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Electric Vehicles in China

Today, there is no doubt that China is one of the leading players in the electric vehicle (EV) industry. Markets in both Europe and the United States hope to compete with China; while China remains in the first place, even after the COVID-19 pandemic. The pandemic has had severe effects on China’s EV market, including 81.2% and 48.9% drops in February and March of 2020. This was not the first year that the Chinese car market has experienced a decline. In fact, 2020 was actually the third year China's car sales declined, after only 29 million sales in 2017. Despite these issues, China still has an excellent EV market due to the strong presence of more than 500 EV companies and startups in the country.


The future of the Chinese car industry will consist of new-energy vehicles (NEVs); including battery electric vehicles (BEVs), plug-in hybrid vehicles (PHEVs), and hydrogen-powered fuel cell electric vehicles (FCEVs). In spite of problems caused by COVID-19, there is also some good news. The Chinese car industry is getting healthier. Although support for NEVs is going down, and tax breaks for small-engine vehicles have been eliminated, these policies are still expected to help the market consolidate over time due to the presence of hundreds of national manufacturers. The market was in fact consolidating, even before the pandemic. Most of the new cars sold on the market are related to top brands, whose sales grew from 48% in 2016, to 54% in 2019. While Chinese manufacturers are consolidating, China’s car market is also dominated by foreign brands, such as Volkswagen and Toyota. While the top 8 Chinese companies had 79% of the market share in 2019; this percentage was 64% in 2016, and this trend is expected to accelerate.


Xi Jinping, the president of China, has announced that the country plans to cut China’s carbon dioxide emissions to nearly zero by 2060. They also plan to limit the sale of fossil-fuel cars by 2035. The government said that all new vehicles sold after 2035 should be eco-friendly NEVs. In this case, 50% of new vehicles should be either electric, plug-in hybrid, or fuel cell vehicles; and the other 50% should be at least conventional hybrids, which still use some gasoline. Therefore, it is not strange that Tesla, and other well-known companies, have tried for so long to become major players in the Chinese market. In 2018, about 1.1 million EVs were sold in China, or 4.2% of all vehicles; and at the end of 2019, more than 3.5 million EVs were on the road in this country. More than 5 million low-speed electric vehicles (LSEVs, electric vehicles that cannot move faster than 70 km/hr.) were also on China's roads at the time. EV sales in China then continued to grow in 2020, with more than 1.3 million EVs sold. This number was roughly 41% of global EV sales, and put China just behind Europe, with 42% of global EV sales in 2020.


Despite the growing number of EV sales, this industry has had to face multiple challenges. Charging infrastructure being one of the main problems. Charging has always been a concern for EV consumers, so the number of charging stations has been increasing in China in order to satisfy EV consumers. According to the Chinese Electric Vehicle Charging Infrastructure Promotion Agency (EVCIPA), the number of charging stations in China was approximately 808,000 in 2019 — a more than an 80% increase in one year. 330,000 of these were public chargers, and the other 480,000 were home chargers.


China's EV market consists of several auto manufacturers, including Tesla, Volkswagen, BMW, BYD, NIO, Geely, Xpeng Motors, Li Auto, and others. Each of these competitors tries to produce improved vehicles, and enhance the quality of their products in order to obtain more customers. Furthermore, they offer a variety of models to appeal to consumers with different tastes. Tesla's Model 3 is one of the best-selling EVs in China; but before this model entered China's market, most of the available EVs were based on traditional platforms. They contained many disadvantages, such as high price, inconvenient charging system, and a low driving range. However, Tesla's Model 3 changed the customers' view of EVs, and caused Chinese EV manufacturers to enhance their products' overall quality. In addition to Tesla, NIO currently offers three premium electric SUVs on the market; while Xpeng Motors produces premium EVs. They are the major rivals of Tesla's Model Y SUV, and Model 3 sedan, and are available on China's market today. The company sold more than 8,500 EVs in 2020 as well. Of China’s other major automobile companies, Li Auto also produces and sells hybrid EVs. This company's SUV, the Li ONE, was one of the top-selling EV SUVs in China in September 2020. These three recent Chinese companies are expected to further challenge Tesla as global rivals in the near future. Other automakers to consider are BYD, which is another Chinese auto manufacturer that produces EVs. Last year, more than one-third of BYD sales (about 131,000 vehicles) were EVs. Automakers like Volkswagen, BMW, and Geely are also going to launch their new EV models. For instance, Volkswagen is expected to launch its ID.4, with a range of 550km, in the near future. The presence of these traditional manufacturers in the EV market is expected to raise market quality.


Despite all the challenges faced, China's EV market has shown that it still has much room to grow. Today, 5% of the total auto market in China consists of EVs. Even if the government suddenly stops supporting the national Chinese EV industry, the strict zero-emission policies still persuade foreign EV manufacturers to invest in China's EV market, allowing it to grow. A majority of experts believe that the future of electric vehicles in China depends heavily on intelligent mobility, especially autonomous vehicles. As most of the well-known car manufacturers are developing autonomous vehicle technology, its likely these cars will dominate the market in the future. As autonomous vehicles also use electricity, they may play a key role in the future expansion of EVs in general, and allow the EV industry to grow rapidly in the coming decades. In addition, China's EV sales in 2021 are expected to reach over 1.9 million vehicles, in line with recent predictions.


References

[1] “Guide to Chinese Climate Policy”, Columbia University

[2] “China plans 2035 gas car ban that doesn’t actually ban gas cars”, Jameson Dow, electrek

[3] “Why China’s electric vehicle market is at full throttle”, Schroders

[4] “The Chinese electric vehicle industry is on a rebound after an almost year-long slump, but startups BYD and NIO are taking initiative to shield against market volatility”, Insider

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