Date:12-12 16:03 Source：China Daily Authour：Li Fusheng
Govt incentives remain the primary driver of the industry, rather than organic demand or products' competitiveness
Electric cars are widely believed to be the future of the automotive industry, but experts say even in the world's largest new energy car market they may need at least five years to be able to fend for themselves.
Statistics from the China Association of Automobile Manufacturers show that China sold 337,000 new energy vehicles in the first 10 months of 2016, which comprise electric cars, plug-in hybrids and fuel cell cars. This was an impressive 82.2 percent growth rate year-on-year.
The record-making sales volume came after China became the world's No 1 market for such cars in 2015, selling 330,000 in the year.
But, despite this rapid sales growth, Wang Binggang, a top expert on China's energy-saving and new energy vehicles program, said there is still a long way to go before the sector can stand on its own, and that the 2016-20 period will be crucial to its development.
"Sales growth is now mainly driven by government policies instead of market demand," said Wang at a recent forum in Beijing.
China's latest policy stipulates that people who buy one electric car are eligible for a 55,000 yuan ($8,088) subsidy, while those who buy a plug-in hybrid can receive 30,000 yuan from the central government in 2016. Local government subsidies vary by region.
The central government started offering subsidies in 2009 to stimulate the development of new energy vehicles, with 33.4 billion yuan earmarked for such purposes as of the end of 2015, said the finance ministry.
Song Qiuling, a finance ministry official, said earlier this year that the ministry is considering raising the threshold at which carmakers qualify for subsidies from the central government.
Various Chinese media outlets have reported that the authorities have approved a new subsidy scheme and are expected to publicize it later this month.
In addition to an overreliance on government incentives, Wang said less competitive new energy vehicle prices, insufficient charging facilities and low demand from personal consumers are also indicators that the sector cannot sustain itself.
Yale Zhang, managing director of consulting firm Automotive Foresight, said individuals account for only around 20 percent of new energy car buyers in China.
Even smaller is the percentage of new energy vehicles in total car sales in the country, which stood at 1.5 percent at the end of October this year.
Chen Quanshi, an automotive engineering professor at Tsinghua University, said if the proportion of new energy vehicles in the wider market is lower than 10 percent, then they have not become a commodity for popular consumption. He estimates it will take the sector five to 10 years to reach that level.
Chen Qingtai, director of China EV100, a non-profit organization dedicated to new energy vehicles, said that Chinese carmakers must address the critical question of how the industry stays competitive, as international rivals are introducing a growing number of products into the market.
Carmakers are already stepping up preparations for the forthcoming e-car era. Chinese companies including Geely Automobile Holdings Ltd and Chery Automobile Co Ltd have announced their five or 10-year plans for the development of electric vehicles.
SAIC Motor, which has been primarily focused on plug-in hybrids, has made public its plan to raise another 15 billion yuan for research and development of new-energy vehicles.
Volkswagen AG said it plans to introduce around 10 electric cars based on its electric-only Modular Electric Model lineup to the Chinese market over 10 years. The German auto giant has also signed a memorandum of understanding with China's JAC Motors to produce electric cars.
Mercedes-Benz showcased its electric concept car EQ at the Auto Guangzhou 2016 show in November. The automaker said the proportion of new energy vehicles in its global product lineup will stand somewhere between 15 and 25 percent by 2025.
Meanwhile, Audi AG said it will add five locally-produced Audi e-tron models to its China portfolio within five years, including pure battery vehicles with a range of more than 500 kilometers.
Zhang Xiangmu, a former official at the Ministry of Industry and Information Technology, said what will make or break a new energy carmaker is its vehicles' overall quality.
This includes breakthroughs in major components, especially batteries, because the distance a car can travel depends on the capacity of its batteries. China accounted for 33 percent of the world's car battery market in 2016, 11 percentage points higher than last year. But, Wang said most local battery providers are lagging behind their international competitors in terms of quality and cost.
Wang urges Chinese companies to enhance their competitiveness, saying it would be extremely advantageous for China's new energy vehicle program if the country had two or three globally competitive battery makers.