Posted on 09 Nov 2020
China has recently released its long-term guidelines for new energy vehicles (NEVs) for the coming 15 years, reaffirming its determination in prospering the auto models as part of the green economy, which the domestic market sources applauded, agreed the NEV to be the direction for China’ auto industry, though hiccups will emerge along the path of development.
The 20% NEV proportion by 2025 to motivate China’s automakers
China’s State Council, the country’s top economic governing body, reemphasizes in a November 2 notice that NEVs will be the compulsory path for the country to develop its automobile industry, as Mysteel Global reported, and among the detailed targets are that the NEVs should account for about 20% of total new auto sales nationwide by 2025.
NEVs would and should be the crux for China’s auto industry, market sources agreed.
“After the high-speed growth in volume for years, the sales have headed downward for two successive years, suggesting the industry has reached its plateau,” a Beijing analyst said, and “high-performance, low-emission and energy-saving vehicles, thus, will be the new way to divert from the simply quantitative development,” he added.
A Shanghai-based analyst calculated that to fulfil the 20% target, China’s NEV sales will be growing to nearly 6 million units annually at the present sales level, which has been far beyond today’s level.
Over January-September, NEVs sales totaled 734,000 units, or accounting for only 4.3% of China’s total new auto sales, according to the latest statistics from the China Association of Automobile Manufacturers (CAAM).
To help boost NEVs sales, starting 2021, Beijing will request those eco-sensitive regions and eco-friendly trial zones to buy NEVs for its 80% of newly-added vehicles for public transportation, taxis or for logistics services, as stated in the notice.
Some industrial sectors in China have already been more eco-friendliness conscious, and a market source in East China noted that a steel mill she is cooperating with in transportation announced in October to only engage diesel-fuelled trucks and the electrical trucks that are conforming to National Emission Standard Stage V for its daily logistics.
“This is a tendency, and our company has procured a batch of such trucks at the start of the year for our business continuity,” she said.
Mysteel Global’s story on China’s auto industrial development guidelines over 2021-2035 can be found at the link: https://www.mysteel.net/article/5019371/NEVs-to-be-20-of-Chinas-total-new-auto-sales-by-25.html
Bitter sweetness along the NEV development path
Despite the resolution from Beijing, uncertainties and challenges have and will accompany the NEV industry in the years to come, market sources cautioned.
“In the earlier draft (released last December), which was to collect feedbacks from the NEV industry, NEV sales target was set at 25% of the total new auto sales by 2025, but this has been adjusted downward to 20% in the final version,” a Shanghai-based analyst pointed out.
“The revision to 20% must have taken into consideration of the COVID-19 contagion and the newly-released subsidy scheme, and the slower pace has reflected Beijing’s closer look at the manufacturing technology, the safety of such models, as well as the related community facilities such as charging piles,” he elaborated.
The subsidy on NEVs has been extended until 2022 to fend off some of the pandemic impact, but the amount will be trimmed 10% on year for 2020, another 20% for 2021 and a further 30% on for 2022 in general though those in the public transport will see the amount cut by 10% only starting 2021 and a further 20% reduction for 2022, which, together with the higher qualification bars for NEV models to enjoy such subsidies, is the clear signal from Beijing to initiate the domestic automakers for technological upgrading, market sources interpreted.
By September, China had installed 42,000 charging stations with 1.4 million charging piles in total, and the ratio of piles against NEVs on the road was at 3.1:1, Xin Guobin, the vice minister of China’s Ministry of Industry and Information Technology, shared at a press conference on November 3.
“Our country has so far built up the largest charging network worldwide…in comparison with the greater adoption of the NEVs, though, the development of charging facilities seems still lagging behind, unable to satisfy the consumers' needs,” he stated.
Besides, Xin noted the greater enthusiasm from the overseas investors too in China’s NEV industry, commenting, “some world-renowned auto producers have been constantly intensifying their investments and cooperation in China, which has effectively helped improve our domestic supply chain and aided the (domestic) NEV manufacturers’ technological upgrading.”
He also warned, though, fiercer competition may come along with welcoming foreign investments in China’s NEV sector, which may accelerate the mergers and eliminations in the market.
A Shanghai-based industrial source working in NEV industry agreed, commenting, “NEV market in China is already with fierce competition, especially in prices, which has posed a challenge especially the overseas auto makers how to set a solid footing in China’s NEV market and come to a balance between quality and new model launches.”
It is usually a lengthy process for the foreign automaker to launch a new model after a series of design revisions and safety tests while in China the cycle can be just one-third of the lead time, according to him.
“The new guidelines, however, with more specific requirements in efficiency and quality, may nurture a fairer environment for both the domestic and overseas manufacturers with plants in China to compete,” he, nevertheless, still expressed the optimism on the new guidelines.
Tesla, with its mega NEV plant in Shanghai, has been fast in making adjustment by reducing its prices substantially to below Yuan 300,000/unit ($45,240/unit) from the initial Yuan 700,000-800,000/unit when it first went into the Chinese market via various means, and its Model 3 from the Chinese plant has been certified under the European standards, enabling it to export to the continent since late October, Mysteel Global noted.
What this means to auto steel producers?
NEVs will need the car body to be more light-weighted, and the Chinese auto steel supplies have been adjusting their operations to cater to the needs either via new steel development or stepping into nonferrous world, and China Baowu Steel Group, the country’s top steelmaker, has again been a role model to its peers, Mysteel Global noted.
Baowu Aluminum Technology Co, headquartered in Sanmenxia city of Central China’s Henan province, has been a joint venture with Baowu holding a 51% stake, and the aluminum plant produced its first batch of primary aluminum ingot on July 30 2020, and it will gradually ramp up to it full capacity of 300,000 tonnes/year by January 2021.
Written by Anna Wu, wub@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
Source:Mysteel Global
