Sales of new energy vehicles in China are expected to rise 15-fold by 2035 and increase their share in total new car sales above 80%, according to new figures published this week by analysts Wood Mackenzie.
In research published Tuesday analysing China’s car sales, Wood Mackenzie forecast the combination of new energy vehicles (NEV) – referring to battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles (FCEVs) – and hybrid electric vehicles (HEV) would rise by 15-fold by 2035, driven in large part by China’s “Energy-saving and New Energy Vehicle Technology Roadmap 2.0”, which aims to phase out conventional internal combustion engine (ICE) car sales by 2035.
Specifically, Wood Mackenzie sees NEVs and HEVs taking equals shares of the domestic car market as ICE car sales diminish – though the presence of FCEVs in China’s passenger car market is predicted to be negligible through 2035.
But with NEVs accounting for only 6% of China’s new car sales in 2020 – made up of 5% BEVs and 1% PHEVs – there’s a long way to go before NEVs and HEVs can account for over 80% of new car sales.
Backed by China’s Energy-saving and New Energy Vehicle Technology Roadmap 2.0, however, and one of the world’s largest economies, the expected growth is not difficult to imagine.
Released in October 2020 by the China Society of Automotive Engineers (China SAE) under the guidance of the Ministry of Industry and Information Technology (MIIT), the new Technology Roadmap laid out the steps ahead of China’s automotive industry which will aim to peak its carbon emissions by 2028 ahead of the national carbon reduction commitment, and by 2035 reduce its emissions by over 20%.
“China now identifies HEVs as the bridge between ICE vehicles and NEVs,” said Yuwei Pei, Wood Mackenzie consultant.
“The country’s evenly split target for NEVs and HEVs is a strong endorsement of the hybrid-electric technology as a pragmatic enabler for vehicle efficiency gains and emissions control. An HEV could be less carbon-intensive on a well-to-wheel basis than a battery electric vehicle (BEV) that runs on coal-generated electricity.”
Beyond 2035, Wood Mackenzie expects NEVs in China to represent around 90% of the country’s new cars by 2050 – with FCEVs taking a share of around 10%.
Unsurprisingly, with NEVs ramping up, hybrid electric vehicles role as the bridge technology will diminish in the long run, according to Wood Mackenzie, with its share of new car sales projected to decrease after 2040.
“The main policy tools to promote NEVs have been the allocation of new car license plates at local levels and NEV purchase subsidies at national levels. However, by 2022, the government will stop subsidising new BEV purchases. It is shifting focus from purchase subsidies to EV charging infrastructure development.”
As with electrification strategies around the globe, Wood Mackenzie notes that a nation-wide EV charging network will be critical to the widespread adoption of battery electric vehicles.
Already, China’s two largest utility companies – State Grid Corporation of China and China Southern Power Grid – have invested almost $US1 billion in direct funding for charging infrastructure, and China Southern Power Grid has promised an additional $US3.6 billion over the next four years.
Such large-scale investment leads Wood Mackenzie to predict that China will become the second-largest market for charging infrastructure, second only to the combined European market.
“In the last decade, Chinese EV makers have been shielded from international competition,” said Pei. “Things are about to change as China opens its EV market to international players and roll back BEV purchase subsidies.
“Access to a larger number of international models as well as a more efficient market is projected to further propel BEV adoption in China.”