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Energy Economics Weekly Briefings

China New Energy: Trip Report

Written by: Ellen Hughes-Cromwick

Key Takeaways:

  • A weeklong visit to China allowed for an updated view of China’s progress toward shifting energy use in the mobility sector.
  • There are reportedly 130+ new energy vehicle companies, all competing for an increasing market share of electrified vehicles.
  • A surge in EV sales is spurred by product availability, pricing, and a host of government incentives.
  • The scope and breadth of EV sales and competition is unlike the traditional market which is comprised of state-owned companies, many of which are in joint ventures with foreign-owned companies. For example, Chery is partnered with Jaguar Land Rover (owned by Tata) and they are initiating production of EVs.

It is true that for any emerging market, unless you visit often, you forgo insights on the attributes of growth and development. Even though a large share of China’s population now enjoys middle class status, it is grappling with several challenges and opportunities, particularly with respect to energy and the environment.

To that end, it is not sitting still. The government recognizes that weaning the transportation sector from fossil fuel use is critical. As China reduces coal use for electric power, it also is incentivizing the production and purchase of “new energy vehicles.” EVs in China, including plug-ins and battery electric, have grown substantially in recent years.

Meeting with automotive experts and executives at EV companies provided for a great exchange of perspectives on current conditions, policies, and what the future may hold for the government’s 2025 targets.

  • Our estimate of nearly 1 million units of EV sales this year was confirmed by China EV experts in meetings over the course of the week (see first chart). Our projections, based on new EV launches in the next two years, suggest sales could exceed 2 million units by 2020.

  • One energy expert noted that the government is really pushing to get to EV production in China at 3-4% of total output, a key target for the country to begin moving toward less oil consumption.
  • There was much less discussion, however, about cleaning up coal consumption. The National Development and Reform Commission stated earlier this year that they are targeting a 150 million tonne reduction in coal consumption in 2018. Coal consumption was flat between 2016 and 2017 (see second chart).

  • On the other end of the spectrum, there are dozens of small startups hoping to capture a slice of the EV market. We met with two such companies: WM Motor Group and NIO.
  • A snapshot of NIO’s product cadence, along with a list of all EV brands are included on page two. The box below shows why there are so many startups: Purchase incentives are plentiful.
  • Look for more field trip takeaways in next week’s blog.

There are well over 100 EV brands (see list at the bottom of this page from the website. Many of these brands are “rolled up” into joint ventures or consolidated companies, such as Tata’s Jaguar Land Rover unit. We visited NIO’s showroom and “house” in Shanghai. The NIO House is a community of services provided to NIO owners, such as a library, conference rooms and refreshment café. NIO just launched a crossover EV called the ES8 and it has an attractive interior with a platform manufactured by JAC, a state-owned automotive company. Three additional products are due to be launched in 2019-2020.