China’s automakers dive into the electric vehicle sea but may be treading water

Western media was all a flutter over the latest new energy vehicle production numbers out of China. Okay, production of NEVs did increase immensely. But let’s put those numbers in perspective. For one, they are production numbers, not sales. Secondly, they represent less than one percent of all vehicle sales in China.

Still, judging from the models on display at the Guangzhou Auto Show automakers have gotten the message that they need to offer new energy vehicle choices to Chinese consumers. There were plenty of NEVs there. As in the past, of course, they could be just for show, not for volume production.

First the numbers. According to the China Association of Automobile Manufacturers (CAAM), in November China produced 3,540 passenger battery-electric vehicles (EVs), 1,640 commercial EVs, 2,469 passenger plug-in hybrid electric vehicles (PHEVs), and 1,977 commercial PHEVs. That’s a total of 9.626 plug-in electric vehicles in November. Yes, a ten-fold increase over the same month in 2013 but still a tiny drop in a large sea.

Sales figures hadn’t been released at the time of writing, but let’s consider who is buying PEVs in general. The Chinese media, which is somewhat more realistic about the market than many foreign media outlets, quoted the assistant general manager of the BAIC New Energy Co. as saying only about 65 percent of the PEVs it sold were to private consumers. The rest were government buyers or BAIC employees. The APEC meeting in Beijing helped boost PEV sales, said the BAIC manager.

I think that customer base is probably similar for many PEVs, that is, mostly governments and related individuals. However, some cities in China are offering special considerations to PEV buyers such as no registration fee. A CAAM official was quoted as saying consumer interest in PEVs might be a bit higher in cities that offer those perks i.e. a higher percentage of buyers may be consumers.

Shanghai, for example, offers free registration to PEV owners. That’s quite a perk when a license plate can cost nearly 100,000 RMB. (Shanghai auctions off a limited number of plates each month). BYD”s Qin PHEV seems to be the biggest beneficiary of the preferential policy. BYD sold 1,700 units in November and 1,212 of those were sold in Shanghai.

That has caused some annoyance among non-PEV owners in Shanghai, however. It seems that the Qin PHEVs, which have a 70 kilometer all-electric range, are running on regular old gasoline 95 percent of the time. If that is the case, grumpy non-Qin owners have asked, why should Qin owners get free plates?

The BYD model has nonetheless remained the darling of some central government advisors and officials. Ouyang Minggao, head of the automotive engineering department at Tsinghua University, at a conference on December 11 praised PHEV technology and singled out the Qin as a fine example. A few months ago Wan Gang, minister of science and technology, also praised the Qin.

Ouyang noted that some have complained that PHEV owners are mostly using gasoline to power their vehicles. But he put the fault squarely on the lack of charging stations rather than the technology.
To be sure, that is one problem. But not one that will be solved any time soon.

A plethora of PEVs

There were plenty of plug-in electric vehicles, both EVs and PHEVs, at the Guangzhou Auto Show, held in that south China city in late November. Thanks to WAYS Consulting in Guangzhou for the information regarding the various electrified models at the show.

There were some 29 EVs on display there including models by domestic, foreign, and joint venture companies. Their range varied from a low of 100 km (62 miles) for an EV produced by Leahead (领志) to a high of 310 km by a model produced by MAXUS (大通). Leahead is a sub-brand produced by the Guangzhou Toyota JV. MAXUS is a sub-brand of SAIC that produces vans. So you can see that all variety of producers have their EV to show off.
In the PHEV segment there were some 16 models on display. Interestingly, all but six were produced by foreign brands. Of those six, three were the BYD Qin, Tang, and Shang, variations on a theme. So let’s say all but four were foreign brands.

I think that is because a PHEV is much harder to produce than a pure EV. As an executive at a foreign supplier pointed out to me, most Chinese automakers can’t produce a PHEV on their own.

Regular old hybrids are gaining some traction in China, it seems. Automakers will need to have some hybrids in their mix to meet the stiff 5l/100 km standard by 2020. Still, local automakers have been slow to launch HEV models. There were only 12 on display in Guangzhou. Of those, five carried a Lexus badge.

So, what is my conclusion regarding the current state of China’s PEV market? It is oddly similar to the U.S. market. Still very little demand from consumers but automakers are being pushed to produce PEVs by regulations and stiffening fuel economy standards.

As in the U.S., demand will grow very slowly but at some point will speed up. As in the U.S., the timing of that depends on battery technology (which means price) and on charging infrastructure. China’s central government may be able to prod and incentivize local governments to install charging. But they won’t be able to speed up technology so consumers will remain reluctant to buy PEVs for some time to come.