Electric cars in the spotlight in China’s post-coronavirus recovery plans


WM Motor’s EX5 electric vehicle on display at the Consumer Electronics Show Asia in Shanghai in June 2019.

Arjun Kharpal | CNBC

BEIJING – As China attempts to recover from the impact of the coronavirus, ensuring that its plans for electric vehicles stay on track is a priority.

Shortly after signs that the epidemic in China was under control, central and local governments announced stimulus policies targeting automobiles, particularly new energy vehicles.

In recent weeks, NEV grants and tax relief policies that were due to expire this year have been extended by two years until 2022. Battery charging infrastructure – often cited as a reason not to buy electric car – received an injection of 2.7 billion yuan. This would increase tenfold from last year, according to state media.

These efforts are part of national ambitions and support the economic contributions of the entire automotive industry. The automotive sector accounts for about 10% of China’s retail sales and one-sixth of jobs, according to official figures for 2018 compiled by the Ministry of Commerce.

As people feel concerned about their income, their businesses, major discretionary purchases like buying a new car will no doubt be affected.

Rupert Mitchell

strategy director at WM Motor

China is also aiming to increase the share of new energy vehicles in the market to a quarter over the next five years, from just 5% last year, said Jing Yang, director of corporate research at Fitch Ratings in Shanghai.

“Supporting the (new energy vehicles) market is actually a long-term strategy for the Chinese central government,” she said, noting that since the authorities started feeding the industry there has been several years, an entire value chain of manufacturers has emerged and depends on the growth prospects of the new energy vehicle market.

A difficult first quarter

While China fought Covid-19 in the first three months of the year, production of new energy vehicles fell 60.2% from a year ago to 105,000, while sales fell 56.4% to 114,000 vehicles, the Ministry of Industry and Information Technology revealed in a press. conference on April 23.

Global auto sales fell 42.4% to 3.672 million vehicles, the ministry said.

“In terms of consumer response to the virus, the health emergency is being replaced in China to some extent by economic uncertainty,” said Rupert Mitchell, director of strategy for the Chinese automaker WM Motor electric companies in an interview on April 15 The company was founded in 2015 by a former executive from Volvo and Geely.

“As people feel concerned about their income, their businesses, major discretionary purchases like buying a new car will undoubtedly be impacted. However, it is very difficult at this time to assess this degree of impact. “

Chinese authorities have extended the Lunar New Year holidays for more than a week to control the spread of Covid-19, which appeared at the end of last year in the Chinese city of Wuhan. The Chinese economy contracted 6.8% in the first quarter and the official unemployment rate hit a record high of 6.2% in February. As the epidemic stalled nationally, the coronavirus has since turned into a global pandemic that has infected well over 3 million people and killed at least 247,000 worldwide, according to Johns Hopkins University.

While consumer confidence may take time to recover, government and commercial purchases are also expected to boost the electric vehicle market in China this year.

“We think demand from institutional buyers will be strong,” said Yang Fitch, pointing to data for 2019 which showed that the share of individual purchases had dropped to 46% from 58.9% a year earlier.

She expects car sales in China to drop 10% this year, but sales of electric vehicles may at least not drop as much.

New cars, resumption of sales

Meanwhile, Chinese electric vehicle start-ups have continued their efforts to get production back online and launch new products. Some have also reported increased sales.

“We are seeing daily improvements in daily sales, and that is very encouraging,” said Mitchell of WM Motors. “We need this trend to continue in the positive direction for several weeks, several months. “

Mitchell said the company could soon open 190 stores in 110 cities in China, up from 120 currently. The company could also benefit from potential purchases from government fleets and commercial car companies, he added.

WM Motor has so far “raised fairly substantial cash over the Christmas and New Year period,” he said. “Our liquidity position is currently very solid. “

Nio, arguably Tesla’s most direct competitor in China, said in early April that deliveries increased 11.7% in the first quarter to 3,838 vehicles. The start-up said that 69% of all deliveries made between mid-February and mid-March came from word of mouth referrals.

The company also signed a strategic agreement with the city of Hefei in late February – when only around two-thirds of the country had returned to work. Nio announced progress on the deal on April 29, with announcements of capital of 7 billion yuan ($ 1 billion) from strategic investors, which include government-related entities.

On April 27, Xpeng, supported by Alibaba, launched its P7 sports sedan, which the company says has the longest range of any electric vehicle in China, 706 kilometers away. Deliveries are expected to begin in June, with after-subsidy prices ranging from 229,900 yuan to 349,900 yuan – between $ 32,462 and $ 49,404.

On April 10, GAC Nio, a joint venture between the traditional automaker and the start-up, launched its first electric vehicle, Hycan 007, on April 10. Deliveries are expected to begin in mid-May and about 20,000 yuan has been collected in deposits, the company said. It would not disclose the precise number of orders.

“Right now, I think the new construction and the new energy vehicle network have not fully satisfied consumers,” Yan Jianrong, vice president of user operations for GAC Nio, said on April 21. CNBC of his mandarin. linguistic remarks.

He said the company had revised many parts of the vehicle’s design in response to user feedback and that the recent drop in oil prices would also affect the relative attractiveness of electric vehicles. While some might consider electric cars for long-term fuel savings, this advantage is now offset by cheaper gasoline and what some see as better-designed traditional fuel vehicles.

One challenge for electric vehicles in China has been quality. Traditional start-ups and automakers have flooded the sector with the aim of receiving government subsidies, which has resulted in many poor and cheap models.

This year, some expect companies that have survived to produce more attractive vehicles for consumers.

But these entrants, especially the more upscale ones, will have to compete with Tesla.

Elon Musk’s electric car company has already started delivering vehicles from its Shanghai plant, and sales in China hit a record 10,160 in March, industry association data cited by Reuters said.

“Tesla (is a stronger brand globally,” said Raymond Tsang, partner at Shanghai-based Bain & Company. “They set the bar very high for technology. (It) depends on who gets the scale quickly enough. “


Please enter your comment!
Please enter your name here