Cadillac advertises its electric vehicles in Shanghai, May 23, 2023. A female traffic policeman stood below.
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BEIJING — Subsidies for electric vehicles are not enough to fuel China’s slowing economic growth.
One of the few detailed stimulus packages announced by Beijing this year extended tax breaks for electric vehicle purchases, according to documents released on Wednesday.
The incentives, which were due to expire this year, will now run until the end of 2027.
Authorities expect consumers to save 520 billion yuan ($72.43 billion) as a result.
However, tax breaks won’t solve the root cause of why Chinese aren’t buying more EVs: the range issue.
charging challenge
Craig Zeng, chief financial officer of Autohome, an online car information and shopping site, said charging car batteries is still “relatively cumbersome.” That’s according to CNBC’s translation of his remarks in Mandarin.
He’s talking about the entire EV market.
He pointed out that the layout of China’s residential areas means that there are not many private parking spaces, and there are limits to the number of charging points that can be installed in a community.
In Chinese cities, where most people live in apartment buildings, some parking lots are located underground or in open spaces around apartment buildings. In the capital, Beijing, owning an assigned parking space (without a battery charger) costs close to $100 a month, more than even apartment rent.
In such an environment, “after many people buy a car, the problem of charging will gradually become prominent.” Zeng said that this problem will affect people’s decision to buy electric vehicles in the future.
At a news conference on Wednesday, Chinese officials took note of the charging problem and called for faster installation of charging infrastructure in residential parking spaces, especially in new developments. That’s according to their official record of what they said.
Officials noted that China’s charging infrastructure has expanded rapidly over the past seven years, with charging stations comparable in coverage to gas stations in central urban areas.
However, China still has a long way to go.
In its report, the International Energy Agency said that more than 70 percent of public fast charging stations are located in 10 provinces. 2023 Electric Vehicle Outlook Report. That’s only about a third of the country.
Fast charging allows drivers to top up a car battery in less than an hour, but it still takes longer than filling up a gas tank.
China still leads the world in the installation of public fast charging stations – accounting for almost 90% of the global increase in such chargers last year, the IEA said.
“Growth in electric vehicle sales can only be sustained if charging needs are met through convenient and affordable infrastructure, whether through private charging at home or at work, or at public charging stations,” the IEA report said.
broader economic slowdown
Stimulating demand for electric vehicles also faces the challenge of tepid consumer spending.
China’s retail sales rose less than expected in May from a year earlier.
Auto sales, one of the largest components of retail sales, maintained steady year-on-year growth but fell 8% quarter-on-quarter. Many brands have also cut prices this year to boost sales.
A recent meeting of the State Council, the top executive body, pointed to economic challenges and called for further support, especially for new energy vehicles. But those announcements and rate cuts fell short of market expectations for broader stimulus.
“While Beijing is still likely to introduce some policy measures to stabilize growth in the coming months, the disappointing State Council meeting suggested that measures to stimulate the economy may be rolled out gradually, as decision-making is now highly focused on ‘safety, security, economy’.” ‘” Nomura analysts said in a note on Monday.
Growing Market Penetration
Analysts still expect electric vehicles to grow in China, the world’s largest auto market.
China typically lumps electric vehicles into a broader category called new energy vehicles, which includes pure battery vehicles and hybrid vehicles.
According to data from the China Passenger Car Association, the penetration rate of new energy vehicles in the overall sales of passenger vehicles has reached about one-third of the market in recent months.
This is far beyond the official target of at least 20% penetration by 2025.
Autohome has said that it is expected that the sales penetration rate of new energy vehicles will remain between 30% and 40% this year, and will reach 50% in 2025.
Over the past decade, Chinese authorities have supported the development of the domestic new energy vehicle market, with a view to becoming a global player in the auto industry.
On the consumer side, cities such as Beijing and Hangzhou have made it easier for drivers to obtain a license for an electric vehicle than for a traditional internal combustion engine vehicle.
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