China launches a campaign to boost rural EV sales
As China is expected to reduce subsidies on new energy vehicles (NEVs), including electric automobiles, by 30% in 2022 and eliminate them entirely by the end of the year, the government is introducing a new strategy to increase sales in the largest automotive market.
China launched the “Go Rural” initiative to encourage people in smaller cities to purchase electric vehicles.
The “go rural” campaign will select small cities and rural areas in Shanxi, Jilin, Jiangsu, Zhejiang, Henan, Shandong, Hubei, Hunan, Hainan, Sichuan, and Gansu in accordance with guidance issued jointly by China’s Ministry of Industry and Information Technology (MIIT) and Ministry of Agriculture and Rural Affairs.
The “go rural” initiative, implemented by the local government from May to December 2022, has drawn 26 auto firms, including BYD, state-owned SAIC, Volvo’s parent company Geely, and GAC’s EV subsidiary Aion, to participate.
Automakers have agreed to offer varied discounts on 70 electric car models and to collaborate with e-commerce platforms such as Alibaba’s Tmall and JD to organize online sales incentives and marketing activities as part of a new promotional campaign.
Of 70 vehicle models, Minicar, compact car, and Mid-size cars account for 14.3%, 35.7%, and 50 percent of the total. Citizens living in rural areas are mainly price-sensitive to purchasing new energy-efficient cars. Research shows that most rural customers are willing to spend no more than 100,000 yuan on average for a new car purchase. To meet demand, the majority of electric vehicles participating in the campaign are priced at less than 300,000 yuan.
BYD’s Dolphin, E2, Yuan Pro, Yuan Plus, Qin Plus EV, Song Plus EV, GAC Aion’s Aion Y, Aion S, Aion S Plus, Aion V Plus, SAIC-GM Wuling’s Mini EV, Kiwi EV, Rongguang EV, Nano EV are included in the list of models eligible to participate in the campaign.
In addition, the central government has already announced that it will cut the purchase tax for selected cars by half.
The electrification project is vital to China’s plan to become carbon neutral by 2060, an initiative that has the potential benefit of reducing dependence on oil and gas imports.
A complex network of charging stations will expedite the adoption of electric vehicles, but the construction of charging stations will not be profitable until more people purchase alternative-energy vehicles.
According to data released by the China Electric Vehicle Charging Infrastructure Promotion Alliance (EVCIPA), China has 1.41 million publicly available charging poles as of May, 2022, up 60.5% compared to last year.
China has set a goal of having at least 20% of the vehicles sold in the country be EVs by 2025, and EVs will account for the majority of car sales by 2035, requiring a significant increase in charging infrastructure.
But just like the service shops, the charging stations for new energy vehicles are concentrated in major cities where major EV companies like Tesla, Li Auto, and XPeng have already built their ecosystems and facilities.
Building many fast-charging stations for electric vehicles requires a significant investment. Most private owners cannot afford it, so the charging infrastructure push must therefore come from the government. In January 2022, China’s National Development and Reform Commission (NDRC) and nine other government departments issued a guideline to boost EV charging services to meet the demand for 20 million such vehicles by 2025.
The guidelines underscored the priority of constructing a charging facility network in rural areas, stating the goal of equipping all villages with charging piles by 2025.
In addition to EV startups like Nio, Li Auto, and XPeng, also commonly referred to as “new automobile power” in China, traditional automakers like Zhejiang-based Geely shifted their focus to penetrate their service in China’s rural areas with more battery-swapping stations.
Geely started developing its battery-swapping technologies in 2017 with an R & D team of more than 1,000 people and launched its first battery-swapping station, E-Energee in Chongqing in September 2020. By 2025, Geely aims to introduce 5,000 battery switching stations across China.
Although rural populations currently have lower access to infrastructure compared with citizens in big cities, new energy vehicles, especially budgeted models, still have a lot of room to grow in less-developed areas. Rural residents find it easier to have parking spots where they can install charging facilities at their homes, which means a higher incentive to purchase new electric vehicles. Local governments will provide extensive charging infrastructure whenever the number of electric car owners hits a certain threshold.