Chinese Analysts Concerned Electric Car Sales Need More Than Subsidies to Succeed

While incentive-driven electric car sales continue to be hot, Chinese analysts are concerned it will take several years for the technology to stand on its own in the market.

Sales are seeing whopping gains this year, up 82.2 percent through October versus that same time period in the Chinese market last year. The China Association of Automobile Manufacturers reported that 337,000 new energy vehicles were sold in the country during the first 10 months of 2016.

Market analysts see these gains that have made the world’s top plug-in electrified vehicle market driven primarily by generous government “new energy vehicle” subsidies. It may take several years for PEVs to be able to fend for themselves, they say, with the 2016-to-2020 period being critical in the industry’s development.

Wang Binggang, considered to be a leading expert on new energy vehicles, said there is still a long way to go before these vehicles can succeed.

“Sales growth is now mainly driven by government policies instead of market demand,” said Wang at a recent forum in Beijing.

Wang also sees less competitive prices, insufficient charging facilities, and low demand from consumers as indicators that PEVs can’t sustain itself as a segment in new vehicle sales in China.

Consumers buying an all-electric vehicle can tap into a 55,000 yuan ($8,088) subsidy, and those buying a plug-in hybrid can get 30,000 yuan ($4,338) from the central government thus year. Local government subsidies vary by region and add to the total discount for buyers, similar to a few U.S. states adding to the incentive provided by the federal income tax deduction.

The Chinese national government started subsidies in 2009 to stimulate development and sales of new energy vehicles. As of 2015, 33.4 billion yuan ($4.8 billion) were earmarked for these incentives through the end of 2015, according to the finance ministry.

SEE ALSO:  China Continues Strong Plug-in Electrified Vehicle Sales During First Half of 2016

Earlier this year, a finance ministry official said the government is raising the bar where carmakers can qualify for subsidies to manufacture and sell PEVs. Chinese media outlets expect the national government to publicize the revised program later this month.

Chen Quanshi, an automotive engineering professor at Tsinghua University, said if new energy vehicle sales is lower than 10 percent of total new vehicle sales in the country, they won’t become an economic commodity for popular consumption. He thinks it will take five-to-10 years to reach that level.

New energy vehicles only made up 1.5 percent of total sales through October.

Another challenge automakers face is getting more consumers out there to buy PEVs.

Yale Zhang, managing director of consulting firm Automotive Foresight, said individuals account for only around 20 percent of new energy car buyers in China. That implies the other 80 percent is made up of government agency and fleet acquisitions.

As is the case in other parts of the world, Chinese automakers are preparing to roll out several new PEV models in coming years.

Geely Automobile Holdings and Chery Automobile Co. have announced their five or 10-year plans for the development of PEVs. SAIC Motor plans to raise another 15 billion yuan ($2.1 billion) for research and development of new-energy vehicles.

Volkswagen AG has a memorandum of understanding with China’s JAC Motors to produce electric cars. The German automaker has said it will be introducing about 10 all-electric vehicles based on its Modular Electric Model technology to the Chinese market over 10 years. Mercedes-Benz displayed its electric concept car EQ at the Auto Guangzhou 2016 show in November, and Audi has said it will add five locally-produced Audi e-tron models to its China vehicle lineup within five years.

China Daily


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