What does the future hold for the electric vehicle market in China?

Tencent Auto community manager Janny Jin explores the opportunities and challenges in expanding the electric vehicle market in China.

In 2014, the Chinese Ministry of Commerce has completed an overarching strategy for electric and hybrid cars in China. The government’s “Energy Saving and New-Energy Auto Industry Development Plan” will see departments aiming to support the growth of these “new-energy” vehicles in the country.

The market for electric and hybrid vehicles has been growing in China over the past two years, but very slowly. In the third quarter of 2014, the China Association of Automobile Manufacturers stated that more than 40,000 “new-energy” vehicles – both fully electric and hybrid models - were bought. This volume of sales is three times the volume of vehicles sold compared to the third quarter in 2013. This compares to a total of 21.9 million vehicles sold in China in 2013. The rapid growth rate of EV sales in China shows that there is huge potential for EVs in China, but much work is needed to convince buyers to go down this route.   

The aim of the Ministry of Commerce is to increase the number of new-energy vehicles sold in China to around 500,000 by the end of 2015. This in itself is an ambitious target. However, the Ministry aims to increase this further by the end of this decade, and wants up to 5 million vehicles across China powered by new-energy systems.

At the first New Energy Vehicle Forum held alongside the Guangzhou International Electric Vehicle Exhibition, the heads of vehicle manufacturers from across China gathered to hear about the plans that the Chinese government has to develop the market for these vehicles. However, this was not just an opportunity to look at what is happening inside China – attendees discussed building businesses that can successfully export products too.

One area of market development is the Chinese government itself. The Action Plan requires that a minimum of 30 per cent of all new vehicles purchased by public sector organisations should be powered by new- energy systems. This will increase the overall volume of new-energy vehicles purchased substantially, particularly around public transport. At the same time, the Action Plan also supports the development of new electric charging infrastructure that will make marketing these vehicles easier to public and private buyers.

If China can grow sales of new-energy vehicles within its borders, this may help to scale the global market as well – support for new manufacturers and different model options can help increase choice in the market, and the vendors should then see more opportunity to expand.

Speaking at the New Energy Vehicle Forum organized by auto.qq.com, economist Mao Yushi discussed how public transport vehicles would suit electric power, as they tend to travel within the distance limits of current battery technologies and can be charged centrally. He also shared that adoption of new technologies could face initial skepticism due to the lack of familiarity and supporting infrastructures.

This creation of demand in the public sector around various types of electric vehicles should help to develop a strong local market in China. This will benefit both the local manufacturers as well as the joint-venture companies that are based on partnerships with international brands.

This success within China should then help all these companies to expand their operations internationally as well. Developed economies may be further ahead than the market in China, but electric cars remain a niche in many countries. If China can grow sales of new-energy vehicles within its borders, this may help to scale the global market as well – support for new manufacturers and different model options can help increase choice in the market, and the vendors should then see more opportunity to expand.

For the Chinese Ministry of Commerce, the potential global market for new-energy vehicles is enormous, and supporting Chinese companies in establishing strong roles within this sector is a key consideration for the Action Plan. Whether this involves companies providing parts and supplies to international brands, or Chinese companies increasing exports of full vehicles remains to be seen.

The ambition is there for China to dominate the new-energy vehicle market in future, as it does other sectors such as high-tech and manufacturing today. At the same time, this investment in infrastructure and purchasing of electric vehicles should help both the local economy and the local environment.

Janny Jin is community manager at Tencent Auto. This piece was written exclusively for Eco-Business.

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