China's Consumers Risk FOMO as Electric Cars' Popularity Soars
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Welcome to 2022 from Beijing. After the explosive growth last year in China's EV market, what could this year have in store for consumers?
The short answer: more of the same. Sales — which more than doubled last year and should end up topping 3 million once December’s figures are added — are forecast to almost double again to 6 million, according to the China Passenger Car Association. New-energy vehicles, which include electric cars, plug-in hybrids and fuel-cell autos, will account for about one in five of new car sales.
A key reason behind the expected sales surge is the looming end of government subsidies for EV purchases, which won’t be available from 2023 on. Introduced 12 years ago to support the development of the nascent industry, the subsidies have slowly been phased out, but are still worth as much as 12,600 yuan, or about $1,200, on purchases up to 300,000 yuan.
A growing preference for greener, cleaner vehicles also contributed to the EV sales surge. And EVs are also seen as smarter than ICE cars, offering features from autonomous driving to in-car karaoke. Homegrown upstarts Xpeng, Nio and Li Auto have established themselves as serious contenders, while SAIC-GM-Wuling Automobile’s pint-sized Hongguang Mini has proved popular with price-conscious young drivers.
New EV owners may also want to beat potential price rises driven by parts shortages and rising raw material costs. On New Year’s Eve, Tesla increased the price of Model Y vehicles made at its Shanghai factory by more than 20,000 yuan and bumped up the cost of its Model 3 by 10,000 yuan — the second hikes in about a month. Other automakers including Polestar, FAW-VW and Leap Motor have also raised prices or set a date for removing factory incentives.
That’s playing on the mind of Beijing resident Zhang Xin, who has finally decided to trade in his old gasoline car for an EV.
“The car-purchase funding is much less now than a few years ago, but it is still some serious money,” the 45-year-old technician said. “I just hope I can get one before the cost goes up any further.”
Still, the year ahead won’t be without challenges, most of them familiar: the ongoing chip shortage and Covid disruptions to supply chains and manufacturing. BYD last week said production at its Xi’an facility had returned to normal levels after being hit when the city of 13 million was plunged into lockdown in late December.
Geely said an outbreak of Covid cases in the city hasn't slowed output at its factories in Ningbo but warned that supply chain efficiencies and deliveries might be affected.
If those hurdles can be overcome, it looks like China’s EV market is in for another blockbuster year.
©2022 Bloomberg L.P.