China

Last modification: 26 Apr 19

Chapter 1: Economic and business environment

Demographics

1,403,500,000 (2016 est.)
Capital

Bejing
Major cities

Chongqing, Shangai, Guangzhou, Wuhan, Tianjin, Shenzhen, Shenyang
Languages

Chinese (zh-CN)
Yue Chinese (yue)
Wu Chinese (wuu)
Daur (dta)
Uighur (ug)
Zhuang (za)
GDP

$10,099 (2019 est.)
Unemployment rate

3.8% in 2018
Main industries

GDP Composition by Sector:
- Agriculture (9.6 percent)
- Industry (46.8 percent)
- Services (43.6 percent)
Industrial Production Growth Rate: 11 percent

Industries: world leader in gross value of industrial output; mining and ore processing, iron, steel, aluminum, and other metals, coal; machine building; armaments; textiles and apparel; petroleum; cement; chemicals; fertilizers; consumer products, including footwear, toys, and electronics; food processing; transportation equipment, including automobiles, rail cars and locomotives, ships, and aircraft; telecommunications equipment, commercial space launch vehicles, satellites
Currency

 CNY Chinese yuan renminbi (RMB)
Interest rate

4.35% in 2018
Inflation

3.8% in 2018

Chapter 2 : Automotive market, segments & sales

Total Car park

Of the 310 million vehicles in China, 217 million are cars. This includes about 1.53 million new energy vehicles (NEVs). More than 170 million cars are in private ownership.

(2017 China Parking Industry Development White Paper)
New vehicle registrations (Cars, LCV, Trucks)

28,808,600 in 2018 (-2.8% vs 2017)
Top 5 brands (total market)

Shanghai Auto
Dongfeng Motor
First car
Changan Automobile
Beijing Auto
Model preference top 5 (total market)

1. Wuling - Wuling Hongguang
2. Haval - Haval H6
3. VW - Lavida
4. Buick - Excelle GT
5. Nissan - Bluebird Sylphy
6. Toyota - Carolla
7. VW - Jetta
8. VW - Tiguan
9. VW - Tiguan
10.VW - New Santana

(2018 Annual Sales Ranking)
Used car market/renewal cycle

Used car transactions, which have been steadily growing in China, have been stagnating since the second half of 2018.

According to the China Automotive Distribution Association (CADA), the number of used car transactions in China grew 19.33% in 2017 but slowed to 11.46% in 2018.

Number of transactions: 13 million units

Market size: 1 trillion yuan (approximately 16 trillion yen); the market size will be about three times that of five years ago. 

Chapter 4: Taxation & legislation

4.1 Car Taxation
Cars are submitted to a vehicle purchase tax and a Vehicle and Vessel Use tax

– Purchasing: VPT (Category), Central government (Tax Distribution), Consumers (Tax Payer) 10%** of vehicle price

– Retaining: VVT (Category) Local government (Tax Distribution) Consumers (Tax Payer) Charged by local governments, varied by engine displacement.

– Using: CT (Category), Central Goverment (Tax Distribution), Consummers (Tax Payer), Circulation tax, with $0.25/L on gasoline and $0.2/L on diesel

4.2 Income tax – Taxable persons
There is no concept regarding the deduction of car related expenses. 

4.3 Company car
No specific regulation regarding company cars, but it is accepted that reasonable expenses related to the generation of income can be deducted from income and decrease CIT.

4.4 Income taxes – drivers’ personal taxation
No regulation available

4.5 Electric vehicles

4.6 Future developments

4.7 Legal background (import taxes)
Different taxations apply on imported vehicles : custom duty, import VAT and import consumption taxfuel

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Chapter 5: Car policies

5.1 Company Car Entitlement

Company cars are unusual in China & less than 0.1% of all the employees have a car or an allowance. 

5.2 Which sectors provide most cars?

The automotive and leasing sector is most likely to give a company car, as it's also considered to be a promotional tool for the products and services. Sectors that are most likely in other countries to give cars (pharmaceutical, medical) don't provide for cars to their employees.

5.3 Which job functions include a company car?

Only top executive functions will have a company car in the benefit package. These cars come with chauffeurs

5.4 Which Reference car is given to

- Junior/entry sales level?

No car

- Senior Sales / Management Level?

No car

- Executive Level

European cars (Mercedes E/S; BMW 5 Series/7 Series; Audi A6/A8)

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Chapter 6: Funding methods

Overview of penetration of funding methods (buy or lease statement)
As leasing is not fully regulated, many companies still opt for purchase or different types of cash allowance (fixed amount or per kilometre fee). 

Type of suppliers
 

6.1 Outright purchase
Company records the vehicle as fixed asset on the balance sheet, at the acquisition cost.
 

6.2. Renting (Finance lease)
Company records the vehicle as fixed asset on the balance sheet, at the acquisition cost

6.3 Full service leasing (operational leasing)
Lease payments are registered as operating cost on the P&L

6.4 Fleet Management

6.5 Short term rental

6.6 Other funding methods

 

 

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Chapter 7: Fuel

Fuel price evolution:

2012: $1.37 /l.

2014: $1.17 /l.

2016: $0.96 /l.

(Feb) 2019: $0.78 /l.

 

Fuel card solution available: Shell, PetroChina

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Chapter 8 : TCO components

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Chapter 9: Safety, insurance and telematics

9.1 Accident Rate

6.76 million road traffic accidents occur in China in the year 2014. Among them, 196812 accidents involve fatality or injury, which make 58523 persons killed and 211882 injured. From the year 1990 to 2014, more than 8.88 million accidents involved fatality or injury occur in China, which kill more than 1.90 million people and wound more than 7.29million people. And these accidents cause huge losses to the safety of people's lives and property. Among all accidents, the accident with over 10 fatalities in one accident is extraordinarily serious, which has immeasurable impact on the safety. 1084 serious fatal road traffic accidents occur in China from 1990 to 2014, which result in 17317 deaths and 18106 injuries

9.3 Insurance Offer

There are two types of mandatory car insurance in China. The first one is the vehicle compulsory insurance, or third party liability insurance, which is used for covering third-party injuries and/or deaths in car accidents. It has limited financial coverage. The second type is the commercial insurance, which covers all related claims that are not covered by the vehicle compulsory insurance.

There are various types of additional insurances:

  • Vehicle damage insurance in many cases covers all the damage to the car regardless of the reason.
  • Theft insurance covers the vehicle and everything in it in the event of burglary or theft.
  • The quota-free insurance allows you not to pay 20% of total compensation in case the damage was your fault.
  • Passengers insurance covers all passengers and is purchased according to the number of car seats.
  • There is also driver insurance, natural damage insurance, scratch insurance, engine insurance for abnormal circumstances, even vehicle window glass insurance.

9.4 Telematics Availability

From January to October 2017, a total of 4.0993 million passenger cars were preinstalled with telematics in China, with market penetration standing at 21.02%, and the industrial scale will be up to RMB29 billion with a year-on-year surge of 38.1% and market penetration hitting 22% in 2017 around. As intelligent driving and autonomous driving get popular and commercialized, the telematics industry size will be developing faster in the future and is expected to report RMB70 billion in 2021 when the rate of telematics installations on passenger cars will be 39%.

As for price range of passenger cars, the models priced between RMB100,000 and RMB150,000 enjoyed the highest rate of telematics installations or 4.52% during January to October 2017, and the installation rate of telematics on the models priced below RMB250,000 is on the rise in the same period. It can be seen that OEMs are aggressively promoting the prevalence of telematics and low- and medium-end car models see a growing installation rate of telematics, which is naturally welcomed by the consumers.

Telematics is technically heading towards intelligence and networking, and the two technical routes are progressing simultaneously and making for a fusion. In respect of vehicle perception layer, the technological improvements are largely shown from novel automotive electronics and operating system. In the wake of technological advancements, automotive electronics are developing towards functional integration of sensors, high-performance computing chip and new human-computer interaction. The automotive operating system is gearing from single function towards the intelligent tiered, modularized and platform-based development.

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Chapter 10: Environment

Government in China is adhering to a philosophy of environmentally friendly, green development aiming to improve the air pollution. Gas exhaust
regulations and fuel consumption regulations of automobiles has been enhanced. Moving forward, more strict regulations are supposed to be implemented, beginning in the eastern 11 provinces
and cities. The scope is expanded in stages and will affect the trend of the Chinese automobile market.

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Chapter 11: Mobility

The need for shared mobility in China is high


In China, car ownership rate is still very low. Chinese roads carried about 163.1 million passenger cars in the same year, which equals a car density of 118 cars per 1,000 capita. Although car density in China was only about a fifth of that in Germany, it does not mean that Chinese roads were not jammed. According to the 2017 Tom Tom Traffic Index, 10 of the 25 most congested cities in the world were in mainland China: Chongqing, Chengdu, Beijing, Changsha, Guangzhou, Shenzhen, Hangzhou, Shijiazhuang, Shanghai and Tianjin.

If China would reach the car density of Germany, another 760 million cars would be on the streets, almost 17 times the existing car stock of Germany. Of course, significant differences regarding the specific domestic conditions but also uncertainties with Chinese consumers’ willingness to own a car are leading to different assumptions of future vehicle stock development in China. But even if “just” another 300 million cars would hit traffic, this would potentially lead to a significant increase of greenhouse gas, local air pollutant and noise emissions, congestion and reduced urban life quality.

In order to avoid a collapse of the infrastructure system by potentially adding hundreds of millions of cars to Chinese roads, the Chinese government promotes the development of a low carbon and “green” transport sector. This includes the massive expansion of public transport infrastructure, the boost of intelligent mobility systems and a focus on CASE (Connected-Autonomous-Shared-Electric). In particular shared mobility is a key to ensure more sustainable transportation systems.

Over the past years China has become a trailblazer in new mobility services, such as car-sharing, bike-sharing and ride-hailing. While most people in Europe and the US have heard about Uber and Car2Go, only a few people outside of China heard of Didi Chuxing or GoFun. In fact, however, Didi Chuxing, China`s version of Uber (Didi acquired Uber China in 2016), has about 6 times more users than Uber: By end of 2017, Didi boasts 450m registered users in China, taking about 20m trips daily and has a valuation of EUR 41bn. In comparison, Uber has 75m registered users worldwide, taking about 15m trips daily and is valuated at EUR 52bn.

The car-sharing market in China is still very small. But this could change in the near future.

The current status quo of car-sharing in China
Even if China`s car market is yet not even close to being saturated and will further grow, there are changes in the customer`s perception of the car as a status symbol and an increasing willingness to consider alternative mobility solutions. A recent JD Power survey of consumer satisfaction states that about 19 percent of consumers in China are “very willing” and 51 percent are “slightly willing”, to consider alternative mobility solutions to owning a car, such as car-sharing (see Figure 3). According to JD Power, a similar survey in the US showed that 69 percent of people still want to own their vehicles.

Evolution

The very first player in the car-sharing game in China was CC Clubs (车纷享). The company was founded in 2010 and started to provide mobility services with a small fleet for the Alibaba business campus.

In the following years, the growth of the car-sharing market in China was only slow with a total fleet size of less than 1,000 by 2013. This changed from 2015, when car-sharing in China started to develop. Beginning of 2017, the total fleet size reached 30,000 vehicles, located mainly in Tier 1 and 2 cities. By 2018, there were more than 40 car-sharing operators with more than 40,000 vehicles in China, mainly in Tier 1 and 2 cities. More than 90 percent of them are Chinese players, which are often more likely to get governmental support such as subsidies or license plate acquisition. Currently only Daimler and BMW as international brands have car-sharing fleets in operation. Daimler started its free-floating car-sharing in 2015 in Chongqing. BMW started end of 2017 in a cooperation with EVCARD as “ReachNow Powered By EvCard” in Chengdu, using EVCARD`s shared mobility app, operating 100 BMWi3 at 25 stations, located mainly around premium residential and commercial areas. Other international brands such as GM, Volkswagen and Renault-Nissan-Mitsubishi, are keen on entering the Chinese car-sharing market, which is being expected to reach EUR 1.26bn by 2020. Figure 4 provides an overview of car-sharing operators in China in 2017.


Reasons for the growing role of car-sharing in China


The growth of car-sharing in China is mainly driven by governmental support measures such as guiding and promotion frameworks and subsidy policies and the demands of customers for alternative mobility solutions: Strong government support, Citizens needs, Limited availability of license plates, Driving restrictions, High costs of owning a car, Limited taxi availability

Current challenges for car-sharing market in China


The car-sharing operators in China are under immense pressure, facing strong government requirements, high initial and after sales costs and external costs such as user misbehavior. Additionally in many Chinese cities, the mobility service environment is highly competitive, making it difficult for operators to compete with ride-hailing, taxi services or even bike-sharing. Major challenges for the car-sharing market in China are: High requirements of customers, Little patience for non-availability, Ease of access to shared, Limited availability of parking spaces also for shared vehicles, Need for high service-levels and seamless booking solutions


Competition and pricing pressure


In China, transportation services are relatively cheap. The availability of alternative affordable and convenient mobility solutions (e.g. bike-sharing, ride hailing) results in a high pricing pressure, particularly on short distances, as can be seen in the following figure. In order to win over customers, some car-sharing operators, have started to offer services cheaper than bike-sharing. In Shenzhen, for example, GoFun, a car-sharing platform backed by state-owned Shouqi Group, has put 300 new energy vehicles (NEVs) into service. The rental cost for the cars is EUR 0.13 per kilometre plus EUR 0.01 per minute. On the 3km distance this would be a total of EUR 0.48 and on the 20 km distance a total of EUR 2.96. New customers can even get special deal of EUR 0.13 for three hours of driving. This pricing policy aims on attracting new users and gaining a certain market share.

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Chapter 12: Key trends to watch

12.1 Future of Fleet Management

Leasing companies are working hard to get foot on the ground in the corporate market, but leasing is still not the reference methodology to source for company cars. The missing items for success are 1/ pricing levels, 2/ product and 3/ perception and understanding of the leasing product.

12.2 Safety

The Chinese goverment is focusing on traffic safety, more specifically on technology solutions to enhance safety. Connected cars are considered to become a solution to reduce the accident rate.

12.3 Mobility

According to China watchers, the country will most likely skip the "leasing" step and move straight away to mobility solutions. As China is limiting the number of cars in major cities and has implemented "lottery" type of license plate allocations, car sharing, poolcars and ride hailing will most probably become the standard way for the Chinese population to move around.

12.4 Driver Behavior

Very little efforts are being made to monitor and change driver behavior.

12.5 Country Development

China's "Made in China 2025" program encompasses measures and strategies to implement new types of mobility and cars. There's a strong focus on electric, hydrogen, connected (cities and cars), autonomous.

 

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