Global Courant
Cadillac advertises its electric car in Shanghai on May 23, 2023. A traffic policewoman stands below.
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BEIJING — Subsidies for electric cars are not enough to boost growth in China’s slowing economy.
One of the few detailed stimulus plans Beijing has announced this year extends tax breaks for electric car purchases, according to documents released Wednesday.
The incentives – which were supposed to expire this year – now run until the end of 2027.
Authorities expect additional consumer savings of 520 billion yuan ($72.43 billion) as a result.
However, tax breaks don’t solve the fundamental reason people in China haven’t bought more electric cars: concerns about mileage.
Charging challenges
Charging the car battery is still “relatively tricky,” said Craig Zeng, CFO of online car information and shopping site Autohome. That’s according to a CNBC translation of his comments in Mandarin.
He was talking about the electric car market in general.
The layout of China’s residential areas means there aren’t many private parking spaces and there is a limit to the number of chargers communities can install, he stressed.
Most people live in apartment complexes in Chinese cities, with a number of parking spaces underground or in areas around the apartment buildings. In the capital Beijing, having a designated parking space — without a battery charger — can cost nearly $100 a month or more on top of the apartment rent.
In such an environment, “the problem of charging will gradually become more apparent after many people buy a car,” said Zeng, noting that the problem will affect people’s future decisions about buying an electric vehicle. car.
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At a press conference on Wednesday, Chinese officials noted the charging problems and called for faster installation of charging infrastructure in residential parking lots — especially in new developments. This is evident from an official transcript of their comments.
The officials pointed out that the country has rapidly expanded its charging infrastructure over the past seven years, and charging stations in central urban areas provide coverage similar to gas stations.
However, China still has a long way to go.
More than 70% of total public fast chargers are in just 10 provinces, the International Energy Agency said in its electric vehicle outlook for 2023. That’s only about a third of the country.
Fast charging allows drivers to charge car batteries in less than an hour, but it still takes much longer than filling up a gas tank.
China continues to lead the world in the installation of public fast charging stations – almost 90% of the global growth in such chargers last year, according to the IEA.
“Electric vehicle sales growth can only be sustained if charging demand is met through accessible and affordable infrastructure, whether through private charging at home or at work, or through publicly accessible charging stations,” the IEA report said.
Wider economic slowdown
Stimulating demand for electric cars is also facing lukewarm consumer spending.
Retail sales in China grew more slowly in May than a year ago.
Auto sales, one of the largest components of retail sales by value, continued to grow steadily year-over-year, but were down 8% from the previous month. Many brands have also cut prices this year to boost sales.
Recent meetings of the highest executive body, the State Council, highlighted the economic challenges and called for further support, especially for new energy vehicles. But the announcements and rate cuts fell short of market expectations for broader stimulus.
“While Beijing may still take certain policy measures to stabilize growth in the coming months, the disappointing State Council meeting suggests that measures to stimulate the economy could be phased in as decision-making is now highly centralized with an emphasis on ‘ safety,'” Nomura analysts said in a report Monday.
Growing market penetration
Analysts still expect growth for electric cars in China, the largest car market in the world.
China typically divides electric cars into a broader category called new energy vehicles, which includes battery-only cars and hybrid cars.
The penetration of new energy vehicles in total passenger car sales has reached about a third of the market in recent months, according to figures from the China Passenger Car Association.
That is well beyond the official target of at least 20% penetration by 2025.
Autohome’s Zeng said he expects new energy vehicle sales penetration to remain between 30% and 40% this year and reach 50% by 2025.
Chinese authorities have supported the growth of the domestic new energy vehicle market for the past decade in an effort to become a global player in the automotive industry.
On the consumer side, cities like Beijing and Hangzhou have made it much easier for motorists to get a license plate for an electric car than for a traditional internal combustion engine car.
China’s new EV subsidies may not be enough
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