The reality of Chinese electric cars may surprise you
China is the world’s largest market for electric vehicles. As the Chinese government continues to insist on expanding electric mobility, its impact on the global vehicle market cannot be overstated.
Feng An, Executive Director of the energy and transport Innovation center based in Los Angeles and Beijing, noted that today’s Chinese electric vehicle market consists largely of minibuses. Last year, China sold about 1.25 million electrified cars. The state significantly limits sales of cars with an internal combustion engine in China, but Chinese buyers can easily purchase electric vehicles.
In China, the roads are not much you can see Nissan Leaf, BMW i3 and Tesla. According to Feng, in the history of sales, most Chinese electric cars were of low quality, low speed and produced by unknown Chinese automakers in small cities. By the end of 2018, the share of sales of electric vehicles, in particular electric minibuses, fell to about 37%. One to two thirds of the cost of electric minibuses is covered by the government.
For China to achieve its future electric vehicle goals, foreign brands should start selling electric vehicles in the country. According to Ana, the actual sales will be around 5% by 2020. China must open the door to The reality of Chinese electric cars may surprise you.
There are currently about 500 electric vehicle startups operating in China. Most of these companies are small factories and garages producing commercial electric vehicles. The launch of the start-up on electric vehicles can be supported by the state, but there is high competition with large domestic companies and foreign automakers who are going to enter the Chinese market.
Over the past year, 40 new electric car manufacturers have emerged, and each of them can make a billion dollars, even if companies and sponsors don’t believe they will be successful in the long run. Most startups want to attract company investment as quickly as possible before China’s economy starts to slow down.
According to Feng Ana, the result of the slowdown in China’s economy is a huge surplus in the production of electric vehicles. 90% of new companies will go bankrupt in the next five years, if not before.
Therefore, when there is information about Chinese entrepreneurs and venture capitalists who are starting to develop electric vehicles, it is worth taking into account that the money comes from the Chinese government. Many regional governments receive money by selling land. The proceeds are invested in new technologies such as electric vehicles. The authorities have almost no problems with the return on investment.
According to Ana, in the next few years the number of existing companies engaged in the development of electric vehicles will be reduced from 500 to ten.
For China, the investment is similar to the government’s large-scale financial program, and it bears little resemblance to Nevada (USA), which provided Tesla with more than a billion dollars in tax benefits for the construction of the Gigafactory plant.
From a purely economic point of view, China should invest in the development of workers. Many Chinese companies developing and manufacturing electric vehicles may close, but their engineers will move on.
In 10 or 20 years, electric cars will have a low margin. No one will make money making electric cars. It will be possible to earn money, providing mobility services, in particular rent of electric cars.
Feng Ahn believes that safety and quality problems will not allow Chinese electric vehicles to enter the world markets. The Chinese don’t make batteries of the same quality as the Japanese and Koreans, however the Chinese batteries are much cheaper. Quality will appear a little later, when a high production scale and a significant reduction in cost will be achieved.
Chinese automakers may consider selling electric cars in the US, but they must first become competitive in China.