China’s EV industry powers ahead, but some problems remain to be solved
September 5, 2017 Category Automotive, Weekly
China’s electric vehicle industry seems to be well on the road to global dominance. Dig a little deeper and the figures are less impressive than they first appear. In 2015, Beijing declared its plans to dominate the world’s electric car industry by the year 2025, and in 2016 Chinese car manufacturers planned to sell 500,000 electric vehicles in the domestic market. The target was met. About 340,000 of the half a million EVs were passenger cars, the rest were mostly buses. In contrast, manufacturers in the world’s second largest market, the United States, sold just 155,000 electric passenger cars.
What is more, China’s electric vehicles are manufactured overwhelmingly by locally-owned producers, not foreign joint ventures, and they are based on Chinese technologies. Last year China’s leading electric vehicle maker, Shenzhen-based BYD, turned out 100,000 cars. The leader in the U.S., Tesla, managed to sell 76,000 into its home market.
But the industry’s development also faces some issues. The rapid increase in electric car sales has been powered by generous government subsidies and incentives. Last year, China’s central government offered subsidies of CNY30,000 to buyers of plug-in hybrid cars, and as much as CNY55,000 to purchasers of pure electric cars. Some local governments offered additional subsidies of the same amount, to total 60% of the vehicle’s sticker price. Thanks to the subsidies, electric vehicles were competitive with conventional cars. On top of that, license plates for electric cars and plug-in hybrids are free. The prevalence of subsidies has meant almost every one of China’s 169 domestic car makers, most of which are backed by local governments, has rolled out models of electric cars. The majority are low-tech and of poor quality, and struggle to make sales in the commercial market.
As a result, the biggest customers for these cars are often the local governments that support their manufacture. Now the central government may cap the subsidies, and impose strict quotas for electric vehicle production on the country’s car manufacturers, which may have a serious impact on sales.
Chinese car manufacturer BYD announced that its net profits fell by 23.8% to CNY1.72 billion in the first half of the year, missing analysts’ expectations. Reduced government subsidies weighed on its sales of new energy vehicles (NEVs), while fierce competition hurt its photovoltaic business. BYD operates in three distinct business sectors: automobiles, mobile handsets, and rechargeable batteries and photovoltaics. For the first half of the year, the three segments posted revenues of CNY22.4 billion (down 4.1% from a year ago), CNY18 billion (up 10.25%), and CNY3.42 billion (down 15.75%), respectively. BYD said that it expected the divergent performance of its three business lines to continue into the latter half of the year.
Renault-Nissan and China’s Dongfeng Motor Group announced they will set up a new joint venture – Hubei-based, eGT New Energy Automotive Co, to develop electric vehicles in China. “This marks a deepened and strengthened strategic cooperation between Dongfeng and Renault-Nissan,” said Zhu Yanfeng, CEO of Dongfeng. Under the agreement, Renault will hold 25% of eGT, Nissan will own 25%, and Dongfeng the remaining 50%.
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