Green vehicles expected to account for half of new cars sold in China by 2030
New-energy vehicles (NEVs) are expected to make up about half of new car sales on the mainland by 2030 as state incentives and more charging stations win over customers, according to Moody’s Investors Service.
The projection suggested a steady and continuous gain over the next six years as subsidies for buyers and tax breaks for manufacturers and battery producers supported demand, the rating agency said in a report released on Monday.
NEV adoption rate in China reached 31.6 per cent last year, a massive jump from 1.3 per cent in 2015. That has already surpassed Beijing’s target of 20 per cent by 2025.
China has the world’s largest automotive and electric-vehicle (EV) market.
“Our estimates are underpinned by growing domestic demand for NEVs and investments in charging infrastructure, China’s cost advantages in NEV and battery manufacturers, and a raft of public policies that support the sector and its adjacent industries,” senior credit officer Gerwin Ho said in the report.
Moody’s forecast is less bullish than an estimate made by UBS Group in 2021. The Swiss investment bank had projected three in every five new vehicles sold in China’s domestic market would be powered by batteries by 2030.
Despite a hiccup in growth this year, the car industry remains a bright spot as the nation’s growth momentum fades.
Manufacturers from BYD and Li Auto to Xpeng and Tesla are facing stiff competition amid a bruising price war.
Moody’s expects the industry to account for 4.5 to 5 per cent of China’s nominal gross domestic product in 2030, compensating for the weaker areas of the economy such as the property sector.
The agency cautioned in the report that geopolitical risks could hamper China’s NEV value-chain development as the country’s car assemblers and component manufacturers faced trade barriers in overseas export markets.
The European Commission is investigating Chinese-made EVs for suspected state subsidies that put European producers at a disadvantage. The inquiry could result in tariffs higher than the standard rate of 10 per cent in the European Union, Moody’s said.
UBS forecast in September Chinese carmakers would control 33 per cent of the global market by 2030, nearly double the 17 per cent they garnered in 2022.
In a teardown report, the bank found BYD’s pure-electric Seal sedan had a production advantage over Tesla’s mainland assembled Model 3. The cost of building a Seal, a rival to the Model 3, was 15 per cent lower, the report added.
“Tariffs will not stop Chinese companies from building factories in Europe as BYD and [battery producer] CATL are already doing [that],” European lobby group Transport & Environment said in a report last month.
“The aim should be to localise EV supply chains in Europe while accelerating the EV push in order to bring the full economic and climate benefits of the transition.”