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Seven million charging stations and cheap electricity: Why EV sales in China are accelerating ahead of Europe

While subsidies, tax breaks, cheap loans and investment are driving EV sales in China, most of its carmakers are loss making

Xiaomi Corp SU7 electric vehicles during the Beijing Auto Show on April 25th. Smartphone company Xiaomi launched an electric vehicle at the end of March and less than a month later, it has received more than 70,000 orders, close to its original target for a full year. Photograph: Qilai Shen/Bloomberg

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Denis Staunton
Fri Apr 26 2024 - 05:45

In a soundproofed room the size of a small concert hall stands a beige SUV surrounded by sensors and antennae, with cables snaking out of its doors. In this lab at Great Wall Motor (GWM) in Baoding, about 160km south of Beijing, they are running electromagnetic tests on their latest electric vehicles (EVs).

The tests aim to ensure that the electromagnetic field the vehicle generates does not interfere with external equipment such as mobile phones, police communications or heart stents. It also seeks to protect the vehicle from external electromagnetic interference that could disrupt the smooth functioning of the car’s entertainment and communications systems.

GWM is among the Chinese carmakers that have emerged in the past couple of years as global players in the market for EVs – its Ora brand is sold in Ireland. Last year, 70 per cent of the company’s sales were in China and 30 per cent were overseas, but they hope to increase the share of exports.

“In the future [we] should be selling 40-50 per cent overseas but after a dip during Covid the domestic market is growing again,” says Liu Huaxue, vice-president of operations management.

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“In Germany, Japan and Korea, their local markets are smaller so they sell more cars overseas than in their local markets. But China is a big enough market so basically we sell more cars here and fewer cars overseas. That’s basically the logic.”

All GWM’s vehicles are developed in Baoding and tested in the company’s labs there, but they are sometimes adapted for conditions in overseas markets. Local conditions and surroundings and different consumer expectations require different responses.

“The basic difference is in drivers’ habits. In Germany, there is no speed limit on most motorways but in China we have a 120kph speed limit. So that’s a basic difference. Mechanically, there’s no real difference but we have to do some adaptive design changes to suit the local drivers’ demand for high speed,” Liu says.

While sales of EVs have hit a rough patch in Europe and the United States, they remain buoyant in China where four-in-10 new cars sold are either fully electric or hybrid. Some 1.8 million plug-in vehicles were sold in China during the first three months of 2024, a 38 per cent increase on the previous quarter.

This year is expected to see the launch of more than 100 new plug-in models, with many of them unveiled at the Beijing Auto Show, which runs from April 25th to May 4th. This will bring the number of EV models on sale in China close to 500, 10-times the number available in the United States.

With dozens of manufacturers competing in the Chinese EV market, prices are lower than elsewhere and they are falling further. BYD, China’s biggest manufacturer, has cut the cost of its Seagull model to RMB 69,800 (€9,008) and prices more generally have fallen by about one-third.

EVs have been exempt from China’s vehicle purchase tax since 2014 and the policy will continue until the end of 2025, after which the tax will be levied at half the level for fossil fuel vehicles. Liu believes that low running costs are another reason EVs are more popular in China than elsewhere.

“In Europe, I think the battery charging cost is roughly the same as fuel, I think that’s one reason. Here we have a lot of electricity from wind and whatever so it’s relatively low in price,” Liu says.

“The EV cars are mainly used in the city areas. If you’re going into the mountains you can buy a hybrid car or a fuel car. In the mountain areas we don’t have enough charging stations. But if you mainly want to use the car in the city area, the EV car is a good option.”

The Chinese authorities not only subsidised EV manufacturers but they have also rolled out the world’s largest network of charging stations. In 2015, China had 100,000 charging stations; in August 2023 there were more than seven million. Meanwhile, in Beijing, the running costs of an EV are about one-tenth of those of a fuel car.

And charging may be about to get easier as Nio, one of the top Chinese manufacturers, has introduced a battery swap system. Drivers pull into a station that looks like a car wash and the battery is automatically removed and replaced from beneath the vehicle in a few minutes.

Despite subsidies and tax breaks from state and provincial government and cheap loans from state banks, none of China’s EV producers are hugely profitable and most are loss-making. But the sector has the backing of the Chinese Communist Party leadership and is also attracting new entrants from the technology sector.

[ Tumbling prices for new electric cars is not all good news ]

Smartphone company Xiaomi launched an EV at the end of March and less than a month later, it has received more than 70,000 orders – close to its original target for a full year. Huawei has also moved into the EV market, launching seven models with established Chinese car manufacturers.

Although sales of internal combustion engine cars declined by 10 per cent last year, neither the Chinese authorities nor the country’s manufacturers are planning to eliminate fuel vehicles altogether. Liu says that GWM expects to continue to manufacture traditional vehicles while embracing innovations such as those in hydrogen energy technology.

“We are a new company that covers all categories of traditional fuel vehicles, hybrid vehicles, electric vehicles and hydrogen energy. Our goal is not to simply pursue hybrids and pure electric vehicles,” Liu says.

“We believe that the future world may be one that is relatively balanced. Fuel will not simply disappear. It will continue alongside hybrid, electric and hydrogen.”

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