China’s Energy Saving and New Energy Vehicle (NEV) Industry Development Plan (2011-2020), announced in June 2010, is targeting a domestic production capability of 1 million NEVs (with PEVs accounting for 50%) during the period of 2011 to 2015 and 5 million NEV unit sales by 2020. To meet this goal, the government plans to invest CNY100 billion (US$15.7 billion) in core technologies and the industry to build a strong and competitive NEV industry chain by 2020, according to Pike.

The Chinese government initially overestimated consumer demand for electric vehicles, and has made adjustments to its incentive policies. Many members of the emerging middle and upper classes prefer imported vehicles with nameplates from the United States or Germany—especially larger sedans in which owners can sit comfortably while their drivers navigate China’s often congested roads.

—research director John Gartner

After initially focusing on the public vehicle/bus segment for EV development, last year the government introduced new subsidy programs in 2011 to catalyze the market for hybrid, plug-in hybrid and battery-electric passenger car markets, the report notes. Combined with wider product availability, these subsidies helped total PEV/HEV sales reach approximately 9,000 units in 2011, with cars accounting for 62.7% and buses accounting for 27.6% (or more than 2,000 units). Municipal vehicles composed the remaining 10%. The HEV cars were sold mostly to individual consumers while PHEVs were sold to taxi fleets in Shenzhen and Beijing, as well as to some government agencies as part of pilot demonstration projects.

BEV/PHEV cars that were planned for sales to the mass market in five pilot cities encountered delays due to infrastructure installments, Pike noted, and consequently were not rolled out in 2011.

Competing interests, such as companies producing vehicles with proprietary technologies, have already delayed the release of the Energy Saving and New Energy Vehicle Industry Development Plan (2011-2020), making it difficult for companies to plan their investment in EV production and infrastructure.

Market development. Price will be a major barrier to growth on the demand side, Pike notes, especially given China’s reliance on cash sales over financing. Even with subsidies, PEVs—at up to twice the price of a conventionally fueled car—remain out of reach for low-income, cost-conscious Chinese consumers. The vehicles offered in the EV market are mainly positioned as middle- and low-end cars that are small in size. A conventional car of this size is typically marketed toward the price-sensitive consumer—a poor fit for EVs given the current price premium, Pike suggests. Other local barriers to growth include:

• EV and battery technology remains unproven.
• Recharging infrastructure and vehicle and technical standards are lacking
• The subsidy policy does not favor consumers
• The electricity supply is not fully stable
• A large population of low-income workers, regional disparities in standards of living, and consumers’ negative perceptions of the new technologies.

Although many car makers claim that EV launches are imminent, the reality is that the vehicles could be years away from going on sale to the general public in China. A critical barrier to growth is on the supply side. By the close of 2011, only a few domestically produced EVs were available to China’s general public. Indeed, evidence is emerging to suggest that Chinese EV manufacturers have yet to develop proven technology that can propel the market. On the other hand, because the EV market will be a government- and policy-driven market, China’s push is likely to affect car makers’ EV model strategies, increasing their focus on affordability. Therefore, China’s EV ambitions will provide a huge boost to electric car development worldwide in the long run.

However, it is important to note that Chinese automakers will not be able to match the technical skills of foreign automakers in developing market-competitive EVs as quickly as Chinese automakers and policy makers may suggest. In addition, few global original equipment manufacturers (OEMs) have confirmed the exact timing for their own EV launch plans in China. The EV efforts of China’s government will encourage global investment in the technology as international OEMs look to gain market share in the country. While it is unlikely to reach its targets, China’s government has gone a long way toward making the market viable by pouring public investment into the technology.

—“Electric Vehicles in China”