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Beijing as a microcasm of China’s mighty effort to grow electric vehicle sales

November 13, 2015

I was in Beijing from September 19-26 and did some on-the-ground research into the EV market situation. My conclusion? Beijingers are buying electric vehicles to avoid taking the subway to work. Okay that is an assertion that may not hold for 100% of those buying EVs. But a bunch of them are for sure buying EVs to be able to drive every day in China’s capitol. That’s one thing I learned in my recent visit to Beijing.

Sales of plug-in electric vehicles are growing by leaps and bounds in China. But only because the central government and local governments are rolling out all kinds of incentives to entice China’s wary consumers to try the EV way of life. Its working for now, but like the sales boost the entire car market in China got in October from the tax cut for vehicles with 1.6 liter and less engines, this jump in EV sales is only a short-term fix.  Longer term China needs the same thing we need here in the U.S. to boost EV sales – lots more charging stations and better battery technology/longer range/lower price (which are all connected).

Still, I must admit that Chinese are apparently buying some EVs now. According to the China Association of Automobile Manufacturers, some 126,733 plug-in electric vehicles were sold in China in the first nine months of 2015, an increase of 2.3 times. Battery electric vehicles accounted for more than half the sales, at 87,531 units.  It is taking some pretty serious policy moves on the part of the central and local governments to produce these kinds of numbers, however.

Since I was just in Beijing, and talked to people about the Beijing market for a story for Wards Auto, let’s consider Beijing a representative of all local governments in China. Actually, more like most local governments. Shenzhen has a bit of a head start because BYD is based there and it has pushed BEV sales for longer than most local governments. Not surprisingly, China’s local governments prefer to boost sales of PEVs produced by local companies, of which they are often part owner (though not in BYD’s case, but Shenzhen surely benefits from BYD making more money).

The best-selling BEV in Beijing is made by BAIC, which is owned by the Beijing Municipal government. There’s also a bit of local pride involved in the burst of BAIC EV sales, apparently.  I visited a dealership selling BAIC-brand battery electric vehicles while in Beijing. Jing Li, the manager, said some 30 percent of his sales were because people cared about the environment and/or wanted to support a local company.

Mr. Li has sold 180 BEVs in the last rhree months.

Mr. Li has sold 180 BEVs a month for the last three months.

But I am getting ahead of myself. Finding the dealership was tough. I had the telephone number, but my cab driver seemed to have trouble following the dealer’s directions, or perhaps the directions were bad. After some detours, we arrived. It was in a row of three EV dealerships by different automakers, I think. I was pretty jet-lagged. The manager of the BAIC EV dealership, Li Jing, said sales have been very good the last three months. That coincides pretty closely with a new government policy that allows PEVs to drive any day, any time, on Beijing’s crowded freeways. Otherwise, cars are restricted from driving one day a week. “They are buying EVs as a second car,” said Li. “They use them to drive to work.”

The vehicles Li sells are produced by a special BAIC subsidiary that produces battery-electric vehicles called BAIC BJEV. Prices for the handful of models it sells vary according to battery range. But, BAIC said recently it would extend the electric vehicle selection to its entire self-owned brand lineup i.e. BAIC Motor Co. will produce EVs as well. And, it will produce a PHEV model.   Like all of China’s domestic auto manufacturers, BAIC is being pushed by the central government to produce electric vehicles, whether or not there are customers to buy those vehicles.  I wonder if Mr. Li will get the PHEVs to sell as well. Or will they be sold through regular BAIC dealerships? My bet is on Mr. Li and others like him, at least initially. If sales grow, other BAIC dealers will clamor to sell PEVs, however.

For now, sales are growing but are still a tiny, tiny part of total passenger vehicle sales in China. Like drivers in the U.S., Chinese are wary of the price of an EV (and by EV I am referring to battery electric vehicles). They are worried about the cost – which is offset to some extent by local and central government subsidies – and, more importantly, they fear running out of “gas” i.e. they don’t want their battery to run out of electricity.

Beijing is a sprawling city with epic traffic jams. Such a fear is not unfounded. Despite some grand-sounding targets issued by the central government regarding charging stations, there are few charging posts in Beijing compared to the total number of drivers.  A new regulation requires all public parking areas to have some chargers, and new residential complexes to allot 13% of new spaces to electric vehicles. BAIC isn’t waiting for that to happen. It offers a free charging post with every BEV purchase, says Li.

Buyers of a BAIC BEV have a choice of free charge posts.

Buyers of a BAIC BEV have a choice of free charge posts.

Thought charging posts are still a fairly rare sight in Beijing, I saw some evidence of public charging installation growing.  After some sleuthing, I found a row of EV chargers in the underground garage of Taikoo Li, one of the huge shopping complexes that have arisen on Sanlitun Bar Street in Beijing. There was a row of chargers – electricity in China is 220V so they are effectively Level 2 chargers – and a Tesla charger. All were empty. But heh, they were there.

chargers tailooli BJ

Tesla charger taikooli bjI always stay in the Holiday Inn Express Dongzhimen when I am in Beijing. It is in my old ‘hood – I could see my old apartment when I looked out my hotel room window! – and is very convenient to many things, including the Great Leap Brewery, which is just around the corner.  Newer hotels in Beijing – including the Holiday Inn Express —  now have underground parking garages, a reflection of how times have changed. I went down to the HIE parking garage and was surprised to find not only a charger, but an advertisement for a GoGreen program that allows one to rent an EV!  It may have been just a tease, however, as you will read below.

EV rental info BJ

Beijing Hengyu Electric Vehicle Rental Co. Ltd., which was the company behind the Go Green offer, is jointly owned by BAIC and Foxconn. Foxconn aka Honhai Electronics Precision Co. Ltd. is a contract manufacturer of electronics, most famously Apple mobile phones.  The EVs can be rented by the hour and many different brands are, or were offered for rental, apparently.  There are reportedly 1,000 EVs for rent and 196 charging spots (i.e. parking spots with charging) available around the city.  The rental car program is a great idea. But I’m not sure how successful it has been given that the site where one is supposed to register to rent a car — greengo.cn – produced a “domain name for sale” announcement.”    It was initially a Spring Festival program, perhaps it no longer exists.

A ZEV program for China?

While in Beijing, I met with An Feng, co-founder and president of the Innovation Center for Energy and Transportation (iCET). iCET, a non-profit with offices in Los Angeles and Beijing, is working with local officials in Beijing and the south China city of Shenzhen to implement rules similar to the California’s Zero Emission Vehicle, or ZEV program.

I don’t want to develop a migraine, so I’m not going to try to go into any detail about the ZEV program. Suffice it to say that under California’s ZEV rules, automaker must produce a certain number of zero-emission vehicles to be sold in California or be fined.  Automakers earn credits for each ZEV vehicle produced, and if an automaker doesn’t earn enough ZEV credits, additional credits can be bought from other automakers who have excessive credits, such as Tesla. So, ZEV sales can also be a source of income for automakers beyond the profit on the vehicle.

An figures a program like this might encourage automakers in China to produce more EVs, giving Chinese consumers more choice. The ZEV program in California has resulted in a larger selection of EVs here than in other states. California also accounts for a huge majority of all EV sales in the U.S.  Though that is mostly because of subsidies and High-Occupancy Vehicle lane access, the larger selection does help boost sales. It may also encourage Chinese automakers to “get serious” about producing EVs, An told me.

iCET wants to establish four pilot cities in China to try out the ZEV program, says An. Beijing, Shenzhen, Chongqing, and Shanghai. It is currently working with Beijing and Shenzhen. “Government subsidies are going to come down as the volume of EVs increases,” he says. “The ZEV program is the best way to promote EVs.”

The caveat, he says, is enforcement. “California has worked because it has a very high penalty,” says An “In China, who has the authority to introduce the penalty and manage it?”

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2 Comments leave one →
  1. Tom Jensen Morgan permalink
    November 14, 2015 12:13 am

    Excellent and robust analysis.

  2. KBaye permalink
    November 14, 2015 10:32 am

    As always, a refreshingly honest appraisal of the market AND the consumer!

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