China Electric Car Sales — Incentives Drag The Market Down
The Chinese market had 6,260 new EVs registered in January, far from the 15,275 units of January 2016, dragging down the plug-in market share (of new cars sold) to just 0.25% — far below the 1.45% of 2016.
Considering the seasonality of the Chinese PEV market, where the first quarter is always the slowest selling (due to the December sales rush and New Year holidays), a considerable month-over-month drop was already expected — for example, December 2015 electric car sales reached 35,000 before dropping to 15,000 in the following month. What surprised experts was the size of the fall — 6,260 units is setting back the market two years. The reasons for this unexpected drop will be explained below. For now, let’s focus on last month’s registrations by model.
In January, SAIC and BAIC took over the top positions. Tesla also moved up, benefitting from the local sales drought to post a best ever #5 position.
Here are last month’s top 5 best selling EV models:
#1 – SAIC Roewe e550: Shangai-based SAIC won its first monthly best seller trophy last month, thanks to 956 registrations of its e550, the plug-in hybrid version of Roewe’s Audi A4-sized 550 ICE model. This plug-in hybrid packs an 11.8 kWh LiFePO4 battery, delivering an all-electric range of 58 km (36 mi), for a price of CNY 249,000, or ~$36,200. Despite winning the yellow jersey in the first stage of the race, don’t expect this model to stay on top for long. Once the incentives effect wanes and BYD gets its act together, the e550 should be easily displaced from the podium, a bit like Mark Cavendish in last year’s Tour de France.
#2 – BAIC EU260: In the midst of the incentives drop, the BAIC EU260 got off to a good start, with 812 cars being delivered, winning a precious advantage over the BYD champs, something that could prove crucial in the final stages of 2017 (when racing for the yellow jersey). With a generous 41.4 kWh battery, 260 kilometers of range, and 136 horsepower pulling it to a 0–100 km/h acceleration of 9 seconds, it doesn’t have the sports sedan aspirations of the BYD Qin EV300, but it’s no slouch. Undercutting the aforementioned Qin EV300 by some 5,000 Yuan (CNY 255,000), this is one of the most serious candidates for the “2017 Best Seller” title.
#3 – BAIC EC180: After being shown last November, this little city car got off to a great start in December, seeing 4,128 sales. It registered another 724 registrations last month. The EC180 has the advantage of offering a faux-crossover look, okay interiors, and a usable 180 kms range thanks to a 20.3 kWh battery. BAIC has great ambitions for this car and is promising more models from the same platform. Now, about those subsidies…
#4 – JMC E100: If the Chinese government has its way, this is car representative of a dying breed, but the bargain-basement JMC E100 city car still managed to deliver 701 units in January, so these little buggers will probably keep on zooming around for quite some time.
#5 – Tesla Model X: Y’all know this one, right? With a number of logistical issues arising for Tesla in December, a sizeable number of Model Xs weren’t delivered until January. We estimate that the Tesla Model X had some 624 registrations in China last month, which together with the current incentives standoff helped the Californian SUV to reach the #5 spot in the Chinese PEV ranking, a best-ever position for a foreign model. Now, don’t you worry, Tesla shorts, this is most certainly a freak event and doesn’t mean that Tesla has finally broken the Chinese market.
Looking elsewhere, both SAIC and JMC placed a second model in the top 10, with Shanghai Auto pulling its e950 large sedan — a 289,000 Yuan ($42,000) PHEV based on the 2010 Buick Lacrosse(!) — to 7th Place.
But the real news are the low, low numbers of BYD models, with the #8 BYD Tang being the best of them. With only 278 deliveries, one has to go back 4 years to find such low numbers for the manufacturer. Rumors say that the Chinese manufacturer is preparing new batteries with a different chemistry (NMC?). Considering that BAIC and SAIC weren’t so affected by the incentives delay, it seems BYD took this waiting period to make big changes and pause manufacturing. We have to wait and see what the cause for this slump was, but we are contacting BYD about the matter to try to get more insight.
Looking at the January manufacturer ranking, the surprise leader is BAIC — 26% market share — followed by SAIC Roewe (23%) and JMC (18%).
Interestingly, Tesla (4th, 12%) ended the month ahead of BYD (5th, 9%), which says a lot about the strangeness of the current Chinese ranking. Then again, these are strange times…
Looking forward, the Chinese government set a goal of 2 million “New Energy Vehicles” (NEV = BEV + PHEV + FCEV) in 2020. Considering 2016 ended with a 1 million NEV fleet already, one would only need some 300,000 per year to reach the desired objective, an easy task.
But with subsidies set to be cut off by 20% each year and more demanding conditions applied (they must be safer cars, have larger range, and be more highway capable), a large portion of the market (e.g., ultra-cheap city cars) will suffer. They will struggle to have access to subsidies, but they are not completely alone, since regular EVs will also lose part of the price advantage given to NEVs by generous incentives.
The solution to offset the incentives cut will be dropping costs through scale, and that game can only be played by a number of OEMs — like BYD, BAIC, SAIC, and Geely.
Ultimately, the Chinese EV industry will benefit, because it will have fewer but stronger players, more ready to take on foreign manufacturers head on. But they will be sacrificing certain players on the way. What January showed us is that:
A) The market will become more concentrated, with the top manufacturers distancing themselves from the others.
B) Volume numbers will suffer, especially in the first quarter, with the remaining quarters probably recovering the lost time, but don’t expect the ludicrous growth rates of 100% or so of the past 3 years to be repeated in the short term.
|SAIC Roewe e550||956|
|BAIC EU260 / D50 EV||812|
|Tesla Model X||624|
|SAIC Roewe e950||350|
|Changan Benni EV||202|