The premiumization of electric vehicles remains unsolved for now.

Zebra Consumer Fan Jian

In 2024, the price war in the new energy vehicle market has become increasingly fierce. A similar story is unfolding in the miniaturized version of the new energy sector—the two-wheeled electric vehicle market.

Last year, the two giants in the two-wheeled electric vehicle market, Yadea Holdings (01585.HK), saw comprehensive growth in sales, revenue, and profits; while Aima Technology (603529.SH), saw a decline in sales of its core products, with only slight increases in revenue and net profit, indicating a business bottleneck.

Analysis reveals that Yadea, which has always pursued a cost-effective strategy, continued its price war in 2023; meanwhile, Aima, which originally positioned itself as relatively high-end, maintained its pricing system but lost sales growth.

The underlying industry-wide reason is that the premiumization of the two-wheeled electric vehicle market has temporarily failed, and the industry has regressed into a vortex of internal competition—competing on aesthetics, performance, and technology—ultimately reverting to price wars.

Like motorcycles and new energy vehicles, can overseas expansion become a new growth point for the two-wheeled electric vehicle market?

Performance Divergence

On April 16, Aima Technology (603529.SH), a leading electric vehicle company, released its 2023 financial results.

Last year, Aima's total sales volume was 10.7415 million units, a year-on-year decrease of 0.29%. Among them, sales of electric tricycles increased by over 60%, while its core business of two-wheeled electric vehicles declined by 2.06%, with over 200,000 fewer units sold.

In 2023, Aima Technology's operating revenue reached 21.036 billion yuan, a year-on-year increase of 1.12%. Thanks to improved profitability in its electric tricycle business, the company's overall gross margin slightly increased by 0.16 percentage points. However, due to rising expenses across the board, its non-GAAP net profit was 1.764 billion yuan, a year-on-year decrease of 1.83%, while its net profit attributable to shareholders was 1.881 billion yuan, a slight increase of 0.41%.

Aima Technology went public on the A-share market in 2021 and experienced a significant leap the following year, with sales growth exceeding 25%, revenue growth of 35%, and a 182% increase in net profit.

At the end of his "Letter to Shareholders," Aima Technology's Chairman and General Manager Zhang Jian wrote: "Optimists win the future, pessimists win the present—we embrace both optimism and pessimism."

Changes in consumer trends under economic conditions, the deepening implementation of the new national standards for two-wheeled electric vehicles, and intensifying industry competition are constantly shaping the industry's development trajectory. As industry concentration increases, market competition has evolved from big players squeezing out small ones to big players competing against each other and fast players outpacing slow ones.

What’s surprising is how quickly this divergence has spread to the top-tier players. Even Aima Technology, the second-largest player in the two-wheeled electric vehicle industry, has hit a growth bottleneck.

In contrast, Yadea Holdings (01585.HK), the industry leader, delivered a strong performance in 2023, continuing to dominate the market.

Last year, Yadea sold 16.521 million two-wheeled electric vehicles, a year-on-year increase of 17.9%. The company's revenue reached 34.763 billion yuan, up 11.9% year-on-year, with attributable profit rising 22.2% to 2.640 billion yuan.

The two-wheeled giants have managed to hold their positions, but the second-tier players behind them have already entered a fierce battle for survival. In 2021, the 3rd to 5th places in the two-wheeled electric vehicle industry were Tailg, Jinjian, and Sunra. Just a year later, the rankings shifted to Tailg, Sunra, and Luyuan.

In the first three quarters of 2023, Sunra (603787.SH) reported operating revenue of 3.313 billion yuan, a year-on-year decrease of 19.19%, with net profit attributable to shareholders falling 32.06% to 103 million yuan. Given the market's trend of strong early-year performance followed by a decline later in the year, Sunra is unlikely to reverse its downturn in Q4.

However, another Hong Kong-listed electric vehicle player, Luyuan Group (02451.HK), presented a different picture. In 2023, its revenue reached 5.083 billion yuan, up 6.3% year-on-year, with attributable profit at 146 million yuan, a 23.4% increase.

Thus, the landscape of the second-tier players in the two-wheeled electric vehicle market may undergo significant changes again in 2023.

Giants Gather

In 1995, China's first lightweight electric vehicle was developed at Tsinghua University. The following year, Ni Jie and Hu Jihong, a couple teaching at Ningbo University, spent three months handcrafting the first electric bicycle in a modest basement. In 2003, they founded Luyuan, which became a pioneer in China's two-wheeled electric vehicle industry.

Today, most of the leading players in the electric vehicle market were established around the turn of the century. Yadea was founded in Jiangsu in 2001; Aima was established in Tianjin in 1999 and entered the two-wheeled electric vehicle market in 2004; Tailg was also founded in Shenzhen that year.

After an early experimental phase, the two-wheeled electric vehicle industry entered a rapid growth stage from 2005 onward. By 2013, national production reached 36.95 million units, with an average annual compound growth rate of nearly 15%.

Within just 20 years, China has become the world's largest producer, consumer, and exporter of electric bicycles.

Upon entering maturity, China's electric bicycle production saw a slight decline from 2014 to 2017, only to rebound in 2018.

A new industry variable emerged in 2019. In April of that year, the new national standard for electric bicycles was officially implemented, imposing strict requirements on vehicle weight, dimensions, and maximum speed. Across the country, transitional periods of 3-5 years were set for non-compliant electric vehicles, after which they would no longer be allowed on the road.

Following the implementation of the new national standard, the electric vehicle industry underwent a major shakeout. At its peak, there were 2,000 electric two-wheeled vehicle manufacturers in China; by 2022, only about 100 remained compliant with the new standards.

Simultaneously, China's electric vehicle market experienced a small wave of replacement demand. It was during this cycle that leading brands like Yadea, Aima, and Tailg leveraged the passive increase in industry concentration to rapidly scale up.

Yadea Holdings became the first listed company in the two-wheeled electric vehicle industry when it went public on the Hong Kong Stock Exchange in May 2016. The following year, Sunra rode onto the Shanghai Stock Exchange's main board. Four years later, Aima Technology made its A-share debut. In October 2023, Luyuan Group went public in Hong Kong.

Continued Internal Competition

The enforcement period for the new national standard on electric vehicles is expected to end by late 2024. Recently, a large number of electric vehicle stores in Jiangsu and other regions have closed, and many electric vehicles have been banned from the roads, all related to this policy.

As the new national standard nears full implementation, the electric vehicle market will once again enter a phase of stagnant growth. Faced with an anticipated slowdown in sales growth, leading electric vehicle manufacturers are turning their focus to premiumization.

In 2021, Yadea launched its premium brand "VFLY," with prices ranging from 6,999 yuan to 19,800 yuan. Aima followed suit, introducing its premium sub-brand "Xiaopa," priced between 4,999 yuan and 9,999 yuan.

Newcomer Niu, from the outset, positioned itself as a smart, high-end brand, targeting urban young consumers in first- and second-tier cities and earning the nickname "the Tesla of two-wheelers."

However, the push for premiumization in the two-wheeled electric vehicle market has collided with widespread consumer downgrading.

Sales data from the two giants shows a trend of growth in low-priced electric bicycles and a decline in high-priced electric motorcycles.

In 2023, the average ex-factory price of Yadea's electric bicycles was 1,380 yuan, down 49 yuan year-on-year; the average ex-factory price of its electric scooters was 1,741 yuan, down 130 yuan year-on-year.

During the same period, Aima's electric bicycles averaged 1,689 yuan ex-factory, up 12 yuan year-on-year, while its electric motorcycles (electric scooters) averaged 2,161 yuan, down 24 yuan year-on-year.

The pricing trends of these two giants partly explain their differing performance: Yadea engaged in a price war, while Aima did not follow suit.

This also indicates that, from an industry perspective, the premiumization of the two-wheeled electric vehicle market in recent years has largely failed.

Both segments of Aima's two-wheeled electric vehicle business, whether they lowered prices or not, saw declining gross margins. Niu, which focuses on the premium market, continued to report losses.

The core use case for two-wheeled electric vehicles is commuting, and this limitation caps their price ceiling. If consumers are willing to spend over 10,000 yuan on a two-wheeled electric vehicle, why not consider a Wuling car? Rumors suggest its upcoming new model will cost just over 10,000 yuan.

Thus, the two-wheeled electric vehicle market has returned to a state of extreme internal competition—competing on aesthetics, performance, and technology, but ultimately reverting to price.

If business value cannot be enhanced in a stagnant market, the only option is to look outward. For Yadea and Aima, the path forward lies in overseas expansion.

Aima's overseas performance has been lackluster, with 2023 overseas revenue at 226 million yuan, a mere 2.21% increase, and gross margin at 19.79%, down 1.27 percentage points. It seems the overseas ambitions of leading two-wheeled brands will remain a long-term challenge.

China's new energy vehicles are aggressively capturing overseas markets, and motorcycles, nearly squeezed out of cities, have stabilized their industrial base abroad. Why can't two-wheeled electric vehicles do the same?