China became the world’s largest new energy vehicle market in first half of this year. There are three areas that automakers should pay more attention to if they want the segment to grow even bigger.
In the first half of this year, China surpassed the United States to become the world's largest new energy vehicle market. New models were introduced by Chinese and foreign brands alike, such as BMW, Audi, Lexus, Nissan, Chevrolet, Trumpchi, Denza, Roewe and BYD. It is expected that new energy vehicle sales in China will reach near 200,000 units this year.
However, the several factors have become bottlenecks in new energy vehicle's further development in China. According to TNS Sinotrust's research, there are three major areas that many automakers have overlooked:
1. Meet practical demand from consumers: New energy vehicle models have mushroomed in China. Many brands have been promoting their "environment friendly" and "high technology" features as the main selling points. Our research showed that half of consumers said they will consider new energy vehicles as their next car. But there are many hurdles between consideration and actual purchasing. Audi's A3 Etron and BYD's Qin, both very popular green car models, can travel 50 kilometers and 70 kilometers respectively after fully charged. This distance is enough for daily commuting. However, unlike European and US auto owners, Chinese consumers can afford only one car per family, due to income, home space and government's limit on car plates. So the only car, besides daily commuting, should also be good enough to undertake family travelling tasks. The battery life and insufficient charging network have forced many Chinese consumers opt for gasoline cars even though they wished they could save the environment by driving a "green car".
2. Economic costs behind "going green": Compared with cars in the same segment, new energy vehicles' total ownership cost, including purchasing, maintaining and reselling, is higher than gasoline cars. Our survey has found that consideration for cost has overshadowed people's consideration for environment (31% vs 18%). Even though 75% of surveyed consumers said they are "willing to pay higher price for an environment friendly car," but the premium range is only about 10%.
How to encourage people willingly buy new energy vehicles?
A great example would be Shanghai government's supportive policy for BYD's Qin. Shanghai residents can get 10,000 yuan tax deduction for purchasing this model, plus a free private car plate. (For gasoline car owners, they have to join a monthly online auction with more than 150,000 competitors and the winning of it depends purely on luck. The price has risen to more than 82,600 yuan in August, 2015.) Several Shanghai district governments, such as Jiading, Pudong and Minhang, offered further incentives ranging from 15,000 yuan to 20,000 yuan. The total "green car subsidy package" could add up to more than 160,000 yuan. For a Shanghai consumer, he or she can buy a 1.5T Qin, whose market retail price is 189,800 yuan, with less than 100,000 yuan. As a result, 80% of BYD Qin is sold in Shanghai.
3. The gap between ideal and real worlds: A small part of consumers want to buy a new energy vehicle because they want to enjoy the latest technologies. But the lack of charging stations has always put them under pressure to make sure they can reach home every night. Also, electronic car owners have to install charging stations at home. But not all residential area have the space, or are willing to allow such construction. This further prevents more potential buyers.
Although there are various hurdles to be overcome, TNS Sinotrust believes there are plenty of actions that auto makers should undertake to keep the healthy momentum of new vehicle car growth in China.
Firstly, the initial technology R&D strategy should focus on providing multiple new energy solutions to attract consumers. Fuel cell or hybrid electronic cars can partly solve the problem brought by insufficient charging station coverage. Then, as the sales of new energy vehicles grow, the R&D and manufacturing cost will be diluted and prices for "green cars" could be lowered to consumers' expectation.
The popularity of new energy vehicles needs support of governments' policies, automakers' R&D and consumers' awareness to save the environment. The combined efforts will make Chinese government's goal of "2 million new energy vehicle ownership by 2020" within reach.