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Reduced cost to boost China’s NEV market by 2023

The growth of the world’s largest auto market, China, slowed to a single digit in 2017. Sales of new energy vehicles (NEVs), however, jumped 53.3 percent to a total of 777,000 units.

The Chinese government has been rolling out preferential purchasing policies and even credits to green car makers.

The concern is what would happen if all these policies are phased out. The key may come down to reducing costs.

“There will be one critical trigger point, which is whether the total cost of the ownership of NEVs can be better than the traditional ICE (internal combustion engine) vehicles. Once this trigger point can be conquered, we think the major driver will go back to the market itself,” said Zhang Yichao, a senior project manager at Roland Berger Consultancy.

According to auto parts trade platform Gasgoo, 50 percent of the manufacturing cost for NEVs comes from the dynamic system, which includes the battery, motor and electric control systems. Once the cost for these systems can be reduced, the trigger point may come.

“We estimate that around 2023, NEVs’ competitiveness will surpass traditional vehicles, especially in their long-term value, such as maintenance and operating costs,” said Lian Qingfeng, the spokesperson for Beijing Electric Vehicle (BJEV), a subsidiary of the BAIC Group.

BJEV spends four times more in developing new green energy technology compared to traditional cars, and the firm is confident that the popularity of NEVs will continue to rise in China.