emma’s revenue is 15.4 billion RMB (19% year-on-year), gross profit margin is 12%, net profit margin is 4.3%, and the unit price is close to 1800RMB;

In 2022H1, Emma’s revenue is 14 billion RMB (14% year-on-year), gross profit margin is 15%, net profit margin is 7.3%, and the unit price is close to 1900 RMB. The scale of the two companies has expanded, the gross profit margin has increased, and the cost advantage has begun to become prominent; the net profit margin and unit price have increased, and the brand and channel are being strengthened.

Over 90% of the products of Yadea and Emma are equipped with lead-acid batteries.

Possible reasons behind this include: First, the landing of the new national standard in some regions not only brought a large number of new demand, but also further accelerated the clearing; Second, the competition in the middle and low-end market is relatively mild, and the market presents the characteristics of sellers;

The three changes come from the internal product structure of Yadea and Emma, ​​including the proportion of Yadea’s “Guanneng” and “Guanzhi” series products, the improvement of Yadea’s battery business, and the increase in the proportion of Emma’s “engine MAX”, etc. etc., the “innovative” route focusing on product iterative upgrades has gained brand premiums.

In fact, the number of electric two-wheeler companies has plummeted from 1,000 before the introduction of the new national standard to less than 100 at present, and the industry concentration has increased significantly; In addition, the policy divides electric two-wheelers into electric bicycles and electric motorcycles, the latter of which requires a motorcycle license. From the results, most of the replacement needs are classified into electric bicycles;

The new national standard has clear restrictions on electric bicycles, with a weight of less than 55kg and a maximum speed of less than 25km/h. The weight limit is actually forcing small and medium-sized enterprises to use lithium batteries or more favorable technological innovations, but it is difficult to advance based on cost considerations; Electric motorcycles, on the other hand, do not have strict weight and speed limits, but they are clearly restricted by driver’s license regulations.

ClassificationElectric bicycleElectric mopedElectrical motorbike
Product propertiesnon-motor vehicleMotor vehicleMotor vehicle
Pedal rideMust haveNot haveNot have
Product management3C certification

3C certification and

directory announcement

3C certification and

directory announcement

Maximum speed≤25km/h≤50km/h>50km/h
Vehicle quality≤55kgCan be≥255kgCan be≥255kg
Battery voltage<48VUnlimitedUnlimited

But for leading companies and large upstream battery manufacturers like top 10 two-wheelers battery manufacturers, their “re-innovation” in lead-acid batteries can achieve this weight requirement, such as the graphene lead-acid battery that Yadea has been promoting (in fact, it is only a the multi-layer graphene material is used as a conductive additive), which increases the capacity of the battery, so the battery can be made smaller and lighter; And battery manufacturers such as Tianneng, Chaowei, Haibao also have corresponding graphene lead-acid batteries (also known as black gold batteries), so the new national standard has also helped them increase their market share.

In other words, the electric two-wheeled vehicle market now and for a long time in the future is more like the space cultivated by the new national standard in the greenhouse, and the nutrients in it will be absorbed by the giants. In this hotbed, leading companies are renewing their labels.

For more than 20 years, although electric two-wheelers have become an important means of transportation for people’s short-distance travel, the public’s prejudice against electric two-wheelers is not high because of their large stock (currently about 350 million units in the market).

Look at this industry-because of the industry’s long-term assembly, OEM manufacturing methods, and multiple rounds of fierce price wars, a low-profit and low-efficiency stereotype similar to “shirts for planes” during foreign exchange earning has been formed.

Taking Yadea and Emma as examples, their gross profit margin is generally 10%-15%, and their net profit rate is between 2%-5%. The revenue data is similar to the “Chinese factory”-style assembly line industry. But in the future, their gross profit margin is expected to approach 20%, and their net profit margin may come to 8%-10%.

the public's prejudice against electric

This change means that a concept and prejudice need to be adjusted, that is, such a profit structure can already be aligned with vehicle companies (such as Changan Automobile, Great Wall Motor, etc.) manufacturing connections,this is the qualitative change of enterprise α, which will be relabeled by the market.

The competition between Yadea and Emma

However, most industries in the manufacturing industry that involve the upstream and downstream coordination of the industry will derive two development paths: specialized collaborative division of labor and vertical integration.

According to the development of the two paths in various industries in recent years, in the context of the sharp rise in core raw materials, the advantages of integration are very obvious.

In addition to ensuring maximum business profit margins, there is also the strategic effect of ensuring production capacity. Therefore, we see that Tesla and BYD, which have gone deeper in the direction of vertical integration, can continue to increase their sales in the context of shortage of chips and battery resources.

At present, in the electric two-wheeled vehicle industry, Yadea and Emma have gone to the above two development paths respectively.

Although the homogenization of two-wheeled electric vehicles has slowed down at this stage, it is still difficult to effectively eliminate the product strategies that other manufacturers imitate and follow, so the gross profit margin of companies with similar scales will not be significantly different.

In 2021 and 2022H1, Yadea’s specific gross profit margins are 15.21% and 17.92%, respectively, while Emma is 11.72% and 14.7%. Yadea is 3.49% and 3.22% higher than Emma.

The gap in sales volume is narrowing, that is, the marginal cost has declined to a certain extent after the expansion of the scale, but it is obviously not enough to explain the full 3% gap between the two.

The fundamental reason for the cost difference between the two is that at the end of last year, Yadea held (now wholly acquired) a subsidiary of Narada Power in top 10 energy storage battery companies in China, Huayu New Energy Technology Co., Ltd. (focusing on the research and development and production of new energy batteries), in this way, Yadea has its own lead-acid battery (such as the third-generation graphene lead-acid battery) production capacity and lithium battery technology.

The competition between Yadea and Emma

With the support of the battery business, the average unit price of Yadea’s cars is about 250RMB-400RMB higher than that of Emma, and the price of lead-acid batteries is about 400RMB. In addition, the integration also helps Yadea to launch its own high-end brand model (Vfly) to improve gross profit margin, because the lithium battery model is different from the lead-acid model, which can be used for the frame and body separately due to the standardization of lead-acid battery products. For the former, there is no standardized product specification for lithium batteries, so the development of new models requires the cooperation between the car factory and the battery factory.

The broadened gross profit margin is actually beneficial to Yadea in the face of possible price wars that may reappear in the industry in the future. (The demand for new products stimulated by the new national standard is more than half, the industry lacks destructive innovation soil, and the uncertainty of the second curve going overseas is strong), and it has room to maintain its own financial stability through marketing expenses.

However, Emma’s high growth in 2022H1 has narrowed the gap with Yadea, and the growth in revenue, gross profit margin, and net profit margin has exceeded Yadea’s performance. Behind this may be that traditional lead-acid battery manufacturers including Tianneng and Chaowei have already Feel the threat from the integration of Yadea.
Traditional battery manufacturers need to unite with another oligarch to check and balance the integrated enterprises. Today, Emma’s high-end models are also accelerating.

Therefore, in the field of electric two-wheelers, the two paths of vertical integration and industrial division of labor are likely to coexist for a long time, which is the result of a balanced game between the two forces.

At present, it seems that the Chinese electric two-wheeler brands represented by Yadea, Emma, NIU, and No. 9 are unique in the global market, and they are ushering in their own highlight moment.

Lucky Li
Lucky Li
My name is Lucky Li, and I have been engaged in the lithium battery industry for more than ten years. It has been 5 years since I started writing about lithium-ion batteries, I have a deep understanding of lithium-ion batteries, not only that, but also analyze and write according to the market in this field, and will continue to learn and research. I hope to provide help to everyone who is interested in the new energy industry.
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3 thoughts on “Electric two-wheeler industry has ushered in a bloom time”

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