China, master of the (car) universe ?

China, master of the (car) universe ?

by Pininvest Analysis

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Surpassing the US and becoming the world's biggest auto market in 2009, the Chinese market has slowed from the double digit growth of recent years, but with growth rates in light vehicles around 2%, the market will reach 28.5 million vehicles this year and 32 million by 2022 (IHS Markit forecasts)

This compares to stable volumes of 20 million in North America and 16 million in Western Europe, making China the biggest export market for General Motors (4 million cars and 40% of total sales in 2017), Volkswagen (40% of total sales in 2017), Mercedes Benz (3*sales on German domestic market), BMW (25% of  total sales in 2017 and 2*sales on German domestic market) and others

Car ownership in China still remains low at 121 cars per 1000 (in 2015) and is expected to reach 200 cars by 2021 (IHS Markit forecast) as compared to an average of 587 in the European Union (814 in the US)

Pressure of private car ownership on available road infrastructures and environmental impact are most certainly guiding principles of the Chinese authorities to manage growth trends as much as possible

Furthermore, the potential of an expanding domestic car industry to offer new jobs as those in decommissioned large State enterprises disappear, to stimulate domestic consumption and to create a new export venue is a compelling and attractive challenge

Regulatory requirements, research priorities and industrial strategies for electrical vehicles should be analyzed in this context


The Electric Vehicle market in China

Over the past years, China’s central government has been providing subsidies up to 44,000 ($6,666) per vehicle, depending upon range, with most local governments adding 15-50% to that amount

The policy has been successful in establishing China as the leader in electrical vehicles, expected to account of half global sales over the next 7 years

The domestic sales of Battery-Electric Vehicles (BEVs) and of Plug-in Hybrids (PHEVs ) grew accordingly

Sce Wikipedia EV sales China 2011-2017
Sce Wikipedia EV sales China 2011-2017

In Electrical vehicle manufacturing, a few  performances stand-out

  • the BAIC EC180, a utilitarian hatchback runabout, is the world’s most popular EV – with sales of 72 000 cars by Beijing Automotive Industry Holding Co
  • electric buses, a highly political issue because of rapidly expanding urbanization and strong sensitivity to diesel pollution, are almost exclusively in use in China; with manufacturer BYD in the lead, 99% of global 385 000 units are in the country and an additional 9 500 new buses enter service every 5 weeks (the equivalent of the entire London bus fleet), according to Bloomberg New Energy
sce CleanTechnica EVs sales 2017
sce CleanTechnica - China EV line-up - sales 2017


The New Energy Vehicles policy (NEVs)

With annual production targets of NEVs (electric cars, plug-in hybrids and green alternatives such as fuel cell vehicles)set to reach 2 million by 2022 (from 777 000 in 2017), regulations basically shift the burden of subsidizing the sale of NEVs (electrical vehicles and hybrids) from the government to the car companies

Announced in September ’17, the new rules are a modified version of California’s Zero Emission Vehicle (ZEV) mandate : each NEV is assigned a specific number of credits depending on metrics including electric range, energy efficiency, and rated power of fuel cell systems – up to 6 credits for the most efficient vehicles

NEV credit targets are 10% of the conventional passenger vehicle market in 2019 and 12% in 2020 – meaning that with an average of 3 credits per car, 4% of EV car sales in 2020 hits the 12 % target

If a car company fails to reach the target, and fails to acquire credits from another manufacturer, the company will be submitted to mandatory production and import cuts to bring the total fleet in compliance

Because of the size of the Chinese market in sales, and their profitability at stake, all global manufactures have announced worldwide line-ups of EV and hybrid vehicles from 2019 on and are also expected to bring prices down to the level most likely to generate the required sales

Chinese regulations should have a profound impact on EV manufacturing worldwide but the control gained by Chinese companies over the lithium-ion batteries production may turn out to be just as significant

We intend to discuss this in a follow-up note