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Xinhua: China’s New Energy Vehicle Market Faces Risk of Excess Capacity and Lack of Core Technology

Xinhua published an article on the new energy vehicle industry in China. It reported that, in recent years, the industry has experienced rapid growth. However, the industry is facing some challenges that are also emerging. These include dependence on subsidies, overcapacity, and a lack of ownership of core technologies. According to the article, over the last five years, China has had an annual compound growth rate for new energy vehicle sales of 130 percent, mostly due to financial assistance from the government, which has provided rebates to consumers and subsidies to the manufacturers. Meanwhile, an increased number of public charging stations in residential complexes, work units, and along the highways has boosted the support for electric vehicles. In 2017, the investment in the new energy vehicles industry exceeded 700 billion yuan (US$100 billion), accounting for more than 50 percent of the total investment in the entire automotive industry. However, the new energy vehicle industry also faces challenges. First, the industry is flooded with companies that want to take advantage of the government subsidy program, especially engine battery manufacturers, which has resulted in excess capacity. Also, over a dozen companies have been charged with filing false claims to cheat the subsidy system. Second, the companies lack the drive to develop new technology and to market the vehicles as many of them tend simply to rely on the government subsidies just to break even. According to the 2018 Global Electric Vehicle Development Index, China ranks first overall, but this is mainly reflected in the market scale. On the technical level, China’s vehicle manufacturing is still positioned in the low-tech field. It still relies on imports of basic components such as electric drive high-speed bearings and control chips. Third there is an increased risk in environmental hazard control. The potential environmental waste from used batteries could be a big risk. It is estimated that by 2020, China will have 120,000 to 170,000 tons of electric batteries to be scrapped. Lastly, domestic manufacturers are facing competition as foreign auto manufacturers such as Volkswagen, Honda, Tesla, BMW, Audi, and Jaguar have increased their investment and presence in the new energy vehicle market in China.

Source: Xinhua, November 29, 2018