NEWSFeb 15, 2019

The song of Ice and Fire: Is China's new energy automobile industry a boom or a bubble?

China's new energy automobile industry is gradually transition from policy-driven stage to market-driven.

According to the background between the depletion of traditional fossil energy and the rapid growth of human demand for energy, renewable energy replacing fossil energy has become the inevitable trend of the future development of energy industry. Especially in the auto industry, this trend is manifested in the development of New Energy Automobile. In 2012, the annual sales quantity of new energy automobiles in China are only 18,000, while in just six years later, the annual sales quantity of new energy automobiles has exceeded one million, CAAM figures showed. In the background of the year-on-year decline in production and sales of domestic automobile market in 2018, new energy automobile market continues to maintain a high speed of growth. The annual production and sales volume is 1.27 million and 1.256 million, the year-on-year growth of 59.9% and 61.7%, respectively, has become the biggest bright spot in the market.


At present, the developing trend of New Energy Automobile mainly depending on the support of government policy. Since 2010, China has adopted government policy supporting and capital allowance for helping domestic production and sales of new energy automobile. Thus, the stage of electric automobile from scratch to excellent is realized. Actually, because of the factor of late start and imperfect technology etc., the competitiveness of the traditional domestic automobile enterprises in the automobile market has always been inferior to the traditional European and American automobile enterprises, and still in a backward state in the world. Therefore, under the competition of traditional market and the government policy supporting in the new energy automobile market, there are many automobile companies have focused on the huge market cake of the new energy automobile.


According to a Reuters report, the global automobile industry plans to invest $300 billion over the next 5 to 10 years for the research and development of electric automobile technology, and nearly a half will be invested in China. To be more specific, Beiqi, BYD, Jianghuai and other enterprises have also launched their new energy automobile brands, in which BYD is developing most rapidly. To be more specific, in January, BYD has delivered nearly 60,000 automobiles, of which 32,000 are new energy, a sharp increase of 342%, and the sales of new energy automobile are the first time exceeded the traditional fuel automobile. Furthermore, in 2018, China expanded its charging infrastructure more than any other country. China has doubled the number of charging stations from 2.5 to 5.7 per 100 km in a year. However, behind the current booming market of new energy automobile industry, it should be noticed that the industry has the problem of excessive dependence of the government policy.


The booming market of New Energy Automobile are mainly based on the policy, the policy could make prosperity, but it will also accumulate a lot of bubbles and disturbing the normal order of the market. In 2016, the scam of new energy sources has become a hot topic, seventy-two car enterprises cheated RMB 9.2 billion, in other words, it means the average car cheats RMB 120,000. In 2017, new energy automobile turn from "cheat money" to "cheat qualifications". Once again, consumers are disappointed with these things. After a series of crackdowns, the fraudulent qualification has made serious doubts to consumers about the new energy automobile.


In short, the new energy automobile industry under the policy subsidy has both prosperous market and large amount of bubbles. The purpose of new energy automobile subsidy is to promote the popularization and develop new energy automobiles. After the quantity accumulation of new energy automobile, transition to market-driven, made more people to accept new energy vehicles. Starting from 2018, subsidies for new energy vehicles have been significantly reduced. In 2019, the subsidy policy for new energy vehicles will continue to decline. Until 2021, all subsidies are withdrawn, new energy automobiles are entering a post-subsidy Era. In the year of 2019, it will be the key transitional period to stimulate the market-oriented growth of new energy vehicles and gradually withdraw the subsidy policy. It will have a far-reaching impact on China's new energy automobile market. With the decrease of subsidies, the competition of new energy automobile will return to the competition in the future. The new energy automobile market has begun to enter a new stage of consumption-driven development from policy-driven. The core of competition in the new energy automobile industry is technology, products and services. Under this circumstance, if enterprises want to survive in the case of accelerating the decline of subsidies, they have to invest more on the control of cost, technological upgrading, product research and development, service quality etc., and explore suitable strategies for enterprises.


Subsidy recession or even complete cancellation is a signal to promote the healthy development of the market, also forming a market mechanism for survival of the fittest, and realize the requirement of high-quality development. Although the decline of subsidies may lead to market shrinkage and slow growth, it will also make the development of new energy automobile market more mature and the development of related enterprises healthier, and then gradually eliminate the bubble of new energy automobile industry for achieve real prosperity.

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