Navigant Research Blog

China’s PEV Market Shows Signs of Life

Lisa Jerram — October 12, 2015

China is taking its new plug-in electric vehicle (PEV) market strength seriously, weighing policies that would increase availability of charging equipment both in homes and in public to support growing PEV demand. The Chinese PEV market has suffered from a failure to launch, as sales of PEVs have been dramatically lower than both government officials and many automotive industry analysts had projected. Government interest in PEVs in the country is driven both by the desire to put less polluting vehicles onto the country’s increasingly congested streets and the desire to promote domestic industry. However, these twin goals have often worked at cross purposes. The Chinese government set aggressive goals for penetration of new energy vehicles—including pure battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs)—among its light duty vehicle sales. The national government set a target to have 500,000 new energy vehicles in use by 2015 and 5 million in use by 2020. To spur the market, the federal government offered subsidies for BEVs and PHEVs, and these subsidies have curiously tapered down as PEV sales fell far short of the level needed to reach the goal of 500,000 vehicles by 2015. The subsidy was approximately $8,600 for a BEV in 2015 (down from around $9,400 in 2014), and $3,900 for PHEVs (down from $5,500). Additional subsidies are available at the provincial and city level in many parts of China.

However, these subsidies are restricted to domestically produced PEVs. While this policy was designed to support the domestic industry, it left the Chinese PEV market lagging behind other car markets where American, Japanese, and European PEVs were available. The Chinese OEMs have been slow to bring out their PEV models, leaving the market supply constrained.

Infrastructure Deployment the Next Step

The market is, however, starting to turn around. An influx of domestically produced PEV models have finally made it to market, and PEV sales reached 108,654 in the first 8 months of 2015, a 270% increase over the same period last year. A number of foreign automakers have been working on joint ventures with Chinese automakers for many years, and while many remain cautious, these recent signs of life have been encouraging.

The Chinese government may now be looking to build on this success by spurring infrastructure deployment. In a recent meeting with government ministers, Chinese Premier Li Keqiang shared that the government wants all new residential housing and at least 10% of public buildings and parking lots to be equipped for PEV charging. It is not yet clear how the government will pursue this target, but China is set to release its 13th Five-Year Plan in October and is reportedly making infrastructure deployment a top priority. It remains to be seen whether this will take the form of soft measures, such as incentives, grants, or mandates similar to Russia’s recent decision requiring all gas stations to be equipped with EV charging (the PEV market in Russia has stalled, so the need for widespread charging is unclear). Such a mandate will likely lead to poor implementation and inadequately maintained equipment; China would do better to set aggressive targets and match them to areas where PEVs are most likely to be sold. The country could also offer incentives for deployment and create requirements that new builds have the appropriate wiring and power for PEV stations to be deployed as needed.

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