China’s ambition to become a world leader in electric vehicles was barely mentioned in this year’s annual government work report, presented Friday—a good sign, experts said, that the market is maturing.
After strong policy support over the past several years, the market is now evolving into a demand-driven model amid waning government stimulus, Cui Dongshu, secretary general of the China Passenger Car Association, wrote in a post published Saturday. “We expect auto consumption to grow robustly beginning this year,” (our translation) Cui added.
Growing the adoption of new energy vehicles (NEVs), a catchall term referring to all-electric, plug-in hybrid, and hydrogen cars in China, has been a major agenda item for the country’s annual parliament meetings since 2015. The government had set a sales target of 5 million NEVs in its 13th Five-Year Plan (FYP) ending in 2020 which propelled China to the top spot as the world’s biggest EV market by sales volume in 2015.
Beijing’s next goal is even loftier. It aims for NEV sales to account for 20% of overall new car sales in China by 2025 from the 2020 level of around 5%, according to a policy paper released November as part of the 14th FYP ending in 2025. In the report delivered by Chinese Premier Li Keqiang on Friday, policymakers plan to offer more targeted measures to remove barriers and allow for massive EV adoption in the next five years. Here are the key points.
Li said Friday during the annual meetings of the National People’s Congress (NPC) that Beijing will create a comprehensive regulatory structure for market access of industrial products such as automobiles, including enhanced after-deal scrutiny and cross-functional supervision. The path to reducing red tape is such regulation, Li said, which would benefit market competition.
The main purpose of such regulation is to cool investment in the EV sector and prevent the current supply glut from worsening, Fu Bingfeng, executive vice-chairman of the China Association of Automobile Manufacturers (CAAM) told Chinese media on Saturday. Fu called for “rational development” rather than the stoking of production capacity through investment plans from certain local governments and private investors.
China in April lowered the barrier for entry into the EV market after the Covid-19 pandemic took hold, removing requirements such as design and development capabilities for new entrants, reported China Daily.
China will also continue to help boost consumption via stimulus measures, including growing the number of public charging piles and swapping stations, according to Li. It was the first mention of EV battery swapping facilities in the annual government work report.
Fu expects the initiative will spur demand by providing charging facilities for those who do not have private parking spaces with home chargers, a major pain point that has deterred EV adoption. Prior to that, the central government had announced a RMB 10 billion ($1.5 billion) investment to expand the country’s charging network by 50% to more than 1.8 million public and private charging piles by 2020.
China’s power network for electric vehicles exceeded 1.67 million charging points and 555 swap stations as of December, according to figures from the China Electric Vehicle Charging Infrastructure Promotion Association.
EV battery recycling
EV battery second-life usage was also a key topic during this year’s meeting. Li noted that China will accelerate plans for a comprehensive recycling and reuse policy for electric vehicle batteries. Policymakers in the 14th five-year-plan pledged to “promote the use of second-life energy resources in less-demanding applications” (our translation).
China began its NEV initiatives in 2009 and most EV batteries are designed to have around a decade of use during the first life phase. Officials from the Ministry of Ecology and Environment had estimated in September that more than 200,000 tons of EV batteries would reach the end of the first life phase by 2020 and that number will more than triple in 2025, according to a Caixin report (in Chinese).
The central government in 2018 had made battery manufacturers responsible for addressing battery end-of-life issues, but the market is largely unregulated, lacking mandatory technical standards to ensure safety during the recycling process. This has also overburdened battery manufacturers, which have struggled to recoup the costs for repurposing batteries.