China powers drive for electric vehicles
Asian giant now biggest EV market and still growing
Analys i s
Last year, the world’s consumers bought more than 2 million electric vehicles. By 2025, they’ll be buying 10 million; by 2040, 56 million, according to Bloombergnef’s new long- term Electric Vehicle Outlook.
The report looks at how this fleet will transform transportation as China’s 421,000 electric buses join those millions of personal EVS. As the expanding electric fleet drives electricity demand up, it will also erode demand for millions of barrels of oil.
Globally, more than half of all new car sales will be electric by 2040, but that figure varies by region. In China, the world’s largest auto market, that figure will be closer to 70 per cent; it’s nearly the same in Europe. The U. S. is the relative laggard, at just under 60 per cent.
My colleagues’ analysis includes some near- term indicators of the market, in addition to their long- term projection of consumer adoption of EVS. One of the clearest ones is manufacturer investment in production capacity.
Bloombergnef tracks more than US$ 100 billion in investment between just four automakers — Volkswagen AG, Hyundai Kia Automotive Group, Chongqing Changan Automobile Co Ltd. and Daimler AG — with VW alone planning more than US$50 billion.
Automakers must be producing something with all that manufacturing capability, of course. Bloombergnef also tracks planned model releases. By 2025, manufacturers will offer nearly 400 EV models. VW will debut 80 on its own, which is fitting given that it is also investing the most in EV manufacturing. Fellow German automaker Bayerische Motoren Werke AG will launch 47.
China looms large in any analysis of the future of the global auto market. It’s already a larger market on its own than either North America or Europe. More important, though, it has also been the main source of global growth in auto demand in the past two decades. Consumers worldwide bought 47.5 million new cars in 2001, and 81.4 million last year. China’s growth in that time, to 28 million from 2.4 million, comprised 76 per cent of the world’s increase in demand.
Indeed, China will be the main battleground for electric- car makers for the next two decades, seeing off advances by the U. S. and Europe, amid a government push toward greener vehicles, according to Bloombergnef.
Annual electric- car sales in the Asian country will reach 2 million units next year, after topping 1 million for the first time in 2018, according to the BNEF report, released Wednesday. While China now accounts for more than half of global sales, other regions will start to catch up and its share will shrink to about 25 per cent in 2040, the researcher said.
China’s growth means manufacturers such as Volkswagen and Tesla Inc. can’t afford to lose focus on the country even as sales start to pick up in other regions. The two brands are among those planning to start EV manufacturing in China, while Nissan Motor Co. is looking for acquisition targets in the local industry. Chinese contenders such as Beijing Electric Vehicle Co. and BYD Co. are fighting to defend their home turf.
China surpassed the U. S. in 2015 to become the largest electric- car market and has kept the title since, helped by the government subsidizing purchases and spurring companies’ research efforts. The country is looking to cut back oil consumption, clear up its air and look for new ways to compete with global automobile powerhouses in Japan, Europe and North America.
Now that the industry is past its nurturing stage, the Chinese government is phasing out purchase subsidies and will eliminate them completely in 2020. That is set to weigh on demand slightly in the next two years, though strong growth will resume after that with sales set to hit 3.5 million electric cars in 2023, BNEF predicts.
Traditional internal- combustion cars will gradually give way to electric vehicles, before being overtaken. Electricity- powered cars will account for 8 per cent of China’s passenger- vehicle sales next year, 20 per cent in 2025 and 68 per cent in 2040, according to the report.
Easier registration of electric cars has boosted sales in major cities, while licences for gas guzzlers remain tightly capped. The six cities of Beijing, Shanghai, Shenzhen, Tianjin, Hangzhou and Guangzhou accounted for about 35 per cent of passenger electric vehicles sold in China last year, according to BNEF. Electric- vehicle sales in Shenzhen and Shanghai exceeded those in Germany and the U.K in 2018.
Sales will be further spurred by China’s new stringent rules to promote the production of greener cars, BNEF said. Maj or manufacturers will be punished unless they meet quotas for zero- and low- emission cars or buy credits from other companies that exceed the quotas.
Total EV production this year is set to exceed the government’s target, but most of the major global automakers aren’t generating enough credits and will have to buy them from local automakers, BNEF said.