July 17, 2017 / 2:10 AM / a month ago

Fitch: China New Energy Vehicle Sales to Rise Rapidly Despite Reduced Subsidies

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: China New Energy Vehicle Blue Book - Government Policy Drives Market Development here SHANGHAI, July 16 (Fitch) Fitch Ratings believes China' new-energy vehicle market will expand steadily to meet its two-million-unit annual sales target by 2020, from around 507,000 in 2016, driven by strong policy support that includes consumer purchase incentives, license-plate restrictions and wide public-sector deployment. However, medium- to long-term market development depends on battery technology advancement and charging infrastructure build up. Fitch expects China's e-car penetration to steadily increase from 1.4% in 2016, underpinned by rising retail demand in Tier 1 and large Tier 2 cities, which have license-plate restrictions on internal combustion engine vehicles. These cities contributed around 75% of the e-cars sold in 2016. E-car demand in lower-tier cities should also increase due to tighter regulations on low-speed electric vehicles and greater offerings of cheap, low-end e-cars. Economically developed coastal regions have accounted for a majority share of China's NEV sales due to local governments' deeper pockets for subsidies and more developed charging infrastructure. China's NEV sales volume surged by more than 18-fold from 2013 to 2015, as generous government subsidies fuelled consumer demand and NEV production. However, volume growth fell sharply to around 50% yoy in 2016 after a government crackdown on subsidy fraud. Authorities published an amended NEV subsidy scheme for 2017 to 2020 that includes a subsidy reduction in phases, tighter technical requirements and an extended subsidy collection period. Fitch expects manufacturers to lower vehicle selling prices - gross of subsidies - to partially compensate consumers for the lower subsidies. Headroom for price cuts is sufficient given sound after-subsidy profitability of certain NEVs - especially e-buses - and potential cost savings through economies of scale and battery technology improvement. Fitch expects the number of e-car models made in China to more than double by 2019 and for market competition to intensify. Local and foreign automakers are required to produce NEVs to meet Chinese regulators' stringent fuel-economy targets and passenger vehicle manufacturers will also have to achieve a NEV credit target to avoid financial penalties from 2018 or 2019. The top-10 local manufacturers accounted for more than 96% of 2016 e-car sales volume in China. Sino-foreign joint-venture brands have lagged, but should increase NEV investments in the next five years. China has the world's largest NEV market, accounting for 45% of e-cars and almost all e-buses sold worldwide in 2016. The Shenzhen-based BYD Auto., Ltd. overtook California-based Tesla, Inc. as the world's largest e-car maker by sales volume in 2015. Nine Chinese EV brands ranked among the world's top-20 EV manufacturers by volume in 2016. The full report, "China New Energy Vehicle Blue Book - Government Policy Drives Market Development", is the latest in a series of Fitch China Research Initiative publications dedicated to providing comprehensive, in-depth research and insight into the key credit aspects of corporate sectors in China. The full report is available by clicking on the link at the top of this press release. Contact: Jing Yang Associate Director +86 21 5097 3017 Fitch Ratings (Beijing) Limited, Shanghai Branch 3401, 34/F, Shanghai Tower, No. 479, Lujiazuihuan Road, Shanghai, 200120, China Jenny Huang Director +86 21 5097 3101 Ying Wang Senior Director +86 21 5097 3010 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. 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