Chinese Electric Car Market Highly Price Dependent

The electric car market in China is heating up, thanks to generous government incentives and favorable regulations. China calls all plug-in hybrid and electric cars “new energy vehicles.” Government subsidies can range all the way up to $8,475 per vehicle. With incentives like that, sales of NEVs quadrupled to 331,092 last year — far more than in any other country. China has already provided the equivalent of $4.6 billion in EV subsidies. It wants 5 million NEVs on its roads by 2020, but questions whether it has the financial resources to continue paying such large incentives.

BAIC 113 SUV is not an electric car

China has enacted fuel economy standards similar to those in other industrial countries. To meet them, auto manufacturers agree that plug-in hybrid and electric cars will be needed. Jochem Heizmann, CEO of Volkswagen Group China, says, “To fulfill the fuel consumption targets, you would either have to sell only small cars and no more SUVs, or you have to include NEVs in your fleet. The next phase is starting.” VW will roll out 15 NEVs through the end of the decade.

That puts the spotlight on the same conundrum facing US and EU regulators. Chinese customers are no different than car buyers in the US, the UK, or Germany. Everybody wants SUVs but most of those do not have the fuel economy needed to hit government targets. There are very few electrified SUVs available in any world markets as of yet. And one of the few out there has been leading European EV sales.

Chinese shoppers are like other buyers in another important way. They don’t want to spend any more than they have to for a car. High import duties punish cars made outside of China, which makes domestic brands sales stars even if they are of inferior quality.

“We are disappointed,” Carlos Ghosn, CEO of Nissan said at the Beijing Auto Show last week. “For the moment, we have neither sales nor profits on electric cars. The price of a Nissan LEAF in China is undercut by 25% or more by locally produced alternatives.”

“We brought the car, but we’re not selling it,” Ghosn moaned. “Without any doubt, EV development is going to be driven by regulation,” he added. “The consumer is not ready to jump into EVs.”

Perception is reality, they say. The perception in China, regardless of official government policy, is that conventional cars are less expensive and more reliable than new energy vehicles. Some believe the batteries in electric cars give off radiation that can affect the health of drivers and passengers.

To make matters worse, there are few new energy cars that offer the convenience and cargo carrying capacity of the cars Chinese drivers want most — sport utility vehicles. More than 20 million new cars were sold in China in 2015. One third of them were SUVs.

Chinese authorities are already making noises about reducing the cash incentives for new energy vehicles because they are costing the government too much money. But without the incentives, the chances that China can have 5 million of them on the road are slim. If only buyers were not so persnickety about not paying for what they don’t want. It turns out the Chinese are very much like shoppers anywhere. They want what they want and they want it to be affordable. Who can blame them?

Source: Automotive News | Photo Credit: BAIC

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.