More than 1.2 million NEVs were sold in the first half of this year, of which around 80% were electric cars – a rise of over 200% from the same period last year. By the end of June, there were 6.03 million NEVs on China's roads, according to the China Association of Automobile Manufacturers (CAAM). The proportion of NEVs of total new vehicle sales rose to 9.4% by the end of June, up from 5.4% for the whole of last year. The popularity of NEVs is even more apparent when it comes to family cars, including sedans, sport utility vehicles (SUVs) and multi-purpose vehicles (MPVs). The China Passenger Car Association (CPCA) said sales of electric and plug-in hybrid family cars reached 1.1 million in the first six months of this year, accounting for 46.5% of the global total. Europe, which is stepping up its electrification campaign, came second with 38.2%, followed by the United States with 11.5%. Analysts at Everbright Securities estimate that NEV sales in China could reach 2.7 million this year, thanks to growing demand, manufacturers rolling out new vehicles, and the nation’s firm commitment to the sector. According to global consultancy Accenture, in China, some 68% of people owning cars fueled by gasoline said they would buy an NEV as their next vehicle.
Support for accelerating development of the sector was announced after a meeting of the Political Bureau of the Communist Party of China (CPC) on July 30. Fu Yuwu, Honorary Chairman of the China Society of Automotive Engineers, said he was “excited and exhilarated to learn of this momentous decision”. “It will prove to be another big boost to the already fast-developing NEV industry,” Fu said in an interview with China Automotive News. He added that the focus will not only be on increasing market size, but also on making breakthroughs in core technologies to help China consolidate its leading position in the market. Qin Lihong, President of Chinese electric car startup Nio, said support for the sector shows its strategic importance, paving the way for further development. “Chinese companies are already at a great starting point and we should seize the opportunities to prepare for competition in the next 10, 20 or even more years to come,” he said.
In 2009, China started to develop the sector in earnest at a time when many other countries thought it was too early to do so. NEVs are expected to account for 20% of new car sales in 2025, rising to 40% in 2030 and 50% in 2035. Thanks to a clear strategy and generous subsidies, China has been the leading market for electric cars and plug-in hybrids since 2015. Its first mover advantage and vast market have seen local companies enhance their reputations globally. For example, BYD, which is backed by U.S. investor Warren Buffett, sells its buses worldwide, while leading battery maker CATL sells its products to car companies such as BMW and Daimler.
Chinese electric car startups, including U.S.-listed Nio and Xpeng Motors, are now serious challengers to Tesla in terms of brand awareness and products. Since its launch in July last year, the Wuling Hongguang mini car, with its styling and affordability, has been the most popular electric vehicle in China. Company Representative Duan Yan said more than 200 car dealers from around 70 countries and regions said they wanted to sell the model if it was exported. International carmakers are tapping into the Chinese market and manufacturing expertise. Volkswagen, which is launching five electric car models in China this year, expects its combined sales to reach 100,000 units by the end of December. Tesla is busy building charging infrastructure for a rising number of Chinese customers. Annual capacity at its Shanghai plant, which started production in late 2019, has just been raised to 450,000 vehicles to become its primary export hub.
Chinese companies are cooperating with their European counterparts. In 2019, construction began on a CATL manufacturing plant in the German state of Thuringia. The company said local production of battery cells would start in the second half of next year. Meanwhile, Gotion High-tech Co, based in Anhui province, will act as a technology partner to help Volkswagen produce battery cells at the carmaker’s plant in Salzgitter, Germany. Gordon Executive Roy Lu said that “Europe is trying to catch up in terms of battery technology, so local carmakers and governments want to invite competent companies over to help boost the sector.” Another Chinese company, Envision AESC, will build a USD2.4 billion battery plant in France to supply Renault. Envision aims to produce 9 gigawatt hours of batteries in France in 2024 and 24 GWh by 2030. Volkswagen is working on advanced driver assist functions with China’s DJI, which is better known for its drones.
Statistics from the China Passenger Car Association (CPCA) show that 46% of electric models on the market are mini and subcompact vehicles. This means there are few choices for middle-class owners considering, for example, replacing a Volkswagen Sagitar, Ford Focus or Buick Lavida with an electric car. Volkswagen Group China CEO Stephan Woellenstein said if the current “dumbbell-shaped pattern” does not develop into an “olive-shaped one”, as seen in the gasoline market, it will be difficult for China to realize the goal of new energy vehicles accounting for 40% of total car sales by 2030. “If we want new energy vehicles to become the new normal, we need normal new energy vehicles,” Woellenstein said.
The market situation has already started to change. Chinese and international carmakers operating in China plan to launch 54 NEV models this year, most of them for the mainstream market, according to Everbright Securities. Nio's Qin said that while most carmakers are starting to offer electric vehicles, being electric alone is not enough to survive in an increasingly competitive market. “The next litmus test lies in whether these vehicles are smart, with autonomous driving as the most prominent feature”. Nio said China should place greater emphasis on chip design and production, as smart vehicles will require more-advanced semiconductors than those powered by gasoline. Wang Jun, head of Huawei’s smart car business unit, said the company is working on offering driverless solutions, which are expected to be announced around 2025, after which the emphasis will be on smart onboard functions, the China Daily reports.
In July, five carmakers in China sold over 10,000 NEVs, according to the CPCA. BYD ranked first at 51,000 units. It was followed by Tesla, whose deliveries reached almost 33,000 units. SAIC-GM-Wuling came third at 27,000 units. GAC’s Aion and SAIC each sold over 10,000 units in the month.
