The gradual reduction in new energy vehicle subsidies is expected to intensify competition within the industry, concentrating it among leading automotive companies that possess advanced technology and economies of scale. Despite this, new entrants in the auto industry remain optimistic about the market after more than two years of preparation. Recently, these new carmakers have entered the mass production phase. According to industry insiders, the upcoming product launches by these new players will mark the first major test for the market. If consumers fail to recognize or accept their offerings, many companies may struggle to sustain their operations due to limited financing.
In 2016, the fast-growing new energy vehicle sector faced a slowdown, marked by challenges such as company liquidations and inventory checks. However, in 2017, China reintroduced supportive and regulatory policies aimed at fostering a healthier and more sustainable new energy automotive industry. Today, the world is closely watching China, which remains the largest market for new energy vehicles. With continued policy support, China's new energy vehicle sector is expected to experience rapid growth in 2018.
From a policy perspective, 2017 was dubbed a "policy-friendly year" as the government shifted its approach from purely subsidy-driven strategies to a more comprehensive regulatory framework. In 2014, with the introduction of purchase incentives and local licensing benefits, new energy vehicle sales surged, increasing by 3.2 times in 2014 and 3.4 times in 2015. However, 2016 saw a decline due to fraud involving non-functional vehicles and idle registrations. Starting in 2017, improved institutional policies helped stabilize the market, with new subsidy guidelines focusing on mileage and battery density. Sales returned to growth, and the industry experienced a wave of policy-driven momentum, with 2017 considered a key year for sustained policy support.
Cui Dongshu, secretary-general of the China Automobile Union, noted that the government’s commitment to supporting the new energy vehicle industry has not wavered. Although subsidies decreased by 20% in 2017 and are set to be phased out by 2020, the double-score system aims to mitigate the impact on the sector.
On the regulatory front, the Ministry of Industry and Information Technology recently announced stricter fuel consumption and new energy credit rules. Companies failing to meet targets may face production restrictions, prompting a rush to produce new energy vehicles before the end of the year. This policy pressure could lead to a surge in electric vehicle production.
At the universal level, the Ministry of Public Security has expanded access to private license plates for new energy vehicles, easing ownership barriers. Additionally, the China Insurance Regulatory Commission is developing specialized insurance products tailored for new energy vehicles, addressing unique risks associated with their technology.
On the market side, the rise of shared mobility has further boosted demand for new energy vehicles. Traditional automakers and tech companies are investing heavily in this space, with companies like Didi Chuxing forecasting that over 50% of cars will be designed for sharing in the next decade. Meanwhile, foreign investment in China’s new energy sector is growing, with joint ventures between Chinese and international automakers expanding rapidly. Analysts believe that increased foreign participation will drive innovation, improve competitiveness, and push domestic brands to become more self-reliant and globally competitive.
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