China’s EV strategy exceeds expectations

The transition to electric in China is a planned project; the Chinese Government has designed – years ago – an incentive program for both EV manufacturers and consumers. The rationale for the EV-transition, crystallized in the “Made in China 2025” country-wide economic plan is diverse: there’s the desire to transform the country’s manufacturing from low-quality to a high-tech, the country’s energy supply challenges and, of course, environment reasons.

A brief history of EV incentives

Initially, the Chinese Governments (plural, as the provinces contributed as well), have heavily incentivized every EV, from its design concept to the acquisition by the consumer. In addition to financial incentives, it was also easier to obtain plates for electric vehicles in Tier 1 cities.

Gradually, the incentivation program was tweaked in favor of vehicles with a longer range that were manufactured according to industry best practices (use of materials, manufacturing processes…). As a result, the global media reported the 2020 reductions of the EV incentives as a failure of the EV transition, even though these tweaks were entirely planned.

China is now duplicating the success of its EV transition to hydrogen. We find – again – important incentives dedicated to research into hydrogen production, infrastructure and manufacturing.

Success

During the first 8 months of 2021, the Chinese consumers bought 1.79 million electric vehicles, up 194% from the same period in 2020, whilst overall automotive sales grew with 14%. For 2022, EVs are projected to account for 20% of the total car sales, 3 years ahead of Governmental targets.

This growth is realized in times of microchip shortage, when carmakers globally trimmed forecasts and deliveries.

Charging

Besides the sales successes, China-based manufacturers (including foreign JVs, such as Volkswagen), are investing massively in charging infrastructure. VW, the number 1 OEM in China, aims to increase the number of its charging points to over 13.000 by 2025.

An odd one out is NIO, that allows for battery swaps as an alternative to traditional charging; NIO plans for 4000 battery swap stations by 2025.

Production

As the demand grows, the production of EVs needs to increase. China counts 479 EV companies and the bigger manufacturers are looking for production capacity. The 2 solutions put forward are production outside of China (unsurprisingly, Indonesia, that holds the largest reserve in Nickel, is mentioned as a future production location) and M&A leading to consolidation of the supply chain.

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