China Aims to Become the King of the Global Electric Vehicle Industry

Alvin Karunia By Alvin Karunia
8 Min Read

China has set ambitious targets to dominate the global electric vehicle market. The Middle Kingdom plans for new energy vehicles (NEVs) to contribute around 45% of total sales by 2027. What motivates this target, and what are China’s prospects for achieving it?

Why Electric Vehicles?

Electric vehicles (EVs) are vehicles that use batteries as their main energy source, producing no greenhouse gas emissions. EVs can be categorized into three types:

  1. Battery electric vehicle (BEV): solely powered by batteries that need periodic recharging.
  2. Plug-in hybrid (PHEV): uses both batteries and internal combustion engines, switching between them as needed.
  3. Fuel cell vehicle (FCV): employs batteries and hydrogen fuel cells, generating electricity from the chemical reaction between hydrogen and oxygen.

Electric vehicles offer several advantages over conventional cars, including:

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  • Environmental friendliness: no air or noise pollution, reducing reliance on fossil fuels.
  • Cost-effectiveness: lower operational costs due to stable and cheaper electricity prices and reduced maintenance costs.
  • Comfort and responsiveness: quick and smooth acceleration without the need for a transmission.

However, electric vehicles face challenges such as:

  • Limited and uneven charging infrastructure availability and capacity.
  • Battery range and durability lower than conventional cars, influenced by environmental factors like temperature and speed.
  • Battery raw material prices, availability, and potential environmental and social issues if not managed properly.

How is China Targeting This?

China, being the world’s largest automotive market with sales reaching 25.3 million units in 2020, plans to have NEVs contribute about 45% to total domestic sales by 2027, according to an environmental goal list released by the Chinese government on January 11, 2024. This target is higher than the previous goals set in 2020: 20% by 2025, 40% by 2030, and 50% by 2035.

This goal aligns with China’s commitment to peak carbon emissions by 2030 and achieve carbon neutrality by 2060, as announced by President Xi Jinping in September 2020. China aims to lead globally in green technology and innovation, enhancing the competitiveness of its automotive industry.

To achieve this target, China has provided various incentives and support for the NEV industry, including:

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  • Subsidies and tax benefits for NEV buyers and manufacturers, gradually reducing subsidies until 2022.
  • Building and expanding charging infrastructure with a target of 4.8 million charging points by 2020, including 1 million public charging stations and 3.8 million private charging stations.
  • Promoting battery standardization and integration, mandating NEV manufacturers to use interchangeable and compatible batteries and establishing a shared platform for battery management and recycling.
  • Increasing investment and cooperation in NEV research and development, focusing on areas such as solid-state batteries, hydrogen fuel cells, autonomous vehicles, and connectivity.

What Opportunities Does China Have?

China has significant opportunities to achieve its targets due to several supportive factors:

  • High market demand driven by environmental awareness, changing lifestyles, and diverse consumer preferences. A 2020 Deloitte survey showed that around 53% of respondents in China plan to purchase an NEV as their next vehicle, higher than the global average of 27%.
  • Intense industry competition fostering innovation and product differentiation. China boasts numerous NEV players, including conventional automakers transitioning to NEVs and new companies focusing on them. Competition drives them to offer higher quality, efficiency, and attractive products in terms of design, features, and pricing.
  • Strong government support creating a conducive environment for NEV development. China has policies and regulations supporting the NEV industry in terms of incentives, infrastructure, standardization, and research and development. The country also has a long-term vision and commitment to achieving sustainable environmental and economic goals.

However, China faces challenges and risks that need attention:

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  • Resource limitations and uncertainties that may hinder battery supply and availability. China still relies on imported battery raw materials like lithium, cobalt, and nickel, which have fluctuating prices and availability. Managing the environmental and social issues arising from the mining and processing of these raw materials is crucial.
  • Global competition and protectionism that could threaten NEV expansion and exports. China faces increasing competition from other countries developing the NEV industry, such as the United States, Japan, South Korea, and Europe. The country must also navigate trade and political barriers imposed by these nations, including tariffs, quotas, standards, and sanctions.
  • Changes and uncertainties in demand that can influence consumer preferences and behavior. China must adapt to market changes and uncertainties in technology, economics, and society. Attention to consumer needs and expectations regarding quality, safety, comfort, and style is crucial.

The Future of Electric Vehicles in China

Considering the existing challenges and opportunities, what does the future hold for electric vehicles in China? Here are some predictions and speculations:

  1. Increased NEV Sales: With the ambitious targets set, NEV sales in China are expected to continue rising in the coming years. This is supported by growing environmental awareness, changing lifestyles, and consumer preferences, as well as government incentives and support.
  2. Technological Advancements in NEVs: NEV technology in China is expected to continually evolve and innovate, focusing on improving efficiency, reliability, and comfort while reducing costs and environmental impact. Industry competition, investment in research and development, and battery standardization will drive these advancements.
  3. Expansion of the NEV Market: The NEV market in China is projected to expand and diversify, with the addition and differentiation of products, services, and segments. This growth is fueled by high market demand, changing and uncertain consumer preferences, and global protectionism and competition.
  4. Management of NEV Resources: NEV resources in China are expected to be continuously managed and optimized, with increased battery supply and availability and reduced waste through recycling. This is driven by resource limitations and uncertainties, government policies and regulations, and a long-term vision and commitment.

China has significant ambitions to become the world leader in electric vehicles, setting a target for NEVs to contribute around 45% of total sales by 2027. While China has several advantages and opportunities to achieve this target, it also faces challenges and risks that need to be addressed. China must leverage its potential, overcome existing obstacles, and adapt and innovate in the face of changes and uncertainties. Only time will tell whether China will successfully achieve its goal and become the reigning power in the global electric vehicle market.

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