China’s EV market starting to show slight signs of life

March 14, 2012
BYD e6 and dolly bird

A newly released survey by the China Association of Automobile Manufacturers showed that 8,159 hybrid and plug-in electric cars were sold nationwide in 2011. All together, there are now more than 10,000 green cars on China's roads.

Although a tiny fraction of the original target of having 500,000 electric vehicles on Chinese roads by 2011, the new figures will nonetheless come as a relief to government authorities and the industry, which have been frustrated by doubts among Chinese consumers about the technology and practicality of electric vehicles (EVs).

In terms of market penetration, however, China’s EV sales are still sub-miniscule. 2011 was a slow year by the standards of China’s auto industry with sales of new cars topping 18.5 million, a new record but only 2.54 percent up on 2010.

Buyers of hybrid cars in China get a direct central government subsidy of CNY5,000 (USD790), while rebates of up to CNY60,000 (USD9,480) are offered on the purchase price of plug-in passenger vehicles. At the beginning of the year China halved the tax on energy-efficient vehicles in general and just last week the Ministry of Finance announced that tax on “new energy” cars will be removed entirely.

Other than government incentives, EV manufacturers have also been luring buyers with free maintenance and a range of personalized services.

China’s Ministry of Industry and Information Technology and the National Development and Reform Commission have promulgated at least 20 new regulations in the past decade to regulate and promote wider use of hybrid and all-electric vehicles.

The aim is to make China a world leader in the production of electric vehicles, but tepid consumer sentiment, together with technology constraints and policy co-ordination problems, has resulted in the original half-million target being moved back to 2015.

Despite getting no meaningful return from their investment in EV production, and no-doubt buoyed by government subsidies, China EV pioneers SAIC, Chery and BYD Motors remain committed to the continued development of EV technologies.

SAIC, for instance, is planning to introduce Roewe E50, an all-battery-powered vehicle with a 120-kilometer range (compared to about 80-km for existing models) by the end of this year. According to SAIC chairman Hu Maoyuan, the E50 is "a result of the company's efforts", which he described as an example of "indigenous innovation". The company says it holds the patent and rights to all the key technologies it developed for this project.

While this is certainly a step forward there are significant hurdles to be overcome before hybrids and all-electric EVs become a common sight on Chinese roads. Battery performance remains the greatest challenge and Chinese companies acknowledge they still lag far behind their competitors in Japan, North America and Europe.

According to the United Nations Department of Economic and Social Affairs China holds just one percent of the total patent registrations for lithium ion batteries, while Japanese companies hold 52 percent and US firms 22 percent. The results can be seen in the vast performance gap between the latest Chinese EVs and their international competitors.

This year US EV pioneer Tesla Motors is introducing a top-of-the-line Model S which it says can go up to 300 miles (482-km) on a single charge of its 85-kWh battery pack. The entry level Tesla Model S with 40-kWh of batteries is said to have a 160-mile (257.5-km) range.

To be fair to the Chinese industry, however, buyers in Europe and North America are not exactly falling over themselves to get their hands on EVs either. Although EV sales are stronger in the US than China they currently account for less than a half-percent of the market, according to Pike Research.

"I get asked when it’s going to be a mass consumer product, like 10 percent [of auto sales]?” said senior Pike analyst John Gartner. “Don’t hold your breath —we’ll be lucky to reach that by 2020.”