Cadillac advertises its electric vehicles in Shanghai, May 23, 2023. A female traffic policeman is standing below.
Hu Guo | Getty Images News | Getty Images
BEIJING — Subsidies for electric vehicles aren’t enough to boost China’s slowing economy.
One of the few detailed stimulus packages announced by Beijing this year was an extension of tax breaks for electric vehicle purchases, according to documents released on Wednesday.
Those incentives, which were set to expire this year, will now run until the end of 2027.
Authorities expect consumers to save an additional 520 billion yuan ($72.43 billion) as a result.
The tax cuts, however, don’t address the fundamental reason why Chinese aren’t buying more EVs: the range issue.
Craig Zeng, chief financial officer of Autohome, an online car information and shopping site, said charging car batteries was still a “relative hassle”. That’s according to a CNBC translation of his Mandarin remarks.
He’s talking about the entire EV market.
He pointed out that the layout of China’s residential areas means that there are not many private parking spaces, and the number of charging piles that can be installed in the community is limited.
Most people live in apartment buildings in Chinese cities, with some underground parking lots or lots around the apartment buildings. In Beijing, the capital, owning an assigned parking spot without a battery charger can cost nearly $100 or more a month, on top of apartment rent.
In such an environment, “after many people buy a car, the problem of charging will gradually become prominent,” Zeng said, noting that the problem will affect people’s decision to buy an electric car in the future.
At a news conference on Wednesday, Chinese officials pointed to charging problems and called for faster installation of charging infrastructure in residential parking spaces – especially in new developments. That’s according to official transcripts of their speeches.
Officials noted that China has rapidly expanded its charging infrastructure over the past seven years, with charging stations covering the same area as gas stations in central urban areas.
However, China still has a long way to go.
In its report, the IEA said more than 70 percent of public fast chargers are located in just 10 provinces 2023 Electric Vehicle Outlook Report. This is only one-third of the country.
Fast charging allows drivers to top up a car battery in less than an hour, but it still takes longer than filling up a gas tank.
China remains the global leader in the installation of public fast charging stations – accounting for almost 90% of the global increase in such chargers last year, the IEA said.
“Growth in electric vehicle sales will only be sustained if charging demand is met by accessible and affordable infrastructure, whether through private charging at home or at work, or publicly accessible charging stations,” the IEA report said.
Broader economic slowdown
Stimulating demand for electric vehicles is also being challenged by tepid consumer spending.
China’s May retail sales rose less than expected YoY.
Auto sales, one of the largest components of retail sales, maintained steady year-over-year growth but fell 8% quarter-on-quarter. Many brands have also cut prices this year to boost sales.
A recent meeting of the State Council, the top executive body, noted the economic challenges and called for further support, especially for new energy vehicles. But the announcement and rate cut fell short of market expectations for broader stimulus.
“While Beijing may still introduce some policy measures to stabilize growth in the coming months, the disappointing State Council meeting suggested that measures to stimulate the economy can be phased in gradually, as decision-making is now heavily focused on ‘safety,'” Nomura analysts said in a note on Monday.
Growing Market Penetration
China typically lumps electric vehicles into a broader category called new energy vehicles, which includes pure battery vehicles and hybrid vehicles.
According to the China Passenger Car Association, the penetration rate of new energy vehicles in total passenger car sales has reached about one-third in recent months.
This is far beyond the official target of at least 20% penetration by 2025.
Autohome has said that he expects the sales penetration rate of new energy vehicles to remain between 30% and 40% this year and reach 50% by 2025.
Over the past decade, Chinese authorities have supported the development of the domestic new energy vehicle market, with a view to becoming a global player in the auto industry.
On the consumer side, cities such as Beijing and Hangzhou have made it easier for drivers to obtain licenses for EVs than for traditional internal combustion engine vehicles.