China leads in global NEV transformation

New energy vehicles (NEV) are one of the focuses of China's new strategic industries. Their development promotes the upgrading of manufacturing structure and is central to China’s "dual carbon" policy (reach peak carbon use by 2030 and become carbon neutral by 2060). After years of development, China's NEV industry now ranks first in total sales globally. In 2021, sales of NEV in China exceeded 3.5 million, accounting for more than 50% of the global market. Moreover, in 1H2022, Chinese domestic manufacturers accounted for half of the top 20 NEV brands globally by sales.

Figure 1: Sales of new energy vehicles by region

Source: CleanTechnica, EV Volumes, JLL Research 

Figure 2: Global sales of new energy vehicles in the first half of 2022 by manufacturer

Source: CleanTechnica, EV Volumes, JLL Research

Shanghai has played a pivotal role in developing the country's NEV industry. The city has already established itself as the high ground in the NEV industry for research, production and sales.

Figure 3: Representative leases of Shanghai NEV industry chain (2020 – 2022)

Source: JLL Research

As a R&D centre, Shanghai attracts all players from the NEV industry chain

With its deep-rooted industrial base in integrated circuits and artificial intelligence, Shanghai has gathered many talents in the industry and possesses abundant research and development resources and capacity. Taking vehicle manufacturers as an example, many companies choose stand-alone projects (see Figure 3) in Caohejing, Zhangjiang and other business parks as their headquarters and R&D centres. These stand-alone projects not only provide ample space for manufacturers to expand, but also meets the spec requirements for manufacturers’ R&D functions including ceiling height, floor loading, power supply, and loading deck. Furthermore, Zhangjiang's mature industrial base in integrated circuits and semiconductors helped it become one of the preferred locations for R&D and manufacturing of in-vehicle chips. On the other hand, the Jinqiao business park, with its traditional manufacturing advantages, has attracted many new brands and intelligent technology companies.

Topping the country in production and sales, Shanghai leads China into the passing lane

Shanghai's NEV output value exceeded 160 billion RMB in 2021, with production reaching 632,000 units, ranking top in the country. Most global NEV brands are drawn by Shanghai’s growth potential, including both foreign and domestic manufacturers. From the representative deals above, we can see that well-connected submarkets are attracting attention from upstream and downstream companies in NEV industrial chain. For example, Qiantan, Houtan and Xuhui Bund are popular among these companies for their industrial clustering and proximity to factories in Lingang. Also, the Hongqiao transportation hub and the Linkong business park are famous for their connectivity with the Yangtze River Delta. These submarkets and business parks attracted many NEV industry chain companies to take leases.

On the other hand, active local demand for NEV in the city continues to drive the development of Shanghai's NEV market scale. In 2021, Shanghai topped the list of cities in China with over 240,000 vehicles sold while ranking first in ownership. This wave of NEV companies’ expansion is expected to continue as the city’s New Energy Vehicle Industry Development Plan (2021-2025) aims to exceed annual output of NEV by 1.2 million and the output value by RMB 350 billion by 2025. The vast demand supports a complete industrial chain. Many foreign car manufacturers have also chosen Shanghai as a base to expand their market footprint, as we can see in the figure above, setting up office in well connected submarkets in CBD and emerging submarkets. In the future, we expect more related companies to enter Shanghai and become essential to the demand source for the city’s office and business parks.