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How China Is Driving Demand for EVs

Headline-grabbing reports of the troubled state of China’s financial system have overshadowed a lone bright spot in the world’s second-largest economy—green technology.

China has dominated the area for years, and the slowdown in the overall economy has not managed to put much of a dent in the fast-moving sector, analysts said.

These areas include electric vehicles, battery production, and the manufacture and installation of solar panels and wind-energy systems—all sectors that China overwhelmingly leads in.

All of this is forging ahead despite some of the worst times for China’s economy in decades.

Its strict Covid lockdowns have ground economic activity to a halt in multiple regions through the year.

Its long-running property crisis just recorded its 11th straight month of sales-price declines.

And the uncertainly about when, or if, things will get better has kept consumers from opening their wallets.

“The [green tech] industry has confronted several ‘black swan’ events this year—the Shanghai lockdown and most recently the power crunch affecting Sichuan Province and Chongqing, which is presenting problems for EV owners and how they charge their vehicles due to the limitations placed on electricity usage,” said Lei Xing, former editor-in-chief of Beijing-based China Auto Review.

“But these are short term hiccups that will not affect industry growth in the long run, though this power crunch is a wake-up call for the country’s grid system in the advent of an EV-dominant market,” he told Barron’s.

As Barron’s has noted, China’s issues have led to significant weakness in electric-vehicle stocks like Li Auto and Xpeng, with Li deliveries declining 52% in August from a year earlier.

But strong sales in the first half of September could help turn things around.

And one of the very few areas consumers remain keen to spend on is EVs.

China is projected to sell at least six million new-energy vehicles this year, double the three million it sold last year and five times the 2022 forecast for U.S. sales, according to the China Passenger Car Association.

Lei said next year China EV sales could hit “double-digit millions.”

“Chinese consumer demand for EVs is growing considerably given government support but also falling prices and maturity of EV technologies,” said Ash Sutcliffe, external public relations director of Volvo owner Geely, a fast-growing midlevel player whose first-half sales of pure EVs leapt 520% compared with the same period last year.

Part of this is due to China’s aggressive campaign to install charging stations around the country.

“Consumers are increasingly drawn toward electrified vehicles for fuel savings that are matched by strong EV infrastructure support making them more convenient than gasoline vehicles in many instances,” Sutcliffe told Barron’s.

Though Tesla’s vehicles—most of which are produced in China—are purely electric, new-energy state-owned car leader BYD far outsold the American company in China this year with its combination of pure electric and plug-in hybrids.

Part of the slowdown for Tesla —which could not be reached for comment—was due to a pause in production as it revamped its massive Shanghai factory.

In nearly every area of renewable and electric energy, China may be having its best year ever.

Chinese leading battery maker Contemporary Amperex Technology (CATL) has shocked investors by reporting a leap in profits and revenue, on the heels of a terrible start to the year.

First-half profits jumped 82% year-over-year while revenue rose 156%.

Last year, China invested $380 billion in clean energy, far more than the $235 billion North America invested, according to data from the Atomic Energy Agency.

U.S. President Joseph Biden upped that number significantly with his recently signed $370 billion clean energy bill.

But China has had a head start in the sector for a decade, and it will take years of massive investment for other countries to catch up.

As with the electric auto industry in China, other green-energy sectors have benefited from generous government subsidies.

China last year held roughly half of the world’s renewable energy capacity, according to the International Renewable Energy Agency.

This year has been even more aggressive.

China is on pace install a record 156 gigawatts of solar panels and wind turbines, government-affiliated think tank the China Renewable Energy Engineering Institute said in June.

The majority of those will be solar panels, the group said, though last year, China added new wind capacity equal to the rest of the world combined.

www.marketwatch.com







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