China pursues local incentives to revive troubled EV market

Sales of electric vehicles in China were already in a slump after the government cut subsidies last year. The coronavirus is now resulting in a free fall for the overall vehicle market, including EVs. The drop in electric car sales is prompting Beijing to consider bringing back incentives, starting with local sources.

According to the China Passenger Car Association, EV sales in China fell to 11,000 units in February, a drop of about 77% year over year. Last month marks the eighth straight monthly decline in EV sales in China.

BYD and BJEV sold 2,803 and 1,002 units last month, representing a decline of around 80% and 66% year over year, respectively. NIO car deliveries in February fell by 56%. Tesla is an exception.

Tesla managed to record sales of 3,900 units in China last month. Data from the China Passenger Car Association (and reported by Reuters) showed Tesla sold around 3,900 vehicles in February, up from 2,620 cars in January. To keep the momentum, the company enhanced its home delivery service with “contactless test drives.”

The Chinese government was already discussing an extension of subsidies for electric cars beyond next year. The impact of the coronavirus could intensify those talks.

In July 2019, the government of China scaled back subsidies from 50,000 yuan ($7,000) to 25,000 yuan ($3,500) for cars with a driving range of more than 400 kilometers (250 miles). The government was expected to phase out subsidies by the end of 2020.

Last month, Chinese President Xi Jinping urged local governments to take action to stimulate EV sales. Guangzhou, the capital of southern China’s Guangdong province, responded by offering electric car buyers 10,000 yuan ($1,440) per unit incentives for 10 months starting this month.

Also, in February, the government of Foshan, a city neighboring Guangzhou, announced that it would provide incentives of 2,000 yuan for new car purchases and another 1,000 yuan for each trade-in deal. Central China’s Hunan province followed suit with plans to reintroduce subsidies for first-time EV buyers.

Analysts believe wealthy localities, especially those associated with the auto industry, such as Zhejiang province and Shanghai, will soon introduce more EV incentives.

Electrek’s Take

It’s never easy to get a clear picture of China’s EV market. But now the US market for electric cars has a couple of crucial things in common with what’s happening there.

First, the coronavirus is taking its toll in both markets. We expect electric-vehicle sales to fall this year, but we don’t yet know how far. The new numbers from China look severe.

And in both the US and China, national governments are moving slowly to restore incentives that have dwindled. We might be getting a reprieve from tailpipe emissions while residents are staying home. But now is the time for both Washington and Beijing to anticipate a broad economic recovery — and establish policies that will ensure consumers adopt zero-emission vehicles.

Europe, where CO2 policies are stronger, is a model. The EU is expected to surpass both China and the US to become the world leader for EVs.