China has firmly established itself as the global leader in the new energy vehicle (NEV) sector, capturing roughly 45% of worldwide electric vehicle sales in 2016 and nearly monopolizing the market for electric buses. This impressive dominance was highlighted in a recent report titled "China's New Energy Automobile Blue Book: Government Policy to Promote Market Development," released by Fitch Ratings on July 17. According to the report, China's NEV market is expected to experience steady growth over the coming years, bolstered by robust policy support. The goal is to boost annual sales from 570,000 units in 2016 to 2 million units by 2020. Key strategies driving this expansion include consumer incentives, restrictions on traditional fuel vehicles, and extensive promotion initiatives within the public transport sector.
Fitch anticipates that the percentage of motorized passenger cars in China will gradually rise, starting at 1.4% in 2016. In urban areas where fuel vehicle restrictions are enforced, demand for electric vehicles is projected to remain strong. In fact, in 2016, around 75% of electric vehicle sales were concentrated in cities with such limitations. Meanwhile, tightening regulations on low-speed electric vehicles and the availability of cheaper, lower-end models are expected to drive demand in third- and fourth-tier cities. Coastal regions, known for their advanced charging infrastructure and substantial local government subsidies, have historically been major contributors to China's NEV sales.
From 2013 to 2015, China's NEV sales skyrocketed more than 18-fold thanks to generous government subsidies aimed at boosting both consumer interest and production. However, following increased scrutiny of fraudulent practices in the industry, year-over-year sales growth slowed significantly in 2016, dropping to approximately 50%. To address these issues, the government updated its subsidy policy for 2017–2020, introducing a staged withdrawal approach, raising technical thresholds, and extending the subsidy application window. Fitch predicts that manufacturers will absorb some of the consumer losses resulting from reduced subsidies by lowering prices on supported models. With significant profit margins enjoyed by certain NEVs (particularly electric buses), along with anticipated cost reductions from economies of scale and advancements in battery technology, there is ample room for pricing adjustments.
Looking ahead to 2019, Fitch expects the number of electric vehicle models available in China to double, intensifying market competition. Both domestic and international automakers will need to ramp up their offerings to comply with stringent fuel efficiency standards set by Chinese regulators. Additionally, starting in 2018 or 2019, passenger car manufacturers will face penalties if they fail to meet new energy vehicle point requirements. In 2016, the top ten domestic manufacturers accounted for nearly 96% of China's electric vehicle sales, while joint ventures with foreign brands are currently lagging but plan to increase their focus on NEVs over the next five years.
In terms of production, Shenzhen-based BYD Auto Co., Ltd. surpassed California's Tesla in 2015 to become the world's largest electric vehicle manufacturer based on sales volume. Among the top 20 electric vehicle producers globally for 2016, nine are Chinese brands. China's dominance in this rapidly evolving industry underscores its pivotal role in shaping the future of sustainable transportation worldwide.
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