Although the gradual reduction in new energy subsidies will concentrate competition among leading automotive companies with advanced technology and economies of scale, new entrants in the industry remain optimistic about the market. After more than two years of preparation, these new carmakers are now entering the mass production phase. Industry insiders suggest that the upcoming product launches by these new players will trigger the first round of market evaluations. If consumers fail to embrace these vehicles, the survival of such enterprises may become unsustainable due to limited financing.
The once-booming new energy vehicle sector faced a slowdown in 2016, following a series of challenges like liquidation and inventory checks. However, in 2017, China reintroduced favorable policies aimed at promoting the healthy development of the new energy automotive industry. Today, the world is watching as China continues to lead in this sector. With its status as the largest market for new energy vehicles, China is expected to see significant growth in 2018.
**Policy Level**
2017 was dubbed a "policy-friendly year" for the industry. The government has shifted from purely subsidy-driven strategies to a more comprehensive regulatory approach. In 2014, with the introduction of purchase incentives and local license benefits, new energy vehicle sales saw explosive growth—rising by 3.2 times in 2014 and 3.4 times in 2015. However, 2016 brought scandals involving non-electric vehicles and idle cars, causing a dip in sales. Starting in 2017, policy improvements were introduced, including stricter criteria on mileage and battery density. These changes helped the industry return to a growth trajectory. Analysts describe 2017 as a year of sustained policy support, with long-term benefits expected.
Cui Dongshu, Secretary-General of the China Light Vehicle Association, noted that the government remains committed to supporting the industry’s healthy development. Although subsidies have decreased by 20% since 2017 and will be phased out by 2020, the policy adjustments aim to mitigate the impact through more efficient regulation.
**Policy-Driven Changes**
In early November, the Ministry of Industry and Information Technology issued a notice requiring car manufacturers to account for average fuel consumption and new energy credits. Companies that failed to meet targets would face production restrictions. This policy, announced earlier than expected, could push automakers to accelerate new energy vehicle production. Analysts estimate that over 400,000 to 500,000 new energy vehicles may need to be produced to offset fuel consumption deficits, potentially leading to a rush before the end of the year.
**Universal Support**
Beyond policy, the government has also made it easier for consumers to adopt new energy vehicles. The Ministry of Public Security expanded the use of private license plates for new energy vehicles in 12 cities, with plans to implement this nationwide by mid-2018. According to data from the Ministry, new energy vehicle demand remained strong in 2017, with production and sales reaching 517,000 and 490,000 units respectively—up 45.7% and 45.4% year-on-year.
The China Insurance Regulatory Commission also announced plans to develop specialized insurance products for new energy vehicles. As the number of these vehicles grows, so do concerns about safety risks. New insurance models, including extended warranties and charging infrastructure coverage, are expected to meet rising consumer demand.
**Market Trends**
The rise of car-sharing platforms has further boosted the new energy vehicle market. With supportive policies and capital investment, traditional automakers and tech companies are entering the shared mobility space. Didi Chuxing CEO Cheng Wei predicted that by 2020, over 1 million new energy vehicles will be used for sharing in China.
Foreign investment is also shaping the industry. Joint ventures between Chinese and international automakers, such as JAC Volkswagen and Zotye-Ford, are expanding. Additionally, foreign automakers like Tesla may soon establish local operations under relaxed investment rules. Analyst Zhong Shi believes that increased foreign participation will enhance competition, drive technological innovation, and challenge domestic brands to improve and compete globally.
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