According to the China Passenger Car Association, China's electric vehicle (EV) market is expected to see record sales of 6.5 million units in 2022, almost double the 3.52 million units sold in 2021.
A report from Nikkei Asia tells us that the growth comes as total vehicle sales in the country grew just 3.3% annually to 24.3 million units in the first eleven months of the year. However, the EV market faces several challenges, including the withdrawal of government subsidies and uncertainties caused by the ongoing COVID-19 pandemic.
In addition, industry players have raised concerns about the global shortage of semiconductors for EVs, which the pandemic and geopolitical tensions with the United States have exacerbated. This has led to production slowdowns and adjustments to sales targets for Chinese automakers.
The Issue with Chip Supply and Subsidy
GAC Motor, a state-owned automaker based in Guangzhou, has projected a 10% sales growth for 2023, down from its original estimate of 12% for this year.
The company's general manager, Feng Xingya, noted that the industry confronts "no small amount of risks," including chip supply and the withdrawal of subsidies. Currently, EV buyers in China receive discounts of between 4,800 and 12,600 yuan ($695 to $1,836), but these subsidies are set to end this year.
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The removal of subsidies could put pressure on companies like Nio, a Chinese premium EV maker, which has seen strong demand for its Nio ET5 sedan, with a delivery waiting period of three months.
However, the company's CEO, William Li, recently warned that Nio could face intense pressure in the first half of 2023 due to weaker demand following the end of subsidies.
Overall, the withdrawal of subsidies and the economic uncertainties caused by the pandemic has led to a decline in consumer sentiment in China.
Retail sales of consumer goods contracted by 0.1% in the first eleven months due to lockdowns that disrupted production and businesses. Some experts, including Tu Le, founder of Beijing-based consultancy Sino Auto Insights, have suggested that the government may extend EV incentives to boost consumption and support economic growth.
Chip Support Package
On Dec. 14, Reuters reported that China is preparing a more than one trillion yuan ($143 billion) support package for its semiconductor industry, according to three sources, in a major step toward chip self-sufficiency and offset US actions aimed at curbing its technical gains.
It indicates, as expected, a more direct approach by China in molding the future of an industry that has become a geopolitical flashpoint due to soaring chip demand and that Beijing considers a cornerstone of its technological strength.
On Christmas Day, Bloomberg reported that Nio Inc. founder and CEO William Li stated the Chinese EV manufacturer might face a hard first half as a reduction in government subsidies and the general economic slump erode local demand in the largest new-energy vehicle market in the world.
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