China targets NEVs to become 25% of total car sales by 2025

03 December 2019 Nitin Budhiraja

China is targeting new energy vehicles (NEVs) to account for 25% of total car sales in the country by 2025, up from a 20% target set in a 2017 planning document, reports Reuters, citing a statement by the industry ministry. According to the draft proposal from the ministry, China will continue to focus on development of electric vehicle (EV) battery technology and improve the infrastructure for hydrogen fuel-cell vehicles and connected vehicles. The country is also reported to be considering introducing stricter green-car quotas in the coming years that would push automakers to manufacture a certain amount of NEVs.

Significance: China is one of the biggest markets for NEVs globally. In 2018, the market for NEVs, which include pure battery electric vehicles (BEVs), plug-in hybrid EVs (PHEVs), and fuel-cell vehicles (FCVs), continued to expand at a double-digit rate. Last year, total production of NEVs surged by 59.9% to 1.27 million units, while sales of NEVs increased by 61.7% to 1.256 million units. BEVs remain the main sellers in the sector. A total of 984,000 BEVs were sold in China during 2018, up 50.8%. Sales of PHEVs reached 271,000 units in China last year, up 118%, while sales of FCVs totalled 1,527 units. However, with the Chinese government cutting subsidies on NEVs, sales in the segment have declined over the last couple of months. The subsidies have been reduced to almost half their 2018 levels and the government has further raised the threshold for a vehicle to be eligible for the subsidies. As a result, sales of NEVs declined 34.2% year on year to 80,000 units in China in September. Last year, NEVs accounted for less than 5% of total vehicle sales in China. Reaching a target of 25% by 2025 will be a huge challenge for the Chinese authorities, considering the subsidies have been cut.