All Carmakers are Launching EV Models in China

Date: 2015-11-25

Focus on EVs. This year, electric vehicles (EV) were displayed in a separate and larger space as there were more models. We saw at least 15 fully-new EV models, including pure battery electric vehicles (BEV) and plug-in hybrids. These come from Chinese carmakers – eg Geely Emgrand EV, BAIC EU260, JAC iEV5 – as well as foreign names, eg Volvo XC90 Plug-in, BMW X5 Plug-in. The Chinese and foreign carmakers are targeting the mass and premium markets respectively, hence they are not competing with one another. Note that only a few new PHEV models were displayed at the auto show, and the SAIC Roewe e950 is the only mass-market model. 

Increasing competition in China’s EV market. Now, almost all carmakers, both foreign and Chinese names, are launching EV models. But only a few Chinese carmakers are rolling out PHEVs. It appears that BYD is capturing a niche market – the cheap PHEV segment. But the problem for entry-level PHEV (and also BEV) is that the development and production cost of PHEV is too high and that its profitability solely depends on government subsidies. Now, private customers are buying PHEVs like BYD’s Qin and Tang that deliver a longer drive range on one charge (>600km) to bypass the car licence quota. With the ramping up of sales volume, local governments will likely cut their subsidies on PHEVs in the next few years. Furthermore, the central government will phase out subsidies totally by 2020. By then, Chinese-made EVs will need to compete with local and foreign names on technologies and cost. We think BYD’s dominance in China’s EV industry will be sustained. 

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