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For China’s Auto Market, Electric Isn’t the Future. It’s the Present.


Zhang Youping, a Chinese retiree, bought an all-electric mini sport utility vehicle from BYD – China’s largest electric vehicle maker – at an auto show for about $20,000. last month. Her family has bought three gas-powered cars in the past decade, but recently she was concerned about gas prices and decided to go electric “to save money”. A few months earlier, her son also bought an EV. It is a $10,000 hatchback from Leapmotor, another Chinese manufacturer.

This year, a quarter of all new cars purchased in China will be all-electric or plug-in hybrids. By some estimates, there are more than 300 Chinese companies making electric vehicles, ranging from discounts under $5,000 to high-end models that compete with Tesla and German automakers. Have about four million charging units in the country, double what it was a year ago, with more to come.

While other electric vehicle markets are still heavily dependent on subsidies and financial incentives, China has entered a new phase: Consumers are weighing the value of electric vehicles versus gas-powered vehicles. based on features and price without much consideration for state support. By comparison, the United States is far behind. This year, the country critical threshold crossed Electric vehicles account for 5% of new car sales. China surpassed that level in 2018.

Even the new US incentives raise questions about their effectiveness in addressing mitigating factors for electric cars, such as long waiting lists, limited supply and high prices. high. The US Inflation Reduction Act passed last month includes a $7,500 tax credit for electric vehicles with conditions about where the car was made and where the battery came from. Automakers complain that the credit doesn’t apply to many current electric vehicle models, and sourcing requirements could drive up the cost of building EVs.

It took China more than a decade of subsidies, long-term investment and infrastructure spending to lay the groundwork for the electric vehicle market to begin to take hold. Tu Le, chief executive officer of Beijing-based consulting firm Sino Auto Insights, said competition and dynamism are currently driving the Chinese market, not government subsidies. “We have reached a point in China where we are competing on price. We are competing on features. So it’s not about subsidies,” said Mr. Le. “The market is taking over.”

China’s top leader, Xi Jinping, declare in 2014, the development of electric vehicles was the only way his country could transform “from a major automobile nation to an automotive powerhouse”. Underlining its ambitions, China has set a strong target: 20% of new car sales will be electric by 2025. It is likely that China will achieve that goal this year, ahead of schedule. 3 years. Already the largest electric vehicle market, China is also one of the fastest growing, with sales expected to double this year to around six million vehicles – more than the rest of the world combined.

Of the 10 best-selling electric vehicle brands in the world, half are Chinese, led by BYD, trailing only Tesla in global market share and are starting to bring electric vehicles abroad. And it’s not just car sales that are thriving in China. Chinese battery manufacturers CATL and BYD are the biggest players in the industry, while Beijing has a tight grip on access important raw materials.

Strong demand for electric cars is a bright spot in China’s already sluggish economy, which is grappling with a troubled property market and crippling Covid-19 policies. . As part of its economic stimulus plan, China said it will continue to pour money into electric cars. Beijing said last month that it has tax exemption extension for new energy vehicles through 2023 at a cost of $14 billion instead of letting it expire this year as planned.

Gou Chaobo, a 27-year-old employee at a construction company who recently decided to trade in his gas-powered sedan for an EV, said financial incentives did not influence the purchase decision. your electric car. In Chengdu, a megacity in southwestern China where Mr. Gou lives and works, cars are traditionally restricted from traveling on certain days of the week to help reduce congestion and pollution. However, the trams are free to go to and from. For electric cars, parking is free for the first two hours in public parking lots.

Mr. Gou said the cost of operating an electric vehicle, by his calculations, is only a tenth of that of a gasoline-powered car. Once he’s settled on a particular car, he’ll also benefit from a government grant that could drop nearly $2,000 off the sticker price, depending on the EV Plus, the government will waive the 10% vehicle purchase tax on “new energy” vehicles – a The term catchall is used in China, also including plug-in hybrid cars.

Mr. Gou, who was inspecting a midsize sedan from China’s XPeng brand at the Chengdu auto show, said he decided to go electric “because new energy is where the future is headed.” In other markets, traditional automakers’ electric vehicles are often seen as luxury vehicles, while Chinese brands are also competing with inexpensive models like the Wuling Hongguang Mini, a hatchback. The $4,500 4-seater was once China’s best-selling EV model of 2021. It’s produced by a joint venture of General Motors and Chinese automakers SAIC and Wuling.

The country’s seriousness in developing electric vehicles was shown when they rolled out the red carpet for Tesla to build a big factory in shanghai in 2018. The move is seen as a way to force the domestic market to compete directly with an industry leader. Beijing allowed Tesla to become the first foreign automaker to be allowed to manufacture in China without a local partner, and the Shanghai government provided part of the cost of building the factory.

After some initial stumbles and Covid locked down in China, Tesla now makes more cars at its Shanghai factory than anywhere else. However, a host of Chinese competitors that are catering to the needs of the local population are also launching new models at a rapid pace. About 80% of all electric vehicles sold in China this year are made by domestic automakers. Most foreign brands have largely struggled to break in and keep up with their Chinese competitors.

Domestic competition is becoming fiercer, with New entrants emerge constantly, leaving most Chinese companies on the brink of loss, and many almost certain to fail the challenge of producing electric vehicles at the scale needed to keep costs down. But switching from selling cars in the country to selling cars abroad comes with complications, such as a warranty dispute. However, as sales of gas-powered cars tumble, Chinese automakers have less and less choice but to switch to electric.

Last month, Geely Automobile Holdings, one of China’s best-known automakers, with investments in Volvo Cars and Mercedes-Benz, said it aims to sell as many electric and hybrid vehicles in the coming year as combustion-engined models. in tradition. Jason Low, a Shanghai-based principal analyst with research firm Canalys, said Chinese electric vehicle brands have been more active than foreign automakers in integrating new technology into vehicle, such as entertainment features and voice-activated controls.

Ms. Zhang, who has retired and bought an electric SUV, said she chose BYD because she prefers a bigger brand. She added that she was very cautious about which brand to buy because the air conditioning on her son’s cheaper EV hatchback broke down after a few months. She also considered some foreign electric vehicles, but the minimal features did not suit her taste. “Absolutely nothing inside. I don’t really like that design,” Ms. Zhang said. “It’s a little bit different from the Chinese way of life.”



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