By Trefor Moss
SHANGHAI -- China's leaders are looking for new ways to draw
consumers to electric vehicles as interest in them slumps.
April was the first month in which Chinese EV sales declined
while the overall auto market grew. Gasoline-car sales in April
rose 6% from a year earlier, snapping a 21-month streak of
declines, but EVs were down 27% -- a sharp reversal for a segment
that had outperformed the overall market until this year.
The demand slump is a headache for China's political leaders,
who have championed EVs in hope of turning the country into a world
power in next-generation transport. It is also a challenge for
Tesla Inc. and other auto makers that have been plowing investment
into EV production in anticipation of Chinese buyers flocking to
The Covid-19 pandemic has made matters worse, EV dealers say.
"After the epidemic, [consumers] need a sense of security -- a car
they can trust," said Ma Qiang, a dealer in the southern city of
Shenzhen. That means falling back on familiar brands and the
doughty internal combustion engine, said Mr. Ma, who sells EVs
produced by BYD Co. and BAIC Motor Corp., the two largest Chinese
producers of the vehicles.
The government had set a sales goal of two million electric
vehicles this year, but analysts expect only around 1.1 million
vehicles to find buyers, down about 10% from last year.
Officials aren't giving up. While that goal for 2020 looks well
out of reach, another target for EVs has been raised: instead of
accounting for 20% of Chinese vehicle sales in 2025, the
prospective share is now 25%. And top leaders have repeated their
determination to bring EVs into the mainstream.
Premier Li Keqiang said in a speech Friday at the annual meeting
of the National People's Congress that the government would promote
EV uptake and build more charging stations -- which are now largely
confined to infrastructure clusters in a handful of megacities.
Miao Wei, the minister of industry and information technology, told
reporters on Monday that the state would introduce new perks for
buyers trading in gasoline cars for EVs and encourage local
authorities to electrify public fleets.
However, moves to promote EVs risk being lost amid broader
efforts to revive China's overall auto market, in the doldrums
since mid-2018 and recently hammered by the pandemic.
Shanghai and other cities had been discouraging gasoline-car
sales to fight pollution and traffic congestion, but have now eased
their restrictions to help auto makers sell more cars. Meanwhile,
car companies are offering bargains on older gasoline vehicles,
with dealers selling many models at a loss to move inventory left
over from the virus-hit first quarter.
This year's collapse of global oil prices has further weakened
the case for electrics as the cost of gasoline for Chinese drivers
has fallen by a third.
China was an early leader in mass EV adoption, but in 2019 sales
in the country declined 4% while increasing 10% world-wide.
The slump was set in motion in June when Beijing slashed
subsidies for EV customers. The government has since promised to
extend subsidies through 2022, rather than ending them this year.
Even so, incentives to buy EVs will likely continue to shrink,
reducing their influence on consumer choices.
Subsidies in 2018 could knock about $13,000 off an EV's price
tag, but the amounts now available are much lower. Tesla recently
announced plans to cut the price of its locally built Model 3 to
under 300,000 yuan (roughly $42,000) to qualify for subsidies that
at this year's rates would trim $2,800 from the vehicle's retail
Officials and auto makers are up against a fundamental lack of
demand among ordinary Chinese buyers for electric vehicles, said
Robin Zhu, a Hong Kong-based analyst at Sanford C. Bernstein.
"Consumers just aren't that interested," he said.
Car dealers agree that China's EV sales have long been padded by
purchases for commercial fleets. In Shenzhen, where the city's taxi
fleet is fully electric, only a tenth of EVs are bought by
individuals, Mr. Ma estimated. And even fleet sales started to dry
up after last year's subsidy cut, he said.
With a budget of around $25,000, first-time car buyer Li Zhekun
said he wouldn't consider going electric since Tesla -- the only EV
brand he admires -- is out of his price range. "People here once
rushed to buy EVs," said the 27-year-old Beijing resident, but "I
would rather choose a traditional car where everyone knows how it's
going to perform."
Consumer indifference is a huge problem for auto makers, which
are all now ramping up EV production to comply with a Chinese
government order requiring them to build the vehicles irrespective
of customer demand. General Motors Co., Toyota Motor Corp. and
Volkswagen AG are among those that have outlined aggressive plans
to roll out dozens of electric models this year and beyond in the
Tesla, which started production at its new Shanghai plant in
December, is aiming to build 4,000 Model 3 compact sedans a week at
the facility by mid-2020, while also expanding capacity to begin
producing Model Y compact sport-utility vehicles next year.
It's unclear whether Chinese demand will recover quickly enough
to absorb so many electric cars.
"Tesla's entry may help to expand the retail market, creating a
better product image among consumers and increasing overall
acceptance of EVs," said Bill Russo, founder of Shanghai-based
consulting firm Automobility. "But in the short term EV sales will
--Raffaele Huang contributed to this article.
Write to Trefor Moss at Trefor.Moss@wsj.com
(END) Dow Jones Newswires
May 26, 2020 13:56 ET (17:56 GMT)
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