China keeps impressing the industry and its observers with an amazing uptake of Plug-ins, or New Energy Vehicles, NEVs, as they are called in China. NEV deliveries for the first half of 2018 were clearly above the past 2 years growth rates: Nearly 373 000 plug-in passenger cars, including 15 000 imports, were delivered in January thru June. This is 114 % more than for the same period of last year.

On top of that come 49 000 commercial vehicles, so far, mostly LCV and electric buses, 60 % more than 2017 1-6. China is, by far, the worlds largest market for Plug-ins. 50 % of global plug-in volume was sold in China, for 2018, counting passenger cars only. For electric commercial vehicles, 70 % of the global volume is in China and exports of electric buses from China to other markets are significant.

In May, the NEV share reached a new high with 4,8 % in a total monthly passenger car market of nearly 2 million units. Keen to raise the standard of the Chinese EV industry, the Government introduced new requirements to receive NEV subsidies in June: a minimum 150 km e-range for BEVs and a specific battery capacity of 105 W/kg. This has slowed down the pace considerably as some popular BEV models did not comply and stopped selling. June growth was reduced to 80 % and preliminary results for July show a 61 % y-o-y increase. We expect this trend to continue during the 2nd half, until best-sellers like the BAIC EC-Series are back on track again.

Despite the slow-down, we expect NEV sales in China to reach 1,1 million passenger cars this year, up 83 % from 2017. In addition we expect 275 000 commercial vehicles the be delivered in 2018. For passenger cars we expect the NEV share to reach over 6 % in December and 4,2 % for the complete year. Back in 2016, the Chinese Government set NEV targets for 2020: 6 % share in vehicle sales and 5 million NEVs on the road. With the current adoption rate, these targets, considered highly ambitious in international comparison back then, will be surpassed by a good margin.

Over 1 million deliveries this year

China is, by far, the largest market for Plug-Ins. 2018 NEV passenger car sales thru June were 373 000 units, 3 times higher than in USA, the #2 in the country ranking. With 96 % of sales from domestic OEMs, China is also the largest producer of Plug-ins. Since the boom started in 2015, y-o-y growth has been accelerating, +65 % to 2016, +72 % to 2017 and the expected +83 % to 2018.

This year, we expect NEV sales to reach 1100 000 units, counting passenger cars, 74 % of them BEVs and 26 % Plug-in Hybrids (PHEV). In a total market forecasted to reach 26,3 million passenger cars (+2,2 % vs 2017), this means 4,2 % NEV share.

Our detailed, regular reporting is for the passenger car market. In addition, 49 000 commercial vehicles were sold in the NEV category in 2018 H1. For 2018 we expect this number to reach 275 000 units, half of them large buses, most of them fully electric. For electric busses, 98 % of world sales are in China, today. The domestic sales leader is Yutong, the export leader is BYD. We are maintaining a database for worldwide electric commercial vehicle sales. Contact us for more details.

⅔ rd of volume in the second half

The monthly share development helps to explain the forecast: Only ⅓rd of Chinas NEV sales are during the first half of the year. The first quarter is usually hampered by pending approvals and subsidy paperwork. Is takes until April for shares to connect to the endpoint of the previous year.
This year had a good start and a new share record for NEVs was set already in May. The May result contains a good amount of sales brought forward from models which lost their subsidies in June (the aforementioned tougher requirements on battery capacity). Among them the worlds best selling EV, the BAIC EC series. This put a 15-20k dent into June sales, which is likely to continue into Q3 and parts of Q4.

Still, unless shares and growth completely depart from the usual seasonality, we can expect 1,1 million NEV sales when 2018 is closed. The December share can be as high as 6,5 %, which is twice as high than for other larger economies with total vehicle markets of 1 million and more.

Segment dynamics

An important reason for the Chinese lead in NEVs is their success in offering ultra-affordable EVs in the Mini (A) and Small (B) segments. The industry is upgrading, however, as the Chinese Government continuously raises the bar for granting subsidies. The NEV segments are highly dynamic and compared to the 2017 picture, a lot has changed: Mini and Small cars lost ground, BYD upgraded their SUVs to make space for the new Yuan. The BYD Qin PHEV 10-folds sales after its face-lift. SAIC enters the Compact segment with a Station Wagon (!) and leads it. E-range improvements for, both, BEV and PHEV are the norm, together with the annual model-year changes.

The BEV share is high in international comparison. Europe and USA typically have around 50 % BEVs in their plug-in sales. The reason is partly in the segment composition of Chinese plug-in sales. Over 40 % of NEV sales are in the Mini and Small segments, where PHEVs make little sense. The BEV / PHEV mix has been trending towards pure electric since the last 2 years. In 2017, 81 % of sales were BEVs, for 2018 we expect 74%, due to fewer mini-EV sales and the strong rebound of PHEV models for BYD.

96 % of China NEV sales are China-sourced. Import cars are subject to custom duties (recently increased from 25 % to 40 %) and imports do not receive NEV subsidies. At least, import BEVs are exempted from the prohibitive taxes on big engine luxury cars and SUVs. This makes Tesla a compelling alternative in the high-end import segment. Of all imported plug-ins, 2/3rd are delivered by Tesla.

A comment on segment nomenclature: EV-volumes uses a global segmentation scheme like many western car companies and agencies. In China vehicles are categorised into Cars, SUVs and MPV. No difference to what we do. Then, instead of our A to F segments, cars in China are classed into: A00 (=A, Mini), A0 (=B, Small), A (= C, Compact & D, Mid-Size), B (=E, Large) and C (=F, Luxury).

Change is certain

Despite a complete sales black-out in June, the worlds best selling plug-in, the BAIC (or BJEV) EC180/200 series maintained the #1 position in Q2 and for the 1st half of 2018. This could already change in Q3, if the planned battery upgrade is late and subsidies remain withdrawn. Change is the only constant and, except for the BAIC EC series, the top-30 ranking looks a lot different from the 2017 result. The huge %-variances are a good indicator.

The reasons behind this unprecedented dynamics: Febrile, large scale industry activity and, sometimes, Government intervention to meet revised targets for NEV deployment and competitiveness.

Since June of 2017, the total number of plug-in models available in China has grown by 45, from 56 to 101. We tracked 38 BEVs and 18 PHEVs from 28 OEM in June 2017 versus 70 BEVs and 31 PHEVs from 39 OEM in June 2018. Consumer choice, but also competitive pressure, is now by far exceeding the European and USA markets. 11 new OEM have entered the Chinese NEV market within the last 12 months, but only 1 of them (Tata with JLR) had more than 2000 sales this year and 8 of the newcomers stayed below 1000 units. A shakeout seems likely.

The top-5 manufacturer ranking after 6 months is: #1 BYD 71 900 units +103 %, #2 BAIC (BJEV) 61 000 units +102 %, #3 SAIC 55 000 units +300 %, #4 Geely/Zhidou 25 200 units -6 % and #5 Chery 24 500 units +120 %. The next 5 are JAC, JMC, Hawtai, Changan and Zotye. Tesla is #12 with 9500 deliveries (all imported) and BMW is #13 with 7300 deliveries, nearly all of them 5-Series PHEV and X1 BEV from local production by their J/V with Brilliance.

Exceeding the goals

The Chinese NEV fleet (vehicle population) reached the 1st million in October 2017 and ended 2017 with 1 260 000 NEV passenger cars in operation. By the end of 2018 and counting passenger cars, we expect 2,35 million NEVs to be in operation in China, 90 % more than at the end of last year. This puts China ahead of USA (1080k) and Europe (1350k). With around 200 million cars in operation in China, the PEV share is still just over 1 % of the total fleet, but it is higher than in other regions, where fleet build-up has a stronger legacy. If China reached the motorisation rate of Europe or USA, it’s fleet would be 750 million cars. Hardly sustainable with ICE propulsion.

5 million NEVs on the road by the end of 2020 is a previously stated target of Chinese authorities. This is for all vehicle types combined, including LCVs, trucks and buses. With the current rates of NEV adoption, this target is very likely to be exceeded. Encouraging.