Drivers of China’s Booming Electric Vehicle Market
China is at the forefront of the electric vehicle revolution and the world needs to catch up. The desire to improve air pollution, energy independence, and global leadership in strategic cleantech industries are key drivers for the development of the electric vehicle market in China.
The electric vehicle market in China
China is the biggest global electric vehicle market, accounting for 53% of global sales in 2021. Last year, sales volume almost tripled, reaching a total of 3.3 million. In comparison, sales in Europe increased by 65% to 2.3 million, while they more than doubled in the United States, reaching 630,000. According to the China Passenger Car Association (CPCA), EV sales could reach 6 million units in 2022, of which 500,000 will be commercial vehicles.
The International Energy Agency (IEA) Explain that China was better able to close the price gap with traditional cars by producing smaller vehicles and benefiting from lower manufacturing costs. On average, the price of an electric vehicle in China is only 10% higher than that of traditional cars, which is significantly lower than the average increase of 45-50% in other markets for electric vehicles.
China’s most popular electric car in 2021 was the Wuling Hongguang Mini. This small four-seater electric vehicle was developed by General Motors’ joint venture with Wuling Motors and state-owned SAIC Motor. Its price starts at around 28,800 RMB (US$4,500), which makes electric vehicles really affordable.
From the consumer’s point of view, electric vehicles are more practical than traditional vehicles for several reasons. For example, they are more energy efficient and have a lower maintenance cost than a traditional internal combustion car. Additionally, governments around the world have offered incentives to increase adoption rates. In China, generous government subsidies were first introduced in 2009 and were originally should be deleted Next year. However, in 2020 Beijing extended the electric vehicle subsidy program for two years to stimulate demand in the wake of the COVID pandemic. Now China is considering a further extension in 2023, although details are yet to be confirmed.
It also appears that the Chinese government may be consider extending tax exemptions on EV purchases, costing the government about RMB 200 billion (US$30 billion). At the same time, to compensate for the phasing out of national subsidies, the government has put in place a EV credit system which requires that a certain percentage of all vehicles sold by a manufacturer each year be battery powered. To avoid financial penalties, manufacturers must earn a set number of credits each year. Requirements for earning credits are becoming more stringent over time, contributing to China’s goal of having electric vehicles account for 40% of all car sales by 2030.
Many Chinese provincial and local governments have implemented policies to stimulate the development of the domestic electric vehicle market. In 2017, China introduced green energy license plates for alternative vehicles nationwide, which are not subject to the license rationing system and can be obtained faster and at a significantly lower cost. For conventional vehicle owners, obtaining a license plate in China’s Tier 1 cities is incredibly difficult. Beijing has set up a license plate lottery to combat traffic jams and suffocating pollution; in 2018, the odds of winning the bimonthly draw were as low as 1 in 2,031. Unlike the Chinese capital, Shanghai uses an auction-style system in which people bid for plates. However, the city provides free green license plates to new owners of electric vehicles. Having an electric car can also save Chinese people up to US$12,000. This preferential policy started in 2014 and should continue until 2023.
What has driven the Chinese government’s strong support for electric vehicles?
First of all, Electric vehicles offer a cleaner means of personal transport and supporting the Chinese government’s overall program to address greenhouse gas (GHG) emissions. Vehicle emissions from the use of fossil fuels contribute significantly to air pollution in chinaone of its main environmental concerns since the late 1990s.
A 2013 study shows that in 2013, exposure to fine particle pollution (PM 2.5) reduced the life expectancy of the entire Chinese population by an average of 4.6 years. That same year, Beijing implemented its first national air quality action plan, signaling a shift in its longstanding prioritization of economic growth over environmental concerns. By all accounts, they have been successful: China’s air pollution reduction strategies have resulted in a major improvement in air quality. Reports from the Ministry of Ecology and the Environment indicate a 58% drop in average PM2.5 levels Between 2013 and 2021, from 72 micrograms per cubic meter to 30 micrograms per cubic meter. In 2020, China was no longer among the five most polluted countries in the world.
You might also like: Air pollution in China: are Chinese policies working?
However, much work remains to be done. The concentration of pollutants in the country remains above the 5 microgram limit recommended by the World Health Organization (WHO), while in some northern industrial regions, smog levels approach 200 micrograms during the winter. According to the University of Washington Global Burden of Disease StudyChina’s air pollution caused an estimated 1.4 million premature deaths in 2019. A state-funded task force commissioned by China’s National Pollution Research Program asked Beijing to revise its national air pollution standards and improve legal protections for human health. He further urged the Chinese government to promote clean energy, upgrade emitting industries and control transportation pollution.
Second, China aims to reduce its dependence on oil amid a turbulent geopolitical landscape and soaring prices. According to research published by the Carbon Tracker think tank, China’s shift to electric vehicle use in emerging markets could, by 2030, reduce expected growth in global oil demand by 70%. the Asian nation is currently the largest consumer of energy in the world and oil importer since 2017. Following Western sanctions over the Russian invasion of Ukraine, Beijing was able to procure Russian energy at a reduced price; Moscow has replaced Saudi Arabia as China’s top crude oil supplier. But as global oil prices continue to rise, experts believe China could spend an additional $100 billion this year on imported crude oil compared to 2021.
Volatility in energy markets has raised serious concerns about affordability and security of supply. In March 2022, the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) issued the 14th five-year plan for a modern energy system. The plan aims to improve China’s energy security and accelerate the ongoing green and low-carbon transition.
2025 is an important benchmark: the share of non-fossil energy consumption is expected to increase by around 20%, the share of non-fossil energy generation will reach around 39%, and electricity is expected to account for around 30% of consumption final. energy consumption. China’s electrification project is key to achieving its carbon neutrality goals and reducing its dependence on oil and gas imports. That being said, caps on coal consumption and coal-fired power generation capacity will not emerge in the short term. As China’s primary energy consumption increases, Beijing will prioritize short-term energy securityeven to the detriment of its environmental objectives.
Finally, China wants to achieve global leadership in the strategic electric vehicle industry and take advantage of significant economic opportunities. In 2014, Chinese President Xi Jinping Explain the importance of developing new energy vehicles for China’s auto industry, saying it was the only way for China “to grow from a major automobile country into a powerful automobile center.”
Despite being the largest automobile market in the world, China has never succeeded in becoming a traditional vehicle export hub. Since relaxing its joint venture rules for electric vehicle manufacturers in 2018, more foreign auto enterprises chose China as a base to manufacture vehicles for other regions. Tesla was the first american company and foreign automaker to have a wholly-owned manufacturing plant in China. In addition to being the world’s largest exporter of electric vehicles – accounting for 60% of global production – China is also the leading producer of electric car batteries. Chinese battery manufacturer CATL controls more than 30% of the global electric vehicle battery market. Public investments have also been invested in consumer infrastructure for electric vehicles. Today, the majority of Chinese charging stations are located in developed coastal areas. By 2025, China will dramatically increase the extent of its charging infrastructure to meet the needs of more than 20 million carsincluding in rural areas.
The future of the electric vehicle market
Electric vehicles will shape the future of transportation and China is at the forefront of this revolution. The industry still has a long way to go: significant technological advancements are needed to alleviate the structural challenges to the widespread adoption of electric vehicles. The transport sector is responsible for approximately 20% of global GHGs; 95% of the world’s transport energy still comes from fossil fuels. Faced with the rise of environmental concerns, the electrification of transport has become a priority for a successful climate transition and the fight against climate change.
You might also like: Why electric cars are better for the environment