In China, gasoline cars account for as much as 30% of the total pollution that makes the Chinese suffocate every day. But the most polluting country in the world is also the largest automotive market on the planet. These two factors favored the emergence of a new market in the Middle Kingdom: one of electric cars.
Why is China a promising country for this market?
Not far from half of the electric vehicles sold in recent years have been sold in China. Indeed, the market could not be more promising than it is there, because all the conditions for its success are there. The Chinese Ministry of Industry has also said that China will be following Norway, India, France, and Great Britain in their commitment to completely eliminate fossil fuel vehicles.
There are several reasons:
- The environmental cause: The Chinese suffered the effects of pollution for years on a daily basis. While it was once considered “unpatriotic” to complain about pollution, residents are no longer afraid to show their anger. At the same time, their interest in ecology has increased rapidly.
- Government support: The state introduced some bonuses as incentives for electric car purchases to encourage people those models. This premium can go up to 66,000 yuan (that is to say about $9.000). An amount that is not insignificant to help a population where the emerging middle class can seek to invest in this kind of model, now that they can afford it.
- Escaping restrictions: In Beijing, electric cars exempt residents from having to wait to be “drawn” to be allowed to drive. In Shanghai, this prevents them from paying prohibitive registration fees. But it also allows them to escape the control of registrations which is exercised rather strictly throughout China.
- A taste for innovation: The Chinese love novelty, new technologies, and all kinds of modern gadgets. Thus, the electric car is perceived as “the car of the future”. It is therefore a selling point to the Chinese who really want to catch up with the technological gap they have been accumulating.
- Limited maintenance: The mechanism of an electric car is far less complex than that of a gas car. There would be 7 times fewer components in an electric car! The car is thus much easier to repair and requires less effort to maintain.
A promising but complicated market
China hopes that electric cars will be able to account for one-fifth of all car sales in China by 2025. That is why some restrictions have been put in place. Since builders’ offers and government support for the purchase of electric vehicles have had mixed success, a new wave is now coming. A system of quotas will be imposed from 2019 on each manufacturer present in the Chinese market. This quota will be set at 10% of sales of electric or hybrid vehicles for 2019 and 12% for 2020. If they are not respected, the manufacturers will therefore have to buy credit from competitors that were over the quota. This should really motivate the sales of these models in the years to come.
In addition, foreign car manufacturers are forced to find a local partner and start a joint venture. This can be quite hard, especially when transferring technical knowledge and know-how to Chinese partners. But Ford, Volkswagen, General Motors, Renault and PSA have already all signed joint venture agreements to conquer this growing market.
However, there are still some obstacles
- Well-developed public transport: 37% of the Chinese say they don’t need a car. Indeed, public transport is rather well-developed, especially in major cities. In cities such as Beijing or Shanghai, it is often faster to take the metro than the car during peak hours, as traffic jams are so important.
- Affordable taxi services: Chinese people that don’t own a car can always call a “Didi“. This Chinese app, which can be described as a cheap “Uber”, is used by millions of people every day. They thus don’t need to buy a car.
- Government subsidies are too inefficient: While the state offers a purchase bonus incentive, electric vehicle sales still account for less than 5% of the total car sales in the country. While in the Scandinavian countries (where the inhabitants benefit from similar subsidies), this rate exceeds 15% and up to 25% for the hybrid models.
- The creation of national infrastructure: By prohibiting the sale of gasoline cars, the state should offer Chinese charging points throughout the country, so they will never break down. However, a problem arises: since there are different models of cars, there are different types of chargers. The state will have to find a way to unify these charging spots’ standards and policies.
- Energy costs: By offering these charging spots, China will have to meet a much higher demand for electricity. Shanghai has already planned to install a charging station powered by photovoltaic panels. It would take less than an hour to fully charge the battery. See how China will feed the national network of charging stations in the future. It should be able to accommodate 5 million connected cars by 2020.
Nevertheless, China remains the largest market in the world for car manufacturers, especially for “green” vehicles. This market is already enjoying strong growth, as Volkswagen has seen by achieving 40% of its worldwide sales in this country.
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There’s certainly a lot to find out about this subject. I like all the points you’ve made.