The Chinese government is cracking down on subsidies to the new energy vehicle (NEV) industry, but remains committed to 5 million NEVs being deployed in the country by 2020.
IHS Automotive Perspective
Significance:The Chinese government aims to support the growth of the new energy vehicle (NEV) industry with the goal to ramp up the electric vehicle (EV) charging network across China.
Implications:The investigations into corruption and fraud among manufacturers of NEVs in China will mean greater scrutiny of industry players, and will allow for tighter control over the industry.
Outlook:The NEV growth rate forecasts have been slashed as the authorities accept that previous years' growth has been significantly inflated, although the government has not yet disclosed how accurate 2015's NEV sales and production figures were.
The Chinese government is planning a major boost in the construction of electric vehicle (EV) charging facilities across China. The National Development and Reform Commission (NDRC) has issued a document stating that more EV charging stations will be built in cities in China such as Beijing and Tianjin, as well as cities in Hebei province, Shandong province, the Yangtze River Delta, and the Pearl River Delta, reports the state Xinhua news agency. The document, which has been published by the NDRC and three other government departments, calls for electric power companies to help construct the charging stations. The NDRC's data show that there are 81,000 public charging stations for EVs in the country as of the end of June, marking a 65% year-on-year (y/y) increase. The China Energy Administration states that by 2020 China aims to have a nationwide charging station network capable of fulfilling the power demands of 5 million EVs.
Government tightens control on NEV industry
The latest scandal to rock China's vehicle market is one involving new energy vehicles (NEVs), including passenger and commercial vehicles. The Chinese authorities have already named and shamed five companies involved in what the government has called "classic fraud" and a government-linked newspaper has claimed 20 companies in China, including international passenger vehicle brands, are also involved in the scandal.
A report by the Associated Press (AP) has termed the recent fraud revelations as "the affair of the phantom buses", as five commercial vehicle EV makers were named as being involved in deceiving the government over subsidies for NEV buses that did not exist. The AP report states that the five companies collected over CNY1 billion (USD120 million) in fraudulently claimed subsidies from the Ministry of Finance. The ministry has also stated that 90 companies have been investigated over the alleged fraud, but has not named the other companies.
"'Subsidy fraud' will do a lot of damage to development of the new energy vehicle industry," the deputy general-secretary of the China Association of Automobile Manufacturers, Xu Yanhua, told the Economic Observer newspaper.
The investigations into fraudulent activities in the NEV industry are part of the government's tightening of control over the players in the market.
NEV forecast slashed
Following the scandal involving the NEV industry in China, the China Association of Automobile Manufacturers (CAAM) has slashed its forecast for NEV sales this year. The association has reduced the expected growth rate by 43%. The new forecast for NEV sales in China this year is 400,000 units and the goal is to achieve sales of 700,000 units per annum, reports the South China Morning Post, citing Xu Haidong, assistant general secretary of the CAAM.
Outlook and implications
The Chinese government's announcement today (13 September) that it aims to have a charging network for 5 million EVs in China in 2020 indicates that the authorities have not changed their target, despite the recent allegations on the NEV industry.
The revelations on the NEV industry and the government's current decision to only mention five major automakers is likely with the aim of highlighting the worst cases. It also sends a message to the industry that no one is beyond the law and that the government and regulatory bodies are monitoring the NEV industry and are able to substantially penalise, such as by revoking licences and imposing fines, those found manipulating the system.
Overall, the Chinese government doled out CNY33.4 billion (USD5 billion) in subsidies to EV makers in China during 2009−15, while local governments have also waived licence plate fees for EVs. EV producers can gain rebates of CNY500,000 (USD76,000) per EV bus or CNY50,000 per car, the AP reports.
Now, as the government has begun to share the findings of the investigations started at the beginning of the year into alleged fraud in the industry and inflated sales figures, the CAAM states that industry forecasts need to be adjusted. "We previously made the projection based on last year's sales figures, which include vehicles which should not have been considered new energy vehicles," said Xu. "So there ought be changes to the forecast now.
On a year-to-date basis, a total of 258,000 NEVs were produced in China during the first eight months of 2016, up 111% year on year (y/y), while sales of NEVs rose 115.6% y/y to 245,000 units. Of these, pure EV sales hit 181,000 units, up 147.7% y/y, and PHEV sales hit 64,000 units, up 58.1% y/y. The Chinese government's original target was annual production of 700,000 units of NEVs this year. In 2015, a total of 379,000 NEVs were produced in China, up four times from the volume of the previous year. The CAAM states the new forecast is now just 400,000 units.
The NDRC has warned against rapid growth of the NEV industry and earlier this year highlighted the need to limit the number of players in the industry.
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The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.