New Energy Vehicles Trend in China
In China, the formula for pushing new energy vehicles (NEV) cars is not complicated: combining high purchase subsidies with a huge charging network, sales are accelerating immediately. China’s stated goal of 25% of the auto market being comprised of NEV vehicles is well on its way.
China’s aim is not only to purify their highly polluted air for some of the most polluted cities in the world, but also to accelerate the development of the domestic automobile industry that lags behind the technological development of global competitors.
President Xi does not want to see any of his industries considerably trailing their global peers. Many suspect this was the catalyst for Tesla getting such a warm welcome from the government. Tesla’s ability to expand to China was much easier than most American companies. Elon Musk has promised to share his technology which was a large motivator for President Xi to work with Tesla.
Elon Musk has been reaching out to China since the earliest days of Tesla. In fact Chinese trade and economic ministers have been frequenting Tesla plants since the very beginning. However, Chinese companies are not happy about this arrangement and have compared the act to dropping a catfish in a pond.
But, China has a terrible history of continual failures in their electric car market. At this point, the government is willing to sacrifice the near-term prospects of a number of domestic electric car manufacturers to increase the overall prospects of the industry in the long-term.
China started pushing electric cars on its masses in the late 90s and by the early 2000’s junk yards throughout China were stockpiled with unwanted and poorly made electric vehicles that citizens were discarding for Ford’s and Audi’s.
Gradually China has started seeing good growth in its electric vehicle market, however not at the speed it desires, hence the Elon Musk and Tesla welcome.
The Chinese new energy electric market started progressing well by 2014, as China had successively started issuing aggressive policies to support the development of the new energy vehicle industry. At present, China has become the world's largest new energy vehicle market. Of course, this is simply due to China’s immense size. The 25% government goal for electric vehicles in their market can’t be achieved without Tesla, despite red hot growth recently.
According to the China Automobile Industry Association, by 2018, China's new energy vehicle (NEV) production and sales scale had reached 1.270 million and 1.256 million respectively, a year-on-year increase of 59.9% and 61.7%, which is a stark contrast to the traditional sluggish fuel vehicle market. In 2014, the production and sales of new energy vehicles were only 78,499 and 74,763. In the four short years from 2014 to 2018, the annual growth rates of new energy vehicles were as high as 100.58% and 102.46%.
In the first half of 2019, China's new energy vehicle (NEV) production and sales reached 614,000 and 617,000 respectively, an increase of 48.5% and 49.6% year-on-year. Among them, the production and sales of battery electric vehicles (BEV) were 493,000 and 499,000 respectively, an increase of 57.3% and 56.6% year-on-year; the production and sales of plug-in hybrid electrical vehicles (HEV) were 119,000 and 126,000 respectively, an increase of 19.7% and 26.4% year-on-year.
However, with the new energy subsidies from the Chinese government beginning to phase out on June 25th of 2019, China's electric vehicle market has started to see a slowing demand. New energy vehicles sales fell sharply in the second half of 2019. Many people feel that China was tired of pumping endless subsidies into the market, and this desire is what prompted their decision to work with Elon Musk and Tesla.
The next two years will be a crucial period for China's new energy vehicle industry to transition from "policy-driven" to "market-led development." The full integration of new retail, artificial intelligence, car networking industry and the automotive industry will promote continuous innovation in the value chain of the new energy vehicles industry.
The focus of competition will shift from product competition to service competition, from single-link competition to comprehensive competence of business model, and from intra-industry competition to cross-industry competition.
Under the general trend of consumption upgrade, consumers' choice of new energy vehicles is more comprehensive and rational, which puts forward higher requirements for the new energy vehicles: not only focusing on the range and charging experience of new energy vehicles, driving comfort and intelligent functions are also important factors for car purchase.
This is why many worry that Tesla’s cars could wipe out the rest of China’s new energy auto manufacturers. Tesla cars are just far superior to the current domestic Chinese new energy vehicle offerings. Maybe that is President Xi’s plan? Perhaps Xi has decided that Chinese minds and effort would be best applied elsewhere. Or maybe Tesla gets nationalized and Xi pulls a fast one on Elon?