The Chinese market had 6,260 new EVs registered in January, far from the 15,275 units of January 2016, dragging down the plug-in market share (of new cars sold) to just 0.25% — far below the 1.45% of 2016.
Considering the seasonality of the Chinese PEV market, where the first quarter is always the slowest selling (due to the December sales rush and New Year holidays), a considerable month-over-month drop was already expected — for example, December 2015 electric car sales reached 35,000 before dropping to 15,000 in the following month. What surprised experts was the size of the fall — 6,260 units is setting back the market two years. The reasons for this unexpected drop will be explained below. For now, let’s focus on last month’s registrations by model.
In January, SAIC and BAIC took over the top positions. Tesla also moved up, benefitting from the local sales drought to post a best ever #5 position.
Here are last month’s top 5 best selling EV models:
But the real news are the low, low numbers of BYD models, with the #8 BYD Tang being the best of them. With only 278 deliveries, one has to go back 4 years to find such low numbers for the manufacturer. Rumors say that the Chinese manufacturer is preparing new batteries with a different chemistry (NMC?). Considering that BAIC and SAIC weren’t so affected by the incentives delay, it seems BYD took this waiting period to make big changes and pause manufacturing. We have to wait and see what the cause for this slump was, but we are contacting BYD about the matter to try to get more insight.
Looking at the January manufacturer ranking, the surprise leader is BAIC — 26% market share — followed by SAIC Roewe (23%) and JMC (18%).
Interestingly, Tesla (4th, 12%) ended the month ahead of BYD (5th, 9%), which says a lot about the strangeness of the current Chinese ranking. Then again, these are strange times…
Looking forward, the Chinese government set a goal of 2 million “New Energy Vehicles” (NEV = BEV + PHEV + FCEV) in 2020. Considering 2016 ended with a 1 million NEV fleet already, one would only need some 300,000 per year to reach the desired objective, an easy task.
But with subsidies set to be cut off by 20% each year and more demanding conditions applied (they must be safer cars, have larger range, and be more highway capable), a large portion of the market (e.g., ultra-cheap city cars) will suffer. They will struggle to have access to subsidies, but they are not completely alone, since regular EVs will also lose part of the price advantage given to NEVs by generous incentives.
The solution to offset the incentives cut will be dropping costs through scale, and that game can only be played by a number of OEMs — like BYD, BAIC, SAIC, and Geely.
Ultimately, the Chinese EV industry will benefit, because it will have fewer but stronger players, more ready to take on foreign manufacturers head on. But they will be sacrificing certain players on the way. What January showed us is that:
A) The market will become more concentrated, with the top manufacturers distancing themselves from the others.
B) Volume numbers will suffer, especially in the first quarter, with the remaining quarters probably recovering the lost time, but don’t expect the ludicrous growth rates of 100% or so of the past 3 years to be repeated in the short term.