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    The Chinese car market

    Electric mobility was already being promoted in China as early as 2014. Since the beginning of 2020, the technical requirements for this promotion have been met. All of this presents new challenges for the automotive industry - nevertheless, China will remain one of the most interesting and fastest-growing automotive markets in the world.

    Electric mobility was already being promoted in China as early as 2014. Since the beginning of 2020, the technical requirements for this promotion have been met. All of this presents new challenges for the automotive industry - nevertheless, China will remain one of the most interesting and fastest-growing automotive markets in the world.

    Large incentives for electromobility

    For years, an increasing number of Chinese manufacturers and start-ups have been entering the global market with their innovative products. China is considered a global pioneer in the field of electromobility, which has been subsidized by the state since 2014 – possibly for the last time in 2020. 

    The People's Republic is regarded worldwide as a pioneer of the so-called New Energy Vehicles (NEV). Buyers of battery, hybrid, and fuel-cell vehicles have been benefiting from government subsidies since 2014; in some regions, such as Beijing, these are exclusively for battery vehicles. The electric car market share of new sales in China amounted to 5.3% in 2019. However, a special preference for electromobility cannot be deduced from this; rather, the total costs of ownership also play a significant role for the Chinese, says Dr. Thomas Meurers, Managing Director of VDA China. In Beijing, for example, it is forbidden to drive internal combustion vehicles on one day each week. In addition to the high level of support for electric cars, the state also creates purchase incentives in this way.

    First promotion, then quotas

    At the end of 2020, however, the Chinese government's subsidy for electric cars expired. To avoid a hard break, the technical requirements for subsidized vehicles were expected to be increased in the course of the year, and at the same time the financial support reduced. The renewed introduction of a malus system, under which a certain percentage of the fleet of new cars produced must be made up of cars with electric drives, represents the next challenge for manufacturers. As usual, German automakers are countering these ambitious quotas with their premium products.

    Here, the German automotive industry benefits from the high quality of its vehicles, which more and more Chinese customers are coming to appreciate. Contrary to the general negative trend, German premium manufacturers were able to increase their sales on the Chinese market in 2019. This is due – in addition to the very high quality of the models -- primarily to the high reputation that goes hand in hand with owning a German car in China.

    China remains one of the most interesting markets

    The Chinese car market has been the largest in the world for seven years. It is significantly larger than the US market and almost six times that of the German car market. In 2018, sales figures declined for the first time, yet no other market displayed such a growth story in the past decade. 

    And it still promises a high potential for growth. Temporary negative effects, such as a trade conflict with the USA or a virus outbreak, are unlikely to change this long-term outlook much. At the same time, the global automotive industry is nevertheless clearly feeling the effects of the coronavirus in China. Sales of new vehicles have declined since the virus became known in the People's Republic. Moreover, China is a growing manufacturing location for the major exporter, the German automotive industry.

    Chinese start-ups anticipate resistance

    In addition to a large number of OEMs, China is also home to numerous start-ups that are primarily dedicated to electromobility. Start-ups, in particular, are facing massive financial problems over the short term due to the expiry of subsidies. Despite powerful investors, they are still far from being profitable. This is why some industry experts expect takeovers and an overall consolidation of the market in the long term.

    Alexander Fitz
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    Alexander Fitz

    Automotive forecasts, production and export statistics, CO₂ emissions, electromobility, structural analyses

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