26 March 2019
China's green car industry faces many challenges despite a supportive overall government policy. Photo: JAC
China's green car industry faces many challenges despite a supportive overall government policy. Photo: JAC

No quick breakthrough for new-energy cars

Initiatives by Beijing and Shanghai authorities earlier this year to include non-local auto brands onto their lists of approved new-energy cars had been widely touted as a major breakthrough in ending the trade barriers put up by regional authorities to protect their local auto industries.

The policy moves were cheered by investors, but how realistic are the expectations that it will be a smooth ride for the green car makers from now on?

Anhui Jianghuai Automobile (600418.CN) has told the China Securities Journal that it aims to sell just 2500-3000 new-energy cars this year. The number represents a significant growth from 2013, but still marks a relatively small volume.

More than 80 Chinese cities have announced some sort of new-energy car plans in terms of sales targets and complementary charging infrastructure build-out, making green cars a great trading theme in the stock markets. But Jianghuai’s experience suggests that investors would be well-advised not to get carried away.

Jianghuai’s iEV4 model has gotten onto the approval lists of Beijing and Shanghai in the first quarter. Thus, in theory Jianghuai customers in the two big metros can now enjoy local purchase subsidy and easier access to car license plates. Despite that, the company is yet to start its marketing campaign. So, what is it that has kept things on hold?

The fact is, until Jianghuai gets the go-ahead signal from technical inspection departments of the two municipal governments confirming that the cars meet the local new-energy car standards, the company cannot go anywhere yet.

A senior manger at the group, who uses two new-energy cars to showcase his commitment, also points out another big roadblock.

So far, almost all new-energy car sales of the Hefei-based auto firm came from its home turf. Despite Hefei’s aggressive green car schemes, Jianghuai sold only a little over 5000 units over the past few years. Also, most of the vehicles were sold — at big discounts – to company staff, suppliers, dealers and people engaged in related research projects. 

Hefei is the first city that has a compulsory quota on charging infrastructure. For new office buildings, shopping malls and hotels, at least 20 percent of parking lots have to be equipped with charging poles. But sales were still slow because the majority of people do not live and work in these new premises, and bringing electric car facilities to established neighborhoods and commercial centers proved to be much harder.

Taking a broader perspective, what is certain is that China will keep promoting the development of the green car industry in the coming years as authorities try to curb pollution and reduce the consumption of traditional fuels. New car models will become better and cheaper, and sales are set to rise. The growth rate may look stunning, but one should bear in mind that it would stem from a low base.

Frankly speaking, a true milestone — a one million unit sales mark in green car sales — will take many more years.

In the first quarter this year, less than 7000 green cars were sold in China. The figure tells the whole story, given that the country’s overall car sales last year stood at over 22 million units.

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EJ Insight writer

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