Electric vehicles or hybrid electric vehicles, which will be the mainstream in the Chinese auto market in the future?
In overseas markets, hybrid electric vehicles have existed for 20 years, taking over 95% of the clean-energy vehicle market. In the Chinese market, the government only subsidizes electric vehicles and plug-in hybrid electric vehicles. Hybrid electric vehicles can only get very little energy-efficient vehicle subsidies and take a very small market share. Therefore, the structure of the Chinese clean-energy vehicle market is quite different from the structures of overseas clean-energy vehicle markets. This article analyzes which would be the mainstream in the Chinese auto market in the future.
- Why are hybrid electric vehicles popular in overseas markets?
Electric vehicles have a longer history than vehicles powered by an ordinary internal combustion engine, already nearly 200 years, but in the modern vehicle history, hybrid electric vehicles succeeded in commercialization earlier than electric vehicles. GM first promoted its electric vehicle EV1 in California in 1996. However, due to the high price, immature battery technology and imperfect charging facilities, the project ended in failure in 2002. Toyota sold its hybrid electric vehicle Prius in 1997 and began to promote it in the global market in 2001. The hybrid electric vehicle had similar cost with traditional gasoline-powered vehicles, but the fuel consumption was about 30% lower. What’s more, it got government subsidies in the USA, Europe and Japan. As a result, it succeeded soon. This is why electric vehicles appeared earlier but succeeded later in western markets. This is also why hybrid electric vehicles are more popular than electric vehicles and plug-in hybrid electric vehicles in overseas markets.
- Ups and Downs of hybrid electric vehicles in the Chinese market
In the Chinese market, in the early days, battery technology was immature. Therefore, many manufacturers chose hybrid electric vehicles as their entry point, hoping to develop the Chinese clean-energy vehicle market by learning from overseas successful experience. The Chinese government also launched an 863 Program to offer support. For example, Chery undertook the subject “Hybrid Electric Car” from the Ministry of Science and Technology in 2001, provided the Beijing Olympic Games in 2008 with 50 A5 hybrid electric cars for pilot operation. In 2006, to promote hybrid electric vehicles in the Chinese market, Toyota brought Prius that had the biggest sales in the global market to the Chinese market for local production and sale. Unfortunately, in 2009 the Chinese government formally launched a program called “1,000 Vehicles in 10 Cities”, introduced the new-energy vehicle subsidy policy, formally excluded hybrid electric vehicles from the categories to be subsidized. Without government subsidies, Toyota hybrid electric vehicles didn’t succeed in the Chinese market like it did in overseas markets. In the end, in 2010 the annual sales short of 1,000 vehicles forced Toyota to suspend its production of Prius in China. In 2011, once again Toyota started local production and sale of Prius in China and reduced the price to 250,000 Yuan. However, without government subsidies, again it stopped production in China in 2015. In this way, the global best-selling hybrid electric vehicle Prius retreated from the Chinese market for good after failing twice.
- How long can China remain the biggest new-energy vehicle market in the world?
The Chinese new-energy vehicle market opened in 2009. First, large-scale pilot operation was carried out in the urban bus field. From 2014, new-energy vehicles began to enter the private car market, but only in first-tier and second-tier large cities like Beijing, Shanghai, Guangzhou and Shenzhen. Two factors have contributed to the sales of new-energy passenger vehicles. The first is the purchase restrictions on cars in large cities, which drives consumers to buy new-energy vehicles with free license plates. The second is the hourly rental car fleets. In two years, generous government subsidies have helped creating more than 100 hourly rental car companies in the Chinese market. Rental car companies can greatly reduce their costs by purchasing new-energy vehicles. In addition, they can digest the inventories of new vehicles, promote vehicle brands and cultivate customers. As a result, many vehicle manufacturers have begun to set up hourly rental car companies. At present, China’s largest two hourly rental car brands EVCARD and PAND-AUTO are both directly invested by vehicle manufacturers.
- In 2020, the Chinese clean-energy vehicle market’s structure will approach the international market’s structure
After 2020, China will completely stop new-energy vehicle subsidies. Before 2020, such subsidies are not meant for imported new-energy vehicles, making the hybrid electric vehicle Prius and international best-selling electric vehicles like Nissan Leaf and BMW i3 unable to enter the Chinese market. Therefore, foreign vehicle manufacturers are forcefully developing hybrid electric vehicles, hoping after 2020 they can take China’s clean-energy vehicle market with their hybrid electric vehicle. At present in China, an electric vehicle’s cost is almost three times of a gasoline-powered vehicle’s cost, such as the BAIC electric vehicle EV150; a plug-in hybrid electric vehicle’s cost is about two times of a gasoline-powered vehicle’s cost, such as the BYD Qin. However, a Toyota hybrid electric vehicle’s price in the Chinese market is almost the same with a gasoline-powered vehicle’s price, such as the hybrid electric vehicle Toyota Corolla. Without government subsidies, Honda, Hyundai and GM also have launched hybrid electric vehicles in the Chinese market. So far, not one of Chinese brand vehicle manufacturers has launched a hybrid electric vehicle. Therefore, after China stops subsidies in 2020, hybrid electric vehicle will soon surpass electric vehicles and plug-in hybrid electric vehicle to dominate the market.
About the author
David Zhang is an independent auto consultant and industry analyst. In 2002, he got a PhD degree in marine engineering from Wuhan University of Technology. In 2003, he got the professional title associate researcher when he engaged in post-doctoral research at Hefei University of Technology. Since 2004, he has worked in the auto industry in Shanghai. His domains include new-energy vehicles, charging facilities, power batteries, car sharing, etc. He has investigated auto markets such as the USA, Europe, Japan and South Korea, etc. So far, he has published more than 160 articles, given more than 60 lectures, chaired 10 industry conferences, given more than 200 media interviews, including one given to Shanghai TV Station. He has appeared in Shanghai radio Station’s auto talk show program 7 times. At present, he mainly studies the auto industry’s hot technologies and future trend. In 2016, he visited 32 cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, to investigate the new-energy vehicle, charging facilities and hourly rental car market. He is known as “The Traveler” in the auto industry.