China’s car dilemma: Beijing wants electric, buyers want SUVs

BEIJING — Automakers face a dilemma in China’s huge but crowded market: regulators are pushing them to sell electric cars, but buyers want gas-guzzling SUVs.

The industry is rattled by Beijing’s proposal to require that electric cars make up eight per cent of every brand’s production as soon as next year. Consumers are steering the other way: firstquarter SUV sales soared 21 per cent from a year earlier to 2.4 million, while electric vehicle purchases sank 4.4 per cent to just 55,929.

“It’s tough for someone with an EV to come and take away market share from SUVs,” said Ben Cavender of China Market Research Group.

The pressure for electrification in China is an added headache for automakers at a time when sales growth is slowing and competition heating up in a market they are counting on to drive global revenue.

Sales growth fell to 1.7 per cent in March from last year’s 15 per cent. SUVs made up 40 per cent of sales, while sedan purchases fell 4.9 per cent.

At the Shanghai auto show, almost every global and Chinese brand displayed at least an electric concept car, if not a model ready for sale.

General Motors Co.’s Buick unit announced plans last month for Chinese sales of its Velite 5 gasoline-electric hybrid sedan. Buick also sells a hybrid LaCrosse in China.

This month, Ford Motor Co. said it will sell an all-electric SUV and a plug-in hybrid Mondeo Energi sedan in China. Ford’s joint venture with stateowned Changan Automobile Co. will manufacture the Mondeo.

Ford said by 2025 it plans offer electric versions of 70 per cent of its models sold in China.

“We are prioritizing our electrification efforts on China to reflect its importance as a global electrified vehicle market,” Ford CEO Mark Fields said in a statement.

NextEV, a Shanghai-based startup, displayed 11 vehicles in Shanghai from its all-electric NIO brand. They include the two-door EP9, a contender for the title of fastest electric car, with what the manufacturer says is a top speed of 310 km/h.

Government planners see electric vehicles as a sector where China can lead, and a Cabinet technology development plan issued in 2013 calls for two of the top global brands in 2025 to be Chinese.

Hence the proposal, released in September, calling for electric or gasoline-electric hybrids to make up eight per cent of every automaker’s output next year. That would rise to 10 per cent in 2019 and 12 per cent in 2020.

Manufacturers failing to meet those targets could buy credits from companies that produce more electrics, helping to subsidize development.

People in the industry say manufacturers warned the targets are too ambitious. Reports say regulators might have agreed to lower or delay them in an updated plan due this year, but there has been no confirmation.

China’s standout EV success so far is BYD Auto Co. It sells all-electric vehicles to taxi and bus fleets in China and abroad and gasoline-electric hybrid SUVs and sedans to Chinese consumers. BYD Auto says last year’s sales rose 70 per cent over 2015 to 100,183 vehicles. That would make it the biggest electric brand for a second year.

Other Chinese brands offer plug-in electrics but most sold only a few hundred vehicles last year. That is partly because their vehicles cost up to 350,000 yuan ($50,000), or two to three times the price of equivalent gasoline models.

Some brands promise a range of up to 200 kilometres on one charge. But industry analysts say that is too much money and too short a distance for most drivers, who have few places to recharge.

“The biggest worries for people buying an electric car are lack of convenience for charging and the miserable range most electric cars have,” said Zhang Xin, an independent auto industry analyst.

To ease such “range anxiety,” the Cabinet has ordered the state-owned power industry to step up installation of charging stations.

Government plans call for China to have 100,000 public charging stations and 800,000 private stations by next year, up from a total of 50,000 at the start of 2016. Longer term, the government wants a network that can support 5 million vehicles by 2020.

The government also is trying to nudge buyers toward electrics by exempting them from sales taxes and from licence plate fees and lotteries imposed by Beijing, Shanghai and some other cities to curb congestion.