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China is expected to witness a significant surge in the adoption of new-energy vehicles (NEVs), constituting approximately half of new car sales by 2030, according to a report released by rating agency Moody's Investors Service on Monday.
This projection indicated a steady and continuous increase over the next six years, fueled by state incentives and the expansion of charging infrastructure, Hong Kong's 'South China Morning Post' (SCMP) newspaper reported.
The anticipated growth is supported by subsidies for car buyers and tax breaks for manufacturers and battery producers, which are expected to sustain demand, the report claimed. NEV adoption rates soared to 31.6 per cent in 2023, a significant jump from 1.3 per cent in 2015, already surpassing Beijing's target of 20 per cent by 2025, as outlined in the government's long-term development plan announced in 2020.
However, Moody's projection is more conservative compared to Switzerland's rating agency UBS Group's 2021 estimate, which anticipated that three out of every five new vehicles sold in China's domestic market would be battery-powered by 2030.
Despite a slight growth slowdown this year, the car industry remains a beacon of hope in China's lagging growth trajectory. Manufacturers such as BYD, Li Auto, Xpeng, Tesla, and the new entrant Xiaomi are engaged in fierce competition, marked by a price war.
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Moody's anticipated the industry to contribute 4.5 to 5 per cent of China's nominal gross domestic product (GDP) by 2030, offsetting weaknesses in other sectors like real estate, the SCMP said.
However, the report also warned of geopolitical risks that could impede China's NEV value chain development, particularly as mainland car assemblers and component manufacturers encounter trade barriers in overseas export markets.
What are New Energy Vehicles (NEVs)?
NEVs are automobiles powered by alternative energy sources or propulsion systems other than traditional internal combustion engines (ICEs). These vehicles typically include Battery Electric Vehicles (BEVs), Plug-in Hybrid Electric Vehicles (PHEVs), and Fuel Cell Electric Vehicles (FCEVs) that use hydrogen fuel cells to generate electricity, which powers an electric motor to drive the vehicle. The FCEVs emit only water vapour as a byproduct and offer long driving ranges with quick refuelling times.
NEVs are considered environmentally friendly alternatives to traditional gasoline or diesel vehicles because they produce fewer or no tailpipe emissions, reducing air pollution and greenhouse gas emissions. Governments and policymakers around the world are increasingly promoting the adoption of NEVs through incentives, subsidies, and regulations to address climate change and improve air quality.
Concern for Chinese NEVs
The European Commission's investigation into Chinese-made electric vehicles for suspected state subsidies, potentially disadvantageous to European producers, poses a significant concern. This probe may lead to tariffs higher than the standard rate of 10 per cent in the European Union, according to Moody's analysis as quoted by the SCMP.
