Strong momentum for the Chinese NEV industry

By Martim Facada
Published: Friday, 12 January 2018

The Chinese new energy vehicle (NEV) industry finished 2017 with a strong production and sales performance, and now awaits an update on the new 2018 central and local government subsidies for the industry.

Chinese NEV production and sales figures have come out strong for 2017, the China Association of Automobile Industry Information Department (CAAM) reported in its 2017 automobile industry economic operation report.

Chinese NEV producers reached a total production of 794,000 units, while 777,000 units were sold during 2017. On an annual basis, production and sales increased 53.8% and 53.3%, respectively, according to CAAM. 

NEV’s auto production market share grew 0.9% to 2.7% from 1.8% year on year, representing a total of 794,000 units from the Chinese annual total auto production of 29,015,000 units in 2017. 

Sales and production of pure electric passenger vehicles increased 81.7% and 82.1% on an annual basis, respectively, reaching a total production of 478,000 units and total sales of 468,000 units in 2017.

Pure electric commercial vehicles' production and sales increased 22.2% and 21.5% respectively from the previous year,  reaching a production of 188,000 and 184,000 units in 2017.

Moreover, 114,000 plug-in hybrid passenger vehicles were produced in 2017 while 111,000 units were sold in the same year, an increase of 40.3% and 39.4%, respectively, year on year. Plug-in hybrid commercial vehicles' production and sales units were down 24.9% and 26.6%, producing and selling 14,000 units in 2017 from 17,486 units produced and 17,724 units sold in 2016.

"China has attempted to produce almost 800,000 NEV units in 2017 from the original target of 700,000 NEV units," a Chinese lithium compound producer told Industrial Minerals, adding, "Electric vehicle producers are now looking at understanding whether new 2018 subsidies will be decreased or not, as that might affect production in 2018." 

China is committed to reaching a total production of 2 million NEV’s by 2020, a target changed in 2017 from 5 million units set by the 13th Five-Year Plan in 2015 in order to reduce the levels of pollution in the country. This plan was established by the Party Central Committee and the State Council, to develop, innovate and restructure the Chinese automobile industry.

The Chinese authorities have also decided to adjust duties on a number of import and export items, including cathode materials for power batteries. 

"To encourage imports of advanced equipment, key machine components and raw energy materials, import taxes on products including dobby or jacquard looms, cathode materials for power batteries, raw materials for advanced medicine, and coconut fiber will be lowered starting Jan 1," the Chinese Ministry of Finance said in an online statement. 

China remains the world’s number one automaker, leading the world ranking for nine consecutive years, CAAM stated.

2018 NEV subsidies

Cuts in subsidies for the NEV industry in China have been under the spotlight since the end of 2017, different electric vehicle and lithium producers in China told Industrial Minerals and sister-publication Metal Bulletin.

"The whole Chinese market is waiting for a new subsidy policy and before the policy is confirmed, NEV makers won’t be able to price some models," an automobile producer told Metal Bulletin.

While a final decision [by the Chinese authorities] is expected at the end of January, NEV manufacturers and lithium producers in the country anticipate lower subsidies in 2018.

The Chinese government is expected to encourage electric vehicle (EV) production that focuses on high performance in range and battery energy density and to provide fewer, or even no, subsidies to EVs with lower ranges and battery energy density.

Stopping subsidies to EVs with a range lower than 150 km has been one of the measures car manufacturers and lithium producers because range anxiety remains one of the big constraints of the NEV industry.

Besides range, the threshold of battery energy density subjected to subsidies may also be raised in 2018, up from 90wh per kg to 140wh per kg.

The government may also give more support to vehicles using the NCM 811 battery, given the skyrocketing cobalt price and its limited supply. If that is the case, the development of the NCM 811 battery could be accelerated in the next few years.

"The subsidy adjustment would be in line with the battery production cost," Mo Ke, director at RealLi Research said at a recent conference, "if the cost remained unchanged but the government slashed subsidies, EV producers would not have much incentive to produce more and the production target of 2 million EVs would not be met by 2020," Ke said.

The generous subsidies to boost electro-mobility in China started in 2015 after the launch of the 13th Five-Year Plan by the Chinese authorities, producing a rapid consumption of lithium compounds in China and a spike in lithium carbonate (Li2CO3) prices. Prices moved from $7.70 per kg in October 2015 to $27 per kg in June 2016, according to Industrial Minerals market assessments.

Since then, however, and as displayed below, the subsidies have undergone modifications following the subsidy cheating case in China, when some NEV manufacturers received subsidies but did not produce or sell any NEVs. 

Subsidies Example 2017: Vehicle battery energy density 90-120 Wh per kg

Duration Distance (km)

 Subsidy (Rmb) 

 BEV 100-150

20,000

 BEV 150-250

36,000 

 BEV >250

44,000 

 HEV >50km

24,000 

Comparison: Battery electric vehicle (BEV) with duration distance 150-250 km

 

2016

2017 

Central Govt Subsidy (Rmb) 

45,000 

36,000 

Local Govt Subsidy (Rmb) 

45,000 

18,000 

Total Subsidy (Rmb)

90,000 

54,000 

Comparison: Hybrid electric vehicle (HEV) with duration distance above 50 km

 

2016 

2017 

Central Govt Subsidy (Rmb)

30,000 

24,000 

 Local Govt Subsidy (Rmb)

30,000 

12,000 

 Total Subsidy (Rmb)

60,000

36,000 

Battery producers and lithium producers are currently waiting to see whether there will be further reductions, or not, in the current subsidy policy. Meanwhile CAAM predicts that over 1 million units of NEVs will be produced in the country over 2018. 



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