By Greg Gao

(JW Insights) Oct 25 -- Cost optimization has become a first priority for China’s automakers as the growth rate of the domestic electric vehicle market gradually slows down and industry price wars escalate, JW Insights reported recently.

The auto electrification and smart technology transition has turned into a consensus in the automotive industry. Industry experts point out that as profit margins for automakers continue to decrease amid ongoing rounds of price wars, they are becoming increasingly anxious. The pressure is being passed to upstream suppliers, resulting in significant cost pressures throughout the industry.

Driven by national policies and market demands, the electrification wave in the Chinese automotive industry seems unstoppable.According to the September 2023 data from the China Passenger Car Association (CPCA), the retail market for narrow passenger vehicles in China was approximately 1.98 million units, with a 3.1% monthly increase and a 3% year-on-year growth. Among them, sales of new energy vehicles reached about 750,000 units, with a 4.7% monthly increase and a 22.3% year-on-year growth. The market penetration for new energy vehicles was approximately 37.9%, and it maintained a stable growth trend.

Liao Weide, an expert in electronic products, noted that with the cost of internal combustion engine vehicles already compressed to the utmost, and without any major technological revolution, there is little room left for profit. With the industry trend shifting toward electrification, the materials and technological solutions supporting electric vehicles are rapidly evolving, leading to continuous improvement in module performance and cost reduction.

Silicon carbide (SiC) is undoubtedly the biggest beneficiary of the electrification trend in the automotive sector due to its performance advantages. It was once believed in the industry that SiC would replace the majority of the market share of insulated-gate bipolar transistors (IGBT) .

However, with its substantial cost advantages, an increasing number of industry experts believe that IGBT cannot be replaced by SiC. SiC is better suited for high-end models that prioritize performance, while IGBT will continue to dominate in mid-range and low-end models that seek the ultimate cost-performance ratio.

In terms of smart technologies, there was a time when the number of LiDAR devices equipped in vehicles became the standard for measuring the level of intelligence in automobiles. However, since 2023, under the pressure to reduce costs, more and more automakers are decreasing the use of LiDAR devices.

The primary driver of technological innovation in automobile is gradually shifting from performance enhancement to cost optimization. Downsizing or switching to more cost-effective solutions or components is becoming an industry trend, the JW JW Insights analyst report concluded.