China’s Booming Electric Vehicle Market Expects Another Year of Great Strides

January 25, 2022

Sales of new energy vehicles (NEVs) in China reached a record 2.99 million units in 2021, increasing 169% year-on-year (YoY). The surge reflects China’s push to become a key nation in the automotive industry. Despite several prevailing challenges to the production and distribution of electric vehicles (EVs), the forecast for the sector in 2022 is more than promising.

 

Charging an electric vehicle

EVs Sales Continue to Reach Record Growth

China is, by far, the world’s largest market for EVs and the automotive industry. According to the China Passenger Car Association (CPCA), sales of NEVs more than doubled during the last two months of 2021, compared to 2020, resulting in full-year deliveries of 2.99 million units, or 14.8% of the new passenger car sales in China. About 75% of those cars were bought by individual consumers. The same fraction was also seen in cities where EVs don’t receive any registration incentives.

Sales of electric vehicles, a primary part of the “Made in China 2025” initiative by the Chinese government, are expected to reach 20% of the national new car sales by 2025, equivalent to more than 4 million units hitting the streets of China. China’s monthly NEV sales broke through 20% of market share for the first time in November and surpassed 22% in December.

Think tank ‘China EV 100’ forecasted that EV deliveries will hit 5 million units next year and climb to as high as 20 million by 2030. The think tank also speculated that if NEV sales can account for half of all new auto sales by 2030, emissions from cars, excluding the emission produced during the manufacturing, will peak by 2028.

Heated Competition from Old and New Players

Up to 200 vehicle assemblers and startups are currently competing in China’s NEV market. A small group of top market players is dominating the monthly sales. This group includes market giant Tesla, Warren Buffet-backed BYD, General Motors’ three-way venture SAIC-GM-Wuling, and newly listed startups NIO, Xpeng Motors, and Li Auto. The competition is expected to get more heated as newcomers join in, and foreign players get new freedom from changing regulation.

Chart showing electric vehicle sales in China in 2021

As of 2022, Chinese authorities will allow full foreign ownership of passenger car manufacturing in the country, replacing the previous mandate that foreign car producers must operate in China via a joint venture with a local firm and hold no more than 50% stake in the entity. China has gradually peeled back limits on foreign ownership in the automotive industry, waiving limits on new-energy vehicle manufacturers in 2018 and commercial-vehicle makers in 2020.

International automakers have already begun to strengthen their game. Toyota aims to boost NEVs sales in China by 50% to 2.7 million units by 2025, introducing over 30 models to the market. Meanwhile, Volkswagen is introducing its electric car – the ID.3, to the Chinese market, and Honda stated that all of its new models that will be added in China will be electric by 2030.

Increasing Attention from the Government

Beijing has played an enormous role in pushing the penetration of the EV market domestically, as it seeks to become the world’s powerhouse in the automotive industry. While the government’s central subsidy program for NEVs was set to expire at the end of 2020, it was updated to extend for another two years until the end of 2022. The purchase subsidies extension came as a relief, as the EVs industry in China narrates itself through the continuing disruptions caused by the ongoing COVID-19 pandemic and microchip shortage crisis.

In a meeting chaired by the Chinese Minister of Industry, Beijing has decided to accelerate innovations, products and standards in its zero-emission vehicles industry to “go global”. The government deemed 2022 a critical year for China’s new energy vehicle industry, during which they will speed up key technological innovations in the industry and promote relevant products and standards to “go global”, as stated by the industry ministry.

Authorities in China are paying increasing attention to any possible weak links in the supply chain, considering that domestic automakers heavily rely on imports for raw materials like cobalt and lithium and refrigerants that are used in a car’s heat-management system and the high-wear resistance bearing needed for electric motors. The government is expected to release further initiatives to strengthen the industry’s supply chain.

China has been a strong competitor in the automotive industry, replacing the US as the world’s top market since 2015. As the country races to hit its carbon emissions peak before 2030, EVs have been given extensive attention from the government and private sector alike. The growth trend in NEVs sales is expected to continue, and the market to be much more dynamic, as multiple companies up their game to compete for a sizable slice of the pie.


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    Marcus Sohlberg, Business Development Director

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