More than 351,000 Plug-in passenger cars delivered in 2016 in China, which makes it by far the largest market for Plug-ins (or New Energy Vehicles, NEV, as they are called in China). That’s an increase over 2015 was 85%, which is much less than in previous years, but more than in any other of the large economies.
Share in Passenger Car sales was 1.45% for the year, which is still far cry from leading Norway (24%), but best among all larger car markets with total sales above 1 million, Chinas PEV share is similar to France and UK for 2016. The overall passenger car market in China increased by 15% of 24.3 million units in 2016.
July was the first month when NEVs share passed the 2% mark in total passenger vehicle sales. December, usually the grand final for Plug-in sales, was particularly disappointing. More stringent requirements for local subsidies and more controls to avoid bogus registrations were part of the story.
From 2017 onwards, central NEV subsidies are reduced by 20%, Local subsidies by 50-60%. Some of the support is redirected to the availability of better batteries. Beyond 2017, the Government has expressed ambitious targets for production, market shares and technical content of NEVs, which also will affect importers of regular vehicles. ZEV targets (like in California) and trading of emission certificates are other proposals. The deck is being reshuffled and the NEV market in China is going to stay interesting, to say the least.
China leads in passenger car volume and in electric busses
Since it took off in 2014, the Chinese NEV market has increase over five-fold, a development which is unmatched by any country with notable Plug-in sales back then. Since 2014, the number of OEM in the field (with over 100 unit sales) has increased from 14 to 21. The number of available plug-in models (with more than 10 unit sales) from 29 to 68.
In addition, over 150 000 commercial vehicles were sold in the NEV category in 2016, 80% of them are large buses, most of them fully electric. Regarding electric busses, 98% of world sales are in China, today. The domestic sales leader is Yutong, the export leader is BYD.
Rapid shift back towards EVs
With the success of the BYD Qin and Tang PHEVs, the mix shifted towards plug-in hybrids in 2015. Additionally for 2016, subsidies became depending on all-electric range, with 100 km as a minimum requirement for BEVs. Many of the ever so popular mini-EVs had to be upgraded to retain subsidies in China. This caused low sales of mini-EVs during Q1 and strong rebound during the 2nd half of the year. New Smart-type models with decent specs and range, like the Zotye E200 EV contributed strongly to the revival.
Total Hybrid Electric Vehicle (HEV) sales in China added up to just 85,000 units in 2016, only 13 models were on sale and apart from some hundreds for Buick, Honda and Nissan, the entire volume came from Toyota and their luxury division Lexus.
BYD lost in Q4 but still leads the year
BYD clearly leads the 2016 ranking with a 1-2-3 finish. Even if the Tang and Qin PHEVs had a dismal 4th quarter, they still lead the chart for the complete year. The BYD e6, the oldest EV in the world, was still good for place 3. Frequently updated, it has one of the largest EV batteries around and loyal fleet buyers. Together, BYD (with Tang, Qin, Denza, e5, e6, EV300) accounted for 29 % of NEV sales in China and is the world’s largest plug-in vehicle maker today. BYD delivered 102,465 units of NEVs in 2016.
Fast growing BAIC (or BJEV as its NEV devision is called), moved to #2 in the OEM ranking, thanks to the immense success of the (not really new) EU260 EV model. After a slow start 15 months ago, it topped the sales chart in October. The Geely Emgrand EV became a similar hit, reaching over 17,000 sales in 2016, amid a slow start and a complete blackout in October.
Many high selling models dropped sharply towards the end of the year. Notably for BAIC, BYD and Roewe, whereas the BAIC EC180 EV had a formidable start with over 4,000 units for December alone. The EC180 EV is a new BJEV entry in the B-segment (Super-Mini) with some cross-overish attributes. Battery capacity is 20,3 kWh, range is 180 km (constant 60 km/h), or 156 km NEDC, motor power is 41 kW and V-max is just 100 km/h for that reason. Skimpy specs, but it’s cheap: Prices net of subsidies start at super-low 60 000 RMB.
Other important newcomers in 2016 were the BYD EV300 and e5 EV mid-size sedans, two mini EVs from Zotye, the BAIC EX200 EV SUV and the Chevy Arrizo 7 PHEV. The aforementioned took off to higher sales, while the other arrivals stayed in the 500-1,000 per month interval.
Chinese brands dominate the market. Imports brands stood for just 5.5 % of plug-in sales, 13 import models sell on a regular basis and very few are China-sourced. The others pay custom duties and get no subsidies, which explains the struggle of plug-in imports in China. The best-selling foreign brand is Tesla (2.6 % share), standing for roughly half of the import volume, with Model S and Model X both on sale.
In a bullish total vehicle market, NEV share growth took a severe downturn in the second half of 2016. The usual Autumn trough came earlier and was deeper than usual, following the highest ever recorded NEV share of 2.1 % in July. The reasons are manifold, with more constrained handling of subsidies in the provinces and slow deliveries of popular models being the likely reasons for the weak Q4.
The December share was the same as for the year ago, which is a unique occurrence in the records of the last 3 years. It posts the question whether this is the start of a major adjustment towards more moderate Plug-in growth in China. It would clearly contradict Government targets, but reduced incentives for 2017 speak for a prolonged cooling. The coming months will show how buyers will react on de facto higher NEV prices and whether domestic OEM will try to maintain growth by price reductions.
Hard to predict 2017
For the reasons above, the outlook for 2017 plug-in sales is highly uncertain. The recent share development indicates slow growth or even stagnation. The total market is predicted to increase by 5 % this year, which means 25.5 million passenger cars. China has clear intentions to raise the bar for NEV production, sales and technology, pushing plug-in sales and shares to levels highly above the previous goals of 5 million NEVon the road in 2020 (all vehicle types).
In that context the recent sales trend is utterly adverse to the ambition and the market may need further/other stimuli or enforcements to return to the desired growth path. We like to stay fairly optimistic and predict NEV passenger car sales of around 500,000 units for 2017, which corresponds to 2% share and an increase of 42% over 2016. The NEV stock of passenger cars on the road is likely to surpass the 1 million mark in 2017.