How China Raced Past The Rest Of The World With Its Explosive EV Boom
Carmakers in China sold over half a million plug-in vehicles in May 2023, a staggering figure for a single month. In comparison, US automakers sold about 300,000 battery electric vehicles (BEVs) in Q2 2023 as per Cox data, and have a long way to go before they can compete with China.
A new report chronicles China’s EV offensive, and how it set the benchmark for other nations to follow.
The country’s EV boom is driven by robust investment in charging infrastructure and manufacturing, incentives, and friendly EV policies. And while EV efforts are incentivized, manufacturing polluting vehicles is penalized, which Bloomberg called a carrot-and-stick approach in its new report.
So what are the carrots? Firstly, China’s consumer incentives ran for a decade, offering buyers up to 60,000 yuan ($8,375) in subsidies. Even though the national program ended in 2022, local incentives in cities like Shanghai continue to offer up to 10,000 yuan ($1,383) in rebates.
Secondly, new energy vehicles (NEVs) priced under 300,000 yuan ($41,500) will continue to benefit from a 10 percent tax waiver till 2025, which will be reduced to five percent for 2026 and 2027. China’s total tax breaks will amount to 835 billion yuan ($115 billion) by the end of 2027.
Efforts are ramping up in the US as well, with the Inflation Reduction Act laying out $270B in tax breaks for EV purchases and manufacturing.
Moreover, chargers are more accessible in China. The country had built 6.36 million chargers by the end of May 2023, more than any other country. Additionally, charging standards are uniform, and infrastructure is government-subsidized.
A significant portion of the charging network is part of the state grid – the country’s fourth largest provider – behind private players like Wangbang New Energy Investment Group and TGood New Energy.
As for the sticks, ICE vehicles are losing their appeal in China. To limit the number of cars on the road, Beijing has a license plate lottery system, which by design caters to EVs. For instance, the Beijing Municipal Commission of Transport is granting 100,000 new license plates in the capital in 2023, of which 70 percent are reserved for EVs.
Similarly, the Shanghai International Commodity Auction Co. (SICA) has its own program to limit cars on the road. ICE car buyers in China’s financial capital have to enter a monthly auction to get their vehicles registered. Customers had to cough up an average auction price of 92,500 yuan ($13,000) to get their gas or diesel cars registered in April 2022, and their chance of success was only 5.8 percent.
Meanwhile, SICA offered green plates for PHEVs and NEVs for free. January 2023 onwards, PHEV license plates are reportedly being treated the same way as ICE vehicles, further enforcing all-electric vehicles.
Moreover, a regulatory approach called the dual-credit policy, partially based on California’s Zero Emission Vehicle (ZEV) Program, offers manufacturers credits for meeting fuel efficiency targets, and penalties for non-compliance. If they don’t meet the targets, they can buy credits from another automaker to offset their deficits.
