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The Rise of the Chinese NEV Sector

Posted: Wednesday, December 2nd, 2020

Estimated Reading Time: 2 minutes

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The Chinese NEV (New-Energy Vehicles) sector’s expansion is poised to continue in the years ahead. As China emerges as the first country to regain economic growth, it also put forward an economic agenda for the next five years.

As for all things China, the five-year plan is nothing short of amazing. It focuses on social equity and regional coordination and emphasizes innovation and green developments.

The Chinese state has offered massive support to the NEV sector. The sector aims are replacing a big chunk of the Chinese auto sales, with the most popular name in the Western world being Tesla.

Chinese NEV Sector

However, besides Tesla, numerous Chinese manufacturers exist. Last September, during the Beijing Auto Show, automakers revealed over 750 new models, with more than 20% electric.

Brands like Wuling, BYD, NYO, or XPENG may not mean much to the Western consumer, but the companies behind have strong connections to the Western world. Wuling, for instance, is a joint venture with General Motors and sold 20,000 units of its Wuling Mini EV in September 2020 only. It even outpaced Tesla Model 3 for the month.

Ambitious Charging Infrastructure for the Chinese NEV Sector

In 2020 alone, China’s charging infrastructure expanded dramatically. In June 2020, it had over 750k charging poles for private residences. Moreover, its public charging infrastructure network exceeded 550k stations. As a comparison, one should look at the United States, where only a little over 100k charging outlets exist.

The Chinese NEV sector is critical for what China wants to achieve in the decades ahead. New technologies and faster adoption among the population are key to reducing CO2 levels – a bit problem in China’s urban areas and a cause of death for millions.

While the total government expenditure in the NEV sector declined in 2019 when compared to 2018 (134.9 billion Renminbi vs. 148.2 billion Renminbi), the percentage of total NEV vehicles increased from 29.2% to 30.7%.

Socialist Modernization by 2035

China aims at “socialist modernization” by 2035. The Chinese Communist Party’s Fifth Plenum this year made it clear that to achieve such goal, it means producing and promoting major technological breakthroughs.

While the Chinese NEV sector has grown rapidly, it still lags behind what China wants from it.  A new effort called the “dual-credit” policy encourages automakers in China to have a certain percentage of their fleets in NEVs. The aim here is to raise vehicle fuel efficiency.

This is a program inspired by the Zero-Emission Vehicle Program in place in California, the United States, and encourages the trading of credits from companies that produce more NEVs. If it worked for companies like Tesla to boost its revenues by selling credits, imagine the impact and the stimulus in a country like China.

All in all, the evolution of the Chinese NEV sector has just started. The state has both resources and willingness to invest to reach its long-term goal of reducing emissions.

It is no wonder that Tesla entered the Chinese market too.

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