NEV makers raise prices to offset drop in subsidies
February 26, 2019 Category China News Round-up, Weekly
As the Chinese government is reducing subsidies for sales of new-new-energy vehicles (NEVs), some manufacturers have raised prices to safeguard their profits, but analysts expect that prices will drop again eventually. The subsidy may drop as much as 50% from the previous year, which means CNY70,000 less for one electric car sold. Startup Xpeng Motors has announced that the selling prices of its first model Xpeng G3 will increase to CNY155,800-199,800 from CNY135,800-165,800 at the beginning of this month, up almost 15%. Sitech Dev, another startup based in Guizhou province, has raised the prices of its first model DEV1 by CNY5,000 to CNY6,000 since January 24. Shanghai-based Nio has been coaxing potential customers to place orders as early as possible to prevent price hikes. Nio announced that the customers can enjoy the same subsidy as in 2018 as long as they buy a Nio ES8 this month and get the license plate before the release of the 2019 national new energy vehicle subsidy policy. BYD, China’s leading electric vehicle maker, has similar measures: car buyers who get the license plate before March will receive the same subsidy as they would have in 2018.
Yu Qingjiao, Secretary General of the Zhongguancun New Battery Technology Innovation Alliance, said that price hikes will not become a trend, but a temporary phenomenon, and the prices of new energy vehicles will decline as a whole, as upstream industries, including the battery, electric motor, electric control and intelligence system, have lowered their costs steadily, and market competition may get more intense as Tesla finishes the initial construction of its Shanghai Gigafactory by summer. As a result, Chinese electric carmakers will have to lower prices to keep and enhance their product competitiveness, Yu added.
According to a report by Ways – a provider of business analysis for the automotive industry in China – the cost of the power battery system was CNY3 per watt-hour in 2015, CNY1.2 in 2018, and is expected to be reduced by 20% by 2020, which means that the cost of an electric vehicle with a 60-kilowatt-hour battery is estimated to drop by CNY20,000 to CNY30,000.
A Senior Executive of BYD said that with the gradual reduction and final elimination of government subsidies and the rapid upgrading of the new energy industry, carmakers without core technology or comprehensive competitiveness are very likely to fall behind. Those over-reliant on subsidies and without any ambition and capability to develop valuable new energy products will be squeezed out of the market, the China Daily reports.
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