China’s electric car sales slump, squeezing automakers

CHINA’S leaders are promoting electric cars to help transform the country into a creator of profitable technologies, but sales are stalling as thousands of buyers make a similar choice. That is squeezing automakers that are spending heavily on development as regulators shift the burden to them by imposing mandatory sales quotas. The wrenching transition is revealing the difficulty of luring mainstream buyers to a fledgling, expensive technology.

An industry shakeout lies ahead as novice Chinese producers that rushed into the market are forced to merge or close. Development costs are so high that global competitors including Volkswagen and Ford are teaming up to split the burden.

“China is recognizing you don’t need 400 EV companies. You need maybe 20,” said Bill Russo, chief executive officer of consulting firm Automobility Ltd. and a former Chrysler executive. “That means some have to fall off the competitive landscape.”

In November, purchases of electric and gasoline-electric hybrid SUVs and sedans tumbled 43.7 percent from a year earlier to 95,000, according to the China Association of Automobile Manufacturers. Sales for the first 11 months of the year were up 1.3 percent at just over 1 million vehicles.

China accounts for half of electric vehicle sales worldwide, making any change in its market critical for the global industry.

Worldwide, EV sales were up 13 percent over a year earlier in the 10 months through October at 1.7 million, according to Bernstein Research. Sales in North America were off 2 percent at 301,000 while Europe rose 37 percent to 395,000.

In China, about 70 percent of the 1.2 million electric or gasoline-electric hybrid models sold over the past year went to government and company fleets, according to Bernstein. Almost 500,000 bought by consumers were in cities that offer incentives such as being exempt from registration fees or license plate waiting lists.

“Few real consumers buy EVs except when forced by regulations,” Bernstein researchers Robin Zhu, Luke Hong and Xuan Ji said in a report.

Until June, combined subsidies to buyers from the national and some city governments including Beijing and Shanghai could run as high as 50,000 yuan ($7,100) for vehicles with the longest range.

Industry analysts say one reason for the slump is that anyone who wanted an electric rushed to buy it before subsidies ended. Sales spiked 85 percent in April over a year earlier.

“There will be a few foreign companies that stay in the game, but there will be a few leading Chinese companies that can dominate,” said Russo.

The heavy spending on EVs comes as cash flow is under pressure from weak demand for gasoline-powered models.

Sales of SUVs, sedans and minivans for the 11 months through November were off 10.5 percent from a year earlier at just over 1.9 million. That puts the global industry’s biggest market on track to shrink for a second year.

Despite the end of subsidies, Beijing still is spending heavily to promote electrics. (AP)

Trending

No stories found.

Just in

No stories found.

Branded Content

No stories found.
SunStar Publishing Inc.
www.sunstar.com.ph