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China NEV Sales for 2018

by Roland Irle, EV-volumes.com

We held off the 2018 summary for a while in order to get a better idea about the overall market development and the changes in NEV subsidies for 2019. The Chinese car market has seen volume declines for eight consecutive months, which combine to a 10 % drop since June 2018 and 3% for the year. The losses have increased and February 2019 passenger car sales, including imports, were 18 % below last year. Various factors play in, like overspending on cars in previous years, purchase restrictions in mega-cities, better availability of sophisticated ride hailing and public transport. On top of it, the trade conflict with USA, impairing the business conditions for US makers.

NEV sales held up well in this environment, so far. Volume increased 106 % in the 1st half, 68 % in the 2nd half of 2018 and 79 % for the year. China reached 1,1 million NEV passenger cars, plus 60 000 light commercial vehicles, corresponding to a market share of 4,2 % in the light vehicle sector. In December, their share was as high as 7,6 %. January results came in very strong, preliminary February results were more normal. Still, NEV demand could see a roller-coaster ride this year. NEVs with an e-range below 250 km (up from 150 km last year) do not qualify for subsidies anymore, those with longer e-range have subsidies cut by around 50 %. Direct local subsidies expire, in favour of charging infrastructure investments. Some OEM have indicated to lower list prices to compensate, still, NEVs above 250 km e-range can become 5-10 % more expensive for buyers. Those under 250 km range, mostly mini- and small cars, will become much less attractive as NEVs. The new rules become fully effective in July; following a 3 month grace time from April onwards, when grants are 40 % lower. Orders placed before April receive the 2018 subsidies.

The new regime further enforces the ministries target to consolidate the auto industry to fewer and more competitive players. Times will get tougher for makers of sub-standard models. 2019 will see the production of several low range EVs halted, either for battery upgrades, or infinitely. This happened in 2018, when the 150 km minimum range requirement was introduced. As 30 % of sales are in A and B segment cars (or A00 and A0 in Chinese terminology), it will leave a dent in the sales stats.

The forecast for 2019 has more uncertainty than last year. The current car market downturn is the first in decades and the recent rates of decline are disturbing. A "friendly" trade agreement can bring some relief, but without some easing in prices, taxes and ownership restrictions, the overall Car/SUV/MPV market can contract by 10 % or more this year. Whether this is acceptable, or even welcome for policy makers is hard to say. Our prediction for 2019 is a volume of 1,8 million NEVs, (Cars, SUVs, MPVs and LCVs) in a light vehicle market of 26,7 million, 3 % lower than 2018. This converts to a NEV share of 6,7 % and a growth of 55 % over 2018.

first China NEV Sales for 2018 image

High gains for NEVs in a declining car market

The auto market in China has been in reverse since July 2018. Declines are accelerating and February sales were 18 % lower y-o-y, counting passenger cars of all propulsion types, incl. SUVs and MPVs. Losses were strongest in the economy and SUV segments, while mid-size and large sedans still posted growth. Among the OEMs hit hardest by the slump in therms of %-drops were smaller Chinese car makers, but also Ford, FCA and PSA. In terms of volume, GM, Ford, BAIC, Changan, PSA and Dongfeng were the biggest losers. Winners were BYD, BMW, Toyota and SAIC.

NEVs held up well during the downturn, increasing by 79 %, while all other types decreased by 16 %. Companies gaining significant NEV volume and sector share during this period were BYD, Hawtai, Dongfeng, Great Wall, GAC, BMW, VW and Hyundai. Volume losses, despite rapid sector growth, were posted by Kandi, Zotye, Lifan and, yes, Tesla. Model S and X are imported from USA and subject to a 25 % tariff surcharge since last summer, 40 % instead of the usual 15 %.

second China NEV Sales for 2018 image
third China NEV Sales for 2018 image

Growth reduced, but still high

China is, by far, the largest market for Plug-Ins. 2018 NEV sales reached 1 160 000 units, counting passenger cars and light commercial vehicles.  This compares to 410 000 in Europe and 360 000 in USA.  On top of that came 120 000 medium and heavy commercial vehicles, 80 % of them electric buses in metro areas. Subsidies were very generous, but have been reduced to avoid oversupply, explaining their decline since 2016. China is still world-leading in this category; outside China, the potential for large electric commercial vehicles is not addressed, yet. Total volume was a mere 2600 units, most of them based on Chinese vehicles, including batteries.

For the light vehicle portion, growth has been consistent and high: +96 % to 2016, +75 % to 2017 and +79 % to 2018. This year, we expect NEV sales to reach 1800 000 units, +55 %, counting passenger cars & LCVs, 75 % of them BEVs and 25 % Plug-in Hybrids (PHEV). In a total market estimated to 26,7 million by us (-3 % vs 2018), this means 6,7 % NEV share. Our growth expectation of +55 % is lower than for previous years due to the aforementioned curtailing of NEV subsidies and a general decline in passenger vehicle sales.

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