How successful is the Chinese New Energy Vehicles Program?

How successful is the Chinese New Energy Vehicles Program?

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45% of Chinese EV makers sold less than 500 models per year

 

The recent Chinese Auditor General’s report on the Central Governments budget for the implementation of its New Energy Vehicles (NEVs) program has delivered some mixed results. The State’s Auditing Administration found some disturbing results from its inspection of 66 companies producing new energy vehicles including passenger vehicles, buses, and commercial vehicles. One has to ask yourself how successful has the program been when finding that 2,200 vehicles out of 35,500 produced by 13 companies were left unsold for a period of longer than a year? How successful has the program been to alleviate pollution in cities if 17,200 of the 35,500 traveled less than 3,000km (1,875 miles) in a year?

The program to promote NEVs was established in 2010 to form part of China’s 12th 5-year plan running from 2011 to 2015. The program had a budget of RMB 100 billion ($14.4 Billion) which included the promotion of EVs through subsidies, development of a charging network, and manufacturing incentives. In 2016 the country cracked down on the rampant abuse of the system by handing down fines totaling $150 million and closing five of the worst offenders. In total, the Audit Administration’s report found, that subsidies to the tune of RMB 1.67 Billion ($240 million) were overpaid due to cheating, which is nearly half the entire budget of eight provincial funds.

The Minister of Industry and Information Technology was quoted in January 2017 that China aims to quadruple its NEV fleet to 2 million units by 2020 and have one in five cars as EVs by 2025, which is expected to be 7 million EVs. The report found that in some cases the subsidies might have been too effective in targeting the development of NEVs. In a sample of around 6,800 units from 13 companies, it was found that more than half was buses, which received subsidies of 70% of the units sales price or higher, skewing the intended outcome away from passenger vehicles.

In January 2017 the Government cracked down on the sector by capping the total subsidies available at the Local Government level at 50% of that of the Central Government, dropping the NEV subsidy by 20% effective 1 January 2017, and raising the technology threshold of distance per charge and energy consumption. The new subsidy at Central Government level is now 44,000 yuan ($6,333) for EVs with a range greater than 250km (156 miles), down from 60,000 yuan ($8,600). The subsidy for buses was capped at 300,000 yuan (43,000) down from 500,000 yuan ($72,000). The sudden crackdown led to a crash in NEV sales for January 2017 of below 8,000 units compared to a full year total for 2016 of around 500,000 units. The sector has since recovered but is not expected to reach the stellar growth that it needs to outpace 2016 by double digits.

Other headline figures from the Auditor’s report shows that 45% of EV makers sold less than 500 models per year, which is a justification for the country implementing a production certificate system. The permitting of automakers to produce EVs have reached its current limit of 15 production certificates when JAC received authorisation for its 100,000 units per annum plant.

On the positive side, the Auditor found that Chinese automakers are starting to dominate the world market for electric vehicles as three, BYD, Geely, and BAIC rank in the top ten by EV sales list. Auto parts companies such as CATL, a battery manufacturer, and Jing-Jin Electric, a manufacturer of drivetrains for EVs have become internationally known for their products.

Going forward the Chinese Government is changing tact from a carrot and stick approach by promoting NEVs through subsidies and regulation to relying more on the stick by introducing more stringent NEV quotas on auto manufacturers from 2018. The Chinese authorities had a visit in June 2017 from the California Resource Board, to co-operate on the proposed Chinese ZEV quotas. The Californian Resource Board was responsible for the state’s much hailed Zero Emission Vehicle (ZEV) framework. The proposed Chinese ZEV quotas are set to require auto manufacturers to have ZEV’s contribute 8% of their sales in 2018 and increase annually by 2% to reach 12% in 2020.

 

Picture: Workers assemble new-energy cars at a workshop of Weidong New-Energy Car Co Ltd in Zouping, Shandong province. [Photo/China Daily]

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Top 10 EV Countries Q1 EV sales – USA beats China

Top 10 EV Countries Q1 EV sales – USA beats China

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Now that all the Q1 data is in we can do a detailed dissection of the hottest quarter in EV history in which nearly 200,000 electric vehicles was sold. The headline data is that nearly 180,000 EVs were sold in the top 10 EV countries. Battery Electric Vehicles (BEV) wattev2buy top 10 ev countiresoutperformed Plug-in Hybrid Vehicles (PHEV) by a long shot. A total of just over 106,000 BEVs were sold while only around 70,000 PHEVs moved off the dealership floor in the top 10 countries.

One of the standout data points is USA EV sales which overtook China as the best market for electric vehicles in Q1, making the USA the top EV country in Q1. The worst performer was The Netherlands, who fell out of the top 10. The Netherlands disappointing performance over the last couple of quarters does not bode well for the European country was seen, next to Norway, as one of the proponents of the technology. Only last year still did the Dutch Government contemplated a goal to be 100% electric by the middle of the next decade. It is unclear what caused the drop in EV sales in the Netherlands.

When comparing this quarter’s EV sales by country to their respective totals for 2016 one can see that the pace of EV sales picked up in most. If one should expect that by the end of Q1 EV sales should equate to roughly 25% of 2016, it is only China and The Netherlands that are underperforming. Chinese EV sales have lagged in January due to technical factors including a clampdown on EV subsidy fraud and the annual Chinese holiday, in which most industries shut down. Chinese EV sales have picked up the pace in the following months and the quarter still ended up 30% over the same period of the previous year. It can be concluded that EV sales for the first quarter in China are historically weak and Q1 2017’s performance is by now way an indication of a trend. Furthermore, the Chinese Government last week announced a plan to dominate the electric vehicle sector which should help the country to regain its stature. Japan, on the other hand, has picked up the strongest pace and has already achieved EV sales equal to 59% of its total 2016 sales. The Japanese EV market has the least variety of EV models available to consumers, and it is anticipated that the introduction of more models will stimulate the market further. Germany is the second best performer helped by a 77% improvement in EV sales on a year-to-year basis.

The top EV brand in the Top 10 EV Countries is Tesla for the second year running. Tesla announced in its April trading update that it sold just over 25,000 Models S and X globally. It is important to note that the figure repoQ1-2017-brands-wattev2buy-top-10-ev-countriesrted includes vehicles being shipped, while country sales data shows vehicles registered. Toyota is back in the Top 10 list of EV brands on the back of a well-received new Toyota Prius. Chevrolet did not shoot the lights out with its new mass-market EV, the Chevrolet Bolt / Opel Ampera-e. Most of GM’s sales came from the Chevrolet Volt PHEV. The company is criticized for producing a limited amount of the Bolt and is being labeled as a compliance company for that, a term used for auto manufacturers that only sell EVs in Zero Emission states to gain credits. The big losers included VW, BYD, and Mitsubishi. BYD has been the Top EV manufacturer for 2015 and 2016 globally and was at the number three position for most EVs sold since the start of the decade. Competition from the likes of BAIC and SAIC is the main reason for the companies bad performance. Up til 2016, BYD had the advantage of being first to market, but some new models that can compete on performance and quality with BYD entered the market since 2016. (This sentence could very well be used for Tesla in a couple of years). Mitsubishi fell a staggering ten places as the company has not updated its popular Outlander PHEV or introduced new models as a replacement.

The Top 10 EV models are still lead by the Nissan Leaf, a phenomenal performance by the 7-year-old EV. The Toyota Prius replaced the Tesla Model S in the top two while the Tesla Model X performed the best of the 2016 Top 10 cohort. Newcomers Chevrolet Bolt, BAIC E-180, and the Toyota Prius replaced the BYD e6, BYD Tang and Mitsubishi Outlander in the Top 10 EV models list for Q1.

Please use the comment section below to share your thoughts on the EV market.

 

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Note on data: The detailed data above does not include the UK, who keeps their EV data more secret than Donald Trump does classified information.

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