China EV makers worried by end of subsidies and chip crunch
Chinese electric vehicle makers expect to be under pressure after a bumper year in 2022, with the withdrawal of government subsidies and uncertainties driven by the shift to living with Covid-19.
The global shortage of semiconductors for EVs was another concern raised by industry players at the 2022 Auto Guangzhou motor show, which opened on December 30 in the southern Chinese city.
Supported by years of government policies and subsidies, China’s EV market is likely to have delivered record sales of 6.5mn units in 2022, nearly double 2021’s 3.52mn units, according to a projection by the China Passenger Car Association.
In contrast, total vehicle sales grew by just 3.3 per cent annually to 24.3mn units in the first 11 months of the year. The association has forecast 3 per cent growth for the overall market in 2023 and 31 per cent growth for EVs.
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“The industry is facing no small amount of risks,” Feng Xingya, a general manager at state automaker GAC Motor, told reporters in Guangzhou. “For instance, chip supply. We have yet to grasp the full picture, namely resolving the fundamental issues.”
The Guangzhou-based automaker produces the Aion, a battery-powered sedan that is one of the country’s top sellers.
China, the world’s largest EV market, has been hit hard by disruptions to chip supplies sparked by Covid-19 lockdowns since 2020 on top of geopolitical tensions with the US, prompting automakers to slow production and adjust sales targets.
GAC Motor predicted 10 per cent growth in sales in 2023, down from the 12 per cent estimate for 2022.
“Policies surrounding EVs, such as the withdrawal of subsidies, are among the other uncertainties faced by our industry,” Feng said.
Until last week, EV buyers enjoyed a discount of between Rmb4,800 ($695) and Rmb12,600 but the subsidies, which have been phased out gradually since 2020, were due to end on December 31.
“Our Nio ET5 has been a top seller [in 2022] with a delivery waiting period of three months,” a representative of Chinese premium EV maker Nio said at the auto show, referencing its new sedan. “But our new price tag is Rmb328,000 without subsidies. Customers who bought earlier enjoyed a discount of Rmb11,000.”
Nio chief executive William Li recently said the company could face intense pressure in the first half of 2023 on weaker demand following the removal of subsidies.
The policy change comes as consumer sentiment has been hampered by massive outbreaks of Covid-19 after the government shifted to living with the virus, abandoning its zero-tolerance Covid strategy. Total retail sales of consumer goods contracted by 0.1 per cent in the first 11 months, hurt by lockdowns that disrupted production and businesses.
The government might extend EV incentives, given the uncertainties of the pandemic and economic growth pressure, said Tu Le, founder of Beijing-based consultancy Sino Auto Insights. “The 2023 economy will need a consumption boost, not just for autos but the overall market,” Le said.
A version of this article was first published by Nikkei Asia on December 30 2022. ©2022 Nikkei Inc. All rights reserved
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