China Fails To Grow Electric Vehicle Business As Expected

OCT 26 2012 BY STAFF 2

Not often to you come across examples of China not doing something as fast as the United States, but expanding the electric vehicle segment at home and abroad seems to be one such happening.

According to the majority of forecasts and surveys five years ago, by 2013 China was expected to be leading the world in domestic EV sales, and to be pressuring for the manufacturing/export lead as well.  The Chinese electric cars were coming, and they were unstoppable.

When China forecasted they would hit 500,000 units sold in 2015 a couple years ago, it seemed more plausible than that number here in the US.  When they said they would move 5 million by 2020, even that did not sound too outlandlish.  After all, who would question Chinese production and/or its domestic market growth?

However, here are the results as we enter 2013:

  • Fifth largest EV market behind Japan, the United States, France and Germany
  • Production in Q2 b country:  7,931 EVs produced in the US, 4,240 by Japan, 235 by Chinese companies (which was down 31% from Q1)

Here Is What China Can Actually Sell At Home And Abroad Today - Hybrid And Electric Buses

The outlook for EVs now in China?  A recent report from Mckinsey & Company report on the Chinese market suggest that perhaps 300,000 electric vehicles could be produced by 2017.  That report does still allows for the fact that the Chinese market could grow quite rapidly, and once again challenge for the lead in the segment, but provided a couple things occur:

The Government Backs Off Foreign Carmakers – While there is a lot of government incentives in China, they do not apply to most EVs not produced in China.  In fact, auto makers are penalized for not having Chinese content in their cars.    So if you want a Chevrolet Volt, be prepared to shell out $80,000, a Nissan LEAF?  Not much cheaper.    (It should be noted that Nissan is currently working on a circumvention of the Chinese system by making a LEAF-clone though its Chinese Dongfeng – Nissan nameplate)

EVs Get Cheaper – It is almost too obvious to mention, but for a Chinese population that can not afford a pricetag anywhere near where its US counterpart can, the price of an electric vehicle sold in China needs to be many times less than what it sells for today for the segment to take off.  A fact the Chinese government knows.   Which is why they offer as much as 123,000 yuan off the price of a new EV to subsidize buyers.  That figure translates to about $20,000 off the price of an EV, which makes some domestic plug-in products around $10,000.   Still, the sales are not there.

Breaking down deliveries of the electric vehicles to date in China really illustrates the problem.  The general population makes up less than 1 in every 5 sales of EVs.  Chinese EV maker, BYD has only delivered electric cars to municipalities over the past 3 years, Beijing Foton Motor has supplied 250 electric cars, all to the government, and all of which will be used as taxis.

Currently, the Chinese population has no interest, or perhaps more appropriately, no means to purchase a plug-in electric vehicle.  And for now, that means the electric vehicle market in China has, for lack of a better word, stalled.

Categories: BYD, General


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2 Comments on "China Fails To Grow Electric Vehicle Business As Expected"

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Huge opportunity in China – but it’s going to take a team play. Since China is a Communist country, it isn’t as controversial or surprising for government to intervene with incentives if not demands that the general Chinese public buy electric. Will it happen? It depends on many things. Pricepoint is central. China now posesses the lion’s share of lithium-ion battery production in the world. Go to eBay to find either similar or knockoff battery packs galore. Look to YouTube where Japanese EV developers went to inspect Chinese lithium factories which seem to go on for miles and miles without end. There is tons of potential in China for EVs to take off like nowhere else. If they can’t make a budget EV with their low worker pay and nearly nonexistent worker rights – nobody can! Small EVs like SparkEV were made for this market. For one, Chinese first-time auto buyers don’t know what it’s like to “See THE U-S-A In A Chevrolet!” ….in other words, they need basic transportation to and from work usually in large population centers. While rural Chinese need cars and trucks – they’re not where the large concentrations of workers live. China needs engineering. GM… Read more »

Here is my main take:

Today, the US has customers who can see the value in buying a plug-in vehicle.

China’s citizens are just barely meeting the means to get any automobile, let alone an electric. This phenomenon will not last long. If Asia can starts to produce electricity at LCOE rate comparable to the US, their EV market will eventually take off.

In the near term, asian customers will only buy the vehicle they can afford, regardless of where it is built or how “green” it is.