It may surprise our readers to learn that China, the undisputed heavyweight champion of pollution is also leading the world in sales of all-electric vehicle (EV) and plug-in hybrid vehicles (PHEVs). China reported sales of 1.26 million EVs and PHEVs last year, up 61.7 per cent from 2017. This is in comparison to sales of 360,000 in the U.S. and 408,000 for the E.U. During the same time frame.

While the fact remains that China simply has a huge population, and therefore a huge market, the Chinese government’s efforts to put more clean-technology vehicles on the road are respectable. Beijing has offered several subsidies to new car buyers who purchase “new-energy vehicles (NEVs),” what we here in the U.S. call EVs and PHEVs.

These programs were scaled back in June however, and could potentially lead to a downturn in the NEV market. Anecdotal evidence from dealerships offering various NEVs suggests that  consumer interest in these vehicles dropped sharply in July.

In an interview with the South China Morning Post, Shen Wei, an analyst for the United Bank of Switzerland (UBS) remarked that “Sales are set to slow in the remaining year because those customers keen on owning a NEV car have already bought. The industry had been overly optimistic about the NEV segment earlier.”

The NEV market has been strong in China for the first half of 2019, with the sales of over 617,000 units being recorded. This is a whopping 59% increase in sales over the first half of 2018 according to the China Association of Automobile Manufacturers (CAAM).  Unlike the broader automotive market in China, the market for NEVs has been growing exponentially.

Sales of NEVs seem to have peaked in May and June of this year as buyers rushed to take advantage of the disappearing subsidies. The Chinese government announced in March that it would be reducing subsidies on NEVs by up to 60% in an effort to increase technological standards.

In a report released on July 24th, CAAM cut its forecast of NEV sales in 2019 by approximately 5%. The organization had initially predicted that NEV sales would rise by 27% in 2019.

This initial guess was based on the idea that customers would be eager to purchase new NEVs with improved performance and technology, even without the government subsidies. CAAM has appeared to backpedal, and now admits that Beijing’s decision will most certainly have a negative effect on the NEV market. The association also revised its outlook for all nationwide new vehicle sales, and now predicts sales will be down in China across the board.

It should be noted that CAAM is an industry organization, but is controlled by the Chinese government.

“Since no policy incentives are expected to be implemented any time soon, we predict that the [NEV] auto market won’t recover until next year,” said Shen when asked about a potential turnaround in sales.

It will be interesting to see if the Chinese government will allow this trend to continue through the rest of 2019.

What do our readers think about the progress China has made in the clean-car sector? Will the government eventually relent and agree to increased subsidies? What lessons can governments in the west take from China when it comes to increasing clean-car sales? Please leave us a comment below and chime in on the subject.

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