General

Electric vehicles: The race between China and The US markets

Trường Lăng

May 31, 2022

General

Electric vehicles: The race between China and The US markets

Trường Lăng

May 31, 2022

Due to the growing concerns about environmental awareness, many countries in the world have paid more attention to incentivising electric vehicles (EVs) adoption. EVs will play a key role in achieving the goal of zero emissions by 2050. The EV market is growing tremendously over the last few years.  As a result of the booming demand for new energy vehicles (NEVs), multiple players are joining the market, making the EV industry fiercely competitive than ever before.

Electric vehicles industry overview in the global market

What is the current situation?

The worldwide electric vehicle industry has grown significantly in response to rising fuel prices, increased demand for fuel-efficient, low-emission, and high-performance automobiles, and stricter regulatory regulations on vehicle emissions.

The growth of EVs has been impressive over the last three years, despite the supply chain bottlenecks caused by the global pandemic. According to the International Energy agency, in 2019, 2.2 million electric automobiles were sold worldwide, accounting for only 2.5 percent of total vehicle sales. Then, the global cars market shrank in 2020. However, electric car sales bucked the trend, reaching 3 million units and accounting for 4.1 percent of total vehicle sales. Electric vehicle sales rose to 6.6 million in 2021, accounting for over 9% of the global auto industry and more than tripling their market share from only two years before. Noticeably, in 2021, all the net growth in global car sales came from electric cars.

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Figure 1: Global electric vehicles in 2021 (Source: Statista)

According to Allied Market Research, the global electric vehicle market was valued at $163.01 billion in 2020. The figure rose to roughly USD 185 billion in 2021 and is expected to surpass USD 980 billion by 2028. Electric car sales powered through 2021 and have remained strong so far in 2022.

Established firms such as Tesla (US), Volkswagen AG (Germany), SAIC Motors (China), BYD (China), and Stellantis (Netherlands) dominate the electric vehicle industry. These companies have extensive global distribution networks and invest greatly in R&D to develop new products.

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Figure 2: Electric vehicles sales of key players in the world

What are the dominant markets?

These days, China, Europe and the U.S are the 3 biggest EV markets in the world. Europe and China are leading the way with 16% and 14% EV market share respectively, while the US is at 4.5%.

2021 was a breakthrough year for China’s EV sector. According to the China Passenger Car Association, with about 3.2 million electric vehicles sold, China saw the most rapid growth in the EV market. This was an increase of 2 million EV units compared to 2020, more than the combined increase of all other regions taken together. Thus, electric vehicles accounted for over 16% of the automotive market in China in 2021, and 53% of the global market share. This made China regain its dominance in the global EV market – the biggest market for electric vehicles in the world.

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Figure 3: electric vehicles sales by major market in 2021 (Source: Canalys)

China continues its great performance in 2022. In March 2022, plugin vehicles hit 26% China’s market share while full electrics (BEVs) alone accounted for 21% of the country’s auto sales. China is forecast to be the world leader in terms of electric vehicle production over the next few years.  

Consumer behavior is a great contributor to the development of China’s EV market. Because many Chinese have no previous car ownership experience, they can easily adapt to EVs. Besides, many Gen Z and millennial buyers would love to take their new purchase to the next level by customizing their electric vehicles as a form of self-expression. Therefore, many EV start-ups are putting great effort in innovating their products with the view to driving a transformational change towards electrification.

In the US market, there is also a growing demand in vehicles which are carbon-neutral, high performance, economical and practical. The US’ EV market broke records in 2021, estimated at approximately 607,000 sales. This was an 83% increase compared to 2018 – the year marking the beginning of a strong demand for a popular EV product Tesla’s Model 3. The US’s electric vehicle market is projected to grow from $28.24 billion in 2021 to $137.43 billion in 2028 at a CAGR of 25.4%.

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Figure 3: US electrical vehicles sales (Source: Department of energy, the US)
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Figure 4: Tesla electric vehicles dominates US EV market (Source: Forbes, Statista)

In the European market, people widely accept electric vehicles. As charging infrastructure improves, production costs decrease, and governments take action to reduce carbon emissions, electric cars have seen an increasing trend of acceptance throughout Europe. According to the Guardian in 2020, car manufacturers sold over 500,000 electric cars in Europe. The sales of EV in Europe have increased steadily since 2010, with annual growth of roughly 50% over the last 5 years. According to the International Council’s report on Clean Transportation, Europe is currently the world’s second-largest electric car market by volume, after China but ahead of the United States. This tremendous growth in demand for electric vehicles is expected to bring further development to Europe’s EV market.

China and the US’s policies to incentivise EVs adoption

Boosting demands

When it comes to boosting demands. According to the China Association of Automobile Manufacturers, in 2009, the Chinese government started granting incentives of around US$ 15 billion. The funds were used to strengthen its commitment to stimulate EV development, generate employment, and reduce urban pollution and dependence on oil imports.

The very first action was launching the pilot program called The Thousands of Vehicles, Tens of Cities to subsidize Chinese cities to implement EVs. Initially, the program concentrated on public procurement, but they were eventually expanded to include private procurement.

Nowadays, almost all major cities in China are enacting stricter regulations. Beijing, for example, only provides 10,000 registration licenses for combustion-engine vehicles every month in order to encourage residents to switch to electric vehicles. EVs have been exempted from traffic and vehicle ownership control in several large cities. Some cities even allocate dedicated parking space for EVs.

Moreover, the Chinese government has actively promoted the electrification of public transportation vehicles. Many Chinese cities have set specific objectives for fully electrifying taxis and online hailing cars. For example, China’s Ministry of Transport set a goal in 2018 to replace all buses in large cities with electric vehicles by the end of 2020.

Meanwhile,  the United States was said to take a less supportive approach to EVs than China. However, the US Government has put more effort into promoting EVs recently. At least 47 states and the District of Columbia offer incentives to encourage the deployment of EVs. The incentives include measures that provide high-occupancy vehicle lane exemptions for EVs, financial incentives for purchasing EVs, vehicle inspection or emissions test exemptions, parking incentives and utility rate reduction.

Utilities also offer incentives, rebates, and grants for transportation electrification. Price reductions for charging electric vehicles during off-peak hours are one of the most prevalent incentives. Several electric utilities provide cheaper off-peak prices per kilowatt-hour. Other utilities provide subsidies to encourage people to buy electric vehicles and equipment.

The US Government also offers tax credits for anyone who purchases EVs from certain manufacturers. However, this system is not permanent and is dependent on sales by the model of cars.

Facilitating manufacturers

The Chinese government has provided a variety of policy support for the development of EV-related infrastructure. They include financial assistance for the construction and operation of charging stations and regulatory provisions to streamline charging infrastructure planning processes. By 2020, such policy assistance will boost the number of charging and battery exchange stations to 12,000, as well as the number of charging heaps to 4.8 million.

Monetary consumer subsidies help the China government cultivate the EV industry. This results in a gradually decreasing amount of cost as the supply chain and manufacturing matures while scale is gained. In addition, the government also provides tax reliefs and monetary subsidies for research and development expenditure for companies throughout the EV manufacturing supply chain.

The main reason why EVs are costly is that their batteries are expensive. China’s solution was to invest greatly in battery production. Five Chinese EV battery suppliers entered the global top ten ranking of battery suppliers in 2015. The significant investment in battery production made China become dominant in this  stage of the supply chain. Recognizing the potential market of EV batteries, international battery suppliers are entering China’s market. 

In the meantime, US automobile manufacturers are pouring money into developing a net-zero carbon powertrain for future models that does not rely on third-party technology. The US Government has granted great subsidies to these corporations as part of a large energy investment incentive to help them begin their research and development for American markets.

When it comes to battery supply, recently, the US Department of Energy has announced to invest $3 billion into battery manufacturing and supply chain to promote the transition to EVs. The funds came from last year’s massive infrastructure bill.

Encouraging customers to purchase

Both governments introduced subsidies to bolster sales of electric vehicles. The Chinese government has either exempted or reduced taxes on the purchase of electric vehicles. These programs have attracted a large number of purchasers to acquire electric vehicles in this country.

Meanwhile, in the US, consumer rebate programs are launched in multiple states. They can cover small costs associated with purchasing new electric or alternative fuel vehicles, such as immediate cash down rebate payment. These incentive programs might also be temporary, or may be allotted more funding in the future to provide higher incentives.

Electric vehicles are the key to a sustainable future and will gain more popularity in the future. Our experienced experts will help companies to receive in-depth knowledge about the present scenario of certain markets so that you can adopt the necessary strategies accordingly. We are confident to help you seize ample opportunities ahead. Let us be your trustworthy companion!

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