Beijing saved on subsidies to electric cars and hybrids and brought them to market

6 December 2019

NEV sales in China in October 2019 became a subject of anxiety of the world community

Columnist Roland IRL portal EV-volumes says that the sharp decline in sales NEV (BEV+PHEV+FCEV) in China continues and even accelerates. Preliminary results for October show a decrease of registrations by 48% compared to October 2018 (the exact data for SAAM October 2019 – minus 46.8 per cent to 49.9 thousand at BEV and minus 38,8% for PHEV to 16.2 thousand – ed.) so even the results of October 2017 was higher. The recession began in July, immediately after entered into force announced by the Beijing reductions in subsidies for the purchase of BEV and PHEV, but followed the powerful collapse of the NEV segment has led to confusion as politicians and market analysts. Expected after the reduction of incentives to the purchase of NEV normal recovery of sales in 2-3 months did not take place. So long the failure is unlikely to have been part of the plan of Beijing. MIIT, which defines the course for the industry NEV, determined to sanitize this segment, which showed signs of overheating and is full of startups with uncertain prospects of existence. In addition to reducing subsidies, were raised "bar entry" on the NEV market, including limiting the number of subcontractors involved in the production, the establishment of minimum financial resources allocated to R & d and production capacity. Was tightened also technical parameters are, for example, again increased demands on the capacity and safety of the battery. It is the fire of the batteries raises concerns among the public. The cumulative negative effect of such requirements and restrictions became much deeper. Even the market leaders are large losses in the segment of NEV, and the reduction in the volume of sales among small players with 2-3 years of presence in the market says about strategic issues.

The Chinese car market in General is declining for 16 consecutive months, while sales of NEV continued to grow, at least until June of this year. Thanks to the strong results of the first half of this year, the balance of NEV sales is still positive. In the period from January to October, consumers were delivered 963 million (+19%) passenger and commercial vehicle type NEV, including 748,3 thousand (+16,5%) exclusively battery electric vehicles and electric buses of which 666,1 thousand (+22.6%) of passenger electric vehicles and to 192.2 thousand (-5,2%) PHEV. By the way, passenger FCEV was not at all, and almost all the "vodorodnaya" fell on the buses (1,19 thousand, an increase of 8.7 times).

The boom of electric cars and hybrids in China over? Or is it a respite before a new big leap?

The forecast for the full 2019 carries much more uncertainty than recently. Analysts from China do not expect recovery in the sector over the last 2 months of the year. Forecast EV-volumes for the year 2019 – the volume of the segment NEV will be from 1.1 to 1.2 million (BEV and PHEV in the segment, SUVs, MPVs and LCVs), despite the fact that the market of passenger cars of China will amount to 25.4 million, which is 8% lower than in 2018. The most optimistic estimate of 1 million 164 thousand gives the share of the NEV 4.6% of the market with zero growth by the year 2018.
Main markers of the market, such as targets of Beijing in the development of NEV, the limit for conventional vehicles (ICE), portfolios to expand model ranges from traditional EV manufacturers and investments in charging infrastructure, suggests a further growth of the segment NEV, but there is no indication that the sector returns to its spectacular and steady growth in 60-100% shown in previous years. Officials of China reiterated the target of 2 million vehicle sales in the segment of NEV in 2020. This includes 150-200 thousand electrographical and electric buses.

Drop demand and production
Sales NEV in September fell by 25% after 12% in August and 2% in July.

The second half of 2019 in the segment of NEV can not please neither the Chinese government nor the local and international analysts

In October, the decline only accelerated: preliminary data provide a grim figure of the collapse of 48%, including estimates of imports and light commercial vehicles. Regarding the share of NEV on the market, the reduction was relatively less as the car market as a whole declined by 3-7% compared to the same period last year. Sale NEV is currently approaching the level of 2017, far below the actual values 2018 and the previous upward trend in the first half of 2019.
Subsidies for NEV was reduced several times in recent years. However, the current trend reflects not only the decline in demand due to reduced financial incentives. Have NEVs may experience their first crisis of confidence: the government now insists on quality, not quantity, of competition, not subsidies, OEMs are back to the more profitable production of ICE, customers will lose faith in the struggling producers NEV and overly optimistic claims regarding the specifications of the vehicles. Support after-sales service lags behind, and fires in the battery. In addition, the taxes on the purchase of vehicles with conventional engine has been reduced by a few percent, to stimulate the market vehicles.

Zero growth this year
Such a decline was not expected neither by politicians nor by most analysts.

In the best case, the NEV segment in China will show this year zero growth

  At the end of 2018 NEV 2 million in 2019 seemed the most likely, in June, the majority of forecasts for the current year was still at 1.6 million, and after the July results were down to 1.5 million At present is expected from 1.1 to 1.2 million passenger NEV, which means an average zero growth in this segment this year (see schedule above – ed.). On the background of the market, decreased approximately 8% compared to last year, the share of NEV will continue to grow from 4.2% to 4.6% (despite the fact that Beijing demanded already this year, at least 10% – ed.).

It is difficult to find a reasonable explanation for this disorder the actual state of the market and many of Beijing's plans. I think that in the future planning will be more realistic. In addition, the need to reduce bottlenecks in the production of raw materials and batteries.

The following article will analyzed how the collapse of the market affects the sales of specific manufacturers NEV. Follow the news on the portal www.rim3.ru

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