As it evolves into a demand-driven model, China’s electric vehicle market could regain its ranking as the world’s largest in 2021 after likely losing the crown to Europe this year, an auto association executive said on Tuesday.

The slowdown in EV sales this year will be temporary, a result of reduced purchase subsidies as well as extended production quota mandates, Cui Dongshu, secretary general of China Passenger Car Association (CPCA) said at a briefing.

CPCA said that sales for China’s new energy vehicle (NEV) industry—including all electrics and plug-in hybrids—will fall 17% annually to 1 million units this year. NEV sales in Europe for 2020 through July modestly exceeded those of China, the world’s top market since 2015, Bloomberg reported.

EV stimulus moving from China to EU

Experts say strong growth in the European market is largely driven by generous government rebates, thus the market bears little comparison to China’s, which is shifting from a state-controlled to demand-driven market with the phasing out of subsidies.

The pandemic has also dealt a significant blow to China’s market. Automakers have been hit hard, and as a result have slowed the expansion of their EV portfolios. The central government in June updated mandated production quotas to give automakers one more year to meet their NEV production targets for the three years until 2021.

Global automakers partnered with Chinese companies are “not fully prepared” to release new EV models to the country’s market, but the pace will accelerate next year, Cai said (our translation). NEV sales only account for about 2% of total car sales for overseas automakers partnered locally, which does not meet requirements set by the Chinese government, according to Cui.

Meanwhile, European countries are playing catch-up with generous subsidies to fulfill their goals to sell only zero-emission cars by the next decade. Germany in June announced a sweeping €130 billion incentive package, including doubling its subsidy of €6,000 ($6,700) for EVs costing up to €40,000. Subsidies for EVs below €45,000 in France were also increased slightly to €7,000.

“To drive an early market, the importance of incentives to overcome the affordability barrier is key,” David Wong, senior manager at the Society of Motor Manufacturers & Traders (SMMT), a UK’s automotive industry body, said on Thursday at London Tech Week.

Push for more chargers

Meanwhile, the UK is ramping up legislation supportive of recharging infrastructure, which Wong believes will “give a shot in the arm” to the country’s EV uptake.

Following an £1.5 million ($1.9 million) reward to two charging point projects, Wong said that the UK is planning to launch regulations to facilitate the “smart” charging market, including technical requirements for chargers. The government is also seeking to pass laws that require all new homes in England to be fitted with charging points.

Wong expects these moves to help convince people to switch to EVs and drive the market uptake. So far each rapid charger in the UK is shared by as many as 56 EV owners, whereas that number in China is 16, according to Wong.

China’s passenger EV sales rebounded 43% year on year to more than 100,000 units in August, representing the second consecutive monthly increase after a prolonged market slump which lasted an entire year. CPCA said Chinese EV makers have been increasingly recognized by customers especially in the premium segment, and that Beijing’s recent push to build battery swap infrastructure in major cities would be a big boost to EV uptake.

Jill Shen

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: jill.shen@technode.com or Twitter: @yushan_shen