- EV sales, 45% of the total took place in China
- The largest EV OEM – BYD
- EVs, China holds the highest growth rate
The global auto industry that has been dominated by the internal combustion engine will undergo a significant transformation as several countries such as Germany, China, the United Kingdom, France, Norway, etc. are planning to phase out gasoline and diesel cars. Thus, as nations become more environmentally conscious, EVs (Electric Vehicles) provide a clean alternative to traditional vehicles by reducing air pollution (in the long run) and limiting noise pollution. According to Sherry Boschert (Author: Plug-in Hybrids: The Cars that Will Recharge America), the increasing use of EVs could possibly reduce the amount of smog forming pollutants to as low as 32% from 99%.
Presently, the global EV market accounts for a mere 0.2% of the total light-duty vehicles. Globally, 95% of the electric car sales takes place in just ten countries; China, the United States, Japan, Canada and the six leading European nations; Norway, France, the United Kingdom, the Netherlands, Sweden and Germany. Although the highest domestic EV market share is held by Norway (500,000 EVs or 29%, 2016), China is the global leader in EV usage (about 600,000 EVs ran on its roads, 2016).
According to the International Energy Association (IEA), 2016 registered a new high for electric vehicles with an aggregate of 750,000 new registrations worldwide. This was a spike of 60% (2016) over the previous year and led to the global electric car stocks surpassing 2 million electric vehicles. The growth is remarkable considering the fact that almost a decade ago there were no EV models. In contrast, currently, there are roughly 100 plus EV models across the globe with close to an additional 120 different EV models expected by 2020.
Over the years, EVs saw numerous favourable factors boosting their sales including a reduction in technology costs along with battery costs (account for one-third of an EV cost) down by ~65% in 2016 from 2008. Additionally, more technological innovations as well as substantial advancements made in new battery capacity translated into reduction of price and positively benefited the industry. Hence, from the current cost of $273 per kWh (2016), it is anticipated that battery costs would go down to as low as $120 per kWh by 2030 and will be followed by further reductions.
Internationally, the US held the largest chunk of the electric car stock up to 2015. However, China alone accounted for about 40% of the electric cars sales globally in 2016. This was more than double the number of electric cars sold by the United States. In 2016, China had the largest electric car stock with around one third of the total global output. The nation far exceeded the US and Europe in terms of the total EV sales in the same year. While China sold more than 500,000 EVs (up 53% over 2015), the US and Europe sold 157,000 and 222,000, respectively. In 2017, China is projected to sell 800,000 EVs.
In the contemporary world, China has the largest auto market and the country is a global leader in the electrification of other modes of transportation. The country manufactures nearly 200 million electric two-wheelers, 3 to 4 million low-speed electric vehicles (LSEVs) and 300 thousand electric buses. The total state investment, including subsidies in this sector has been massive. Beijing is likely to spend ~Rmb 400 billion ($60.7 billion) between 2015-21 on new energy vehicle subsidies, this is roughly the GDP of Uzbekistan. These subsidies will gradually phase out after 2021.
The major driver for China’s transition into EVs was the government’s push to improve the air quality in urban areas, while also cashing on the evolving transportation needs of the large middle class through rising per capita income. China aims to have 11% EVs (5 million) of the total car sales by 2020 and 7 million by 2025. Hence, in order to achieve this target, the Chinese government provided financial incentives by attractive monetary and non-monetary initiatives for EV adoption in 2016. The electric cars are exempted from acquisition and excise taxes (worth $5,000-$8,500 per car) in the country according to the IEA. Additionally, China’s local and regional authorities are allowed to complement these with the central subsidies at a limit of 50%. Furthermore, big cities allow partial or total waivers from licence plate availability restrictions, while providing special lanes and other perks to entice customers. This combined strategy resulted in making EVs both financially affordable and attractive to purchase, thereby leading to a strong sales growth rate of 53% or 507,000 EVs in 2016 over the previous year.
The market sales dynamics, in parts, has also been boosted by the launch of several new EV models in China. In 2016, approximately 25 new EV models were introduced, which gave Chinese consumers a choice of ~75 EV models. This is the maximum that is offered in any market around the globe, China is also investing heavily in the development of infrastructure, especially for charging stations to expedite the transition towards the electric mobility. A report by Xinhua, the state news agency, stated that the government will deploy nearly 100,000 public charging stations (~Rmb25 Billion, 2017), to the existing 150,000 (2016). The US only has around 41,000 public charging outlets or plugs at about 16,000 stations in comparison. The Chinese government plan to keep the momentum going at least by 2020 and expect to have an adequate charging capacity to support a whopping fleet of five million EVs by the above period.
In addition, batteries have emerged as a critical front with a view to further bolster China’s EV industry. The country has been criticized by experts and foreign automakers for setting up market and formulating policies in order to favour domestic suppliers, thereby supporting local battery players whilst deploying licensing procedures to restrain foreign companies. This resulted in two of the top-five lithium-ion battery makers in the world, namely CATL and BYD originating from China. The nation also announced several regulations, thereby forcing carmakers to meet steadily increasing production quotas for battery-powered cars beginning 2019.
China experienced ‘subsidy cheaters’ or those companies which utilised the subsidies but did not manufacture EVs. Thus, the government is said to roll back ~Rmb 2.3 billion in concessions. China is also pushing large local and foreign automakers to commence producing EVs. The new rules require 8% of car sales should be electric by 2017 and 12% by 2020, although these targets have been deemed overly ambitious by the automakers. This would further entail that automakers, which miss their quotas will have to purchase credits from EV makers. In this way, the government will end up spending less on its subsidies on EVs and in turn, force the auto industry to do so.
Bernstein, a reputed Wall Street research firm states that EVs could possibly represent 40% of the auto sales as well as 30% of the global car parc in the next 20 years. China’s strong central planning mechanism, proactive and somewhat sneaky policies, the biggest auto market and its impact on the global economy has helped the nation to already capture a big chunk of the EV market. Thus, so far, the progress made by EVs is just the tip of the iceberg. There are several factors such as the impact of phasing out of subsidies, along with competition from non-Chinese automakers, which will further chart the course for China and its competitiveness in the sector.