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China looks set to remain global Electric Vehicle market leader

Publication Date: 09 Oct 2018 - By Thisara Niriella By Thisara N.

Environmental, Social & Governance Equity Fundamental Macro Multi Asset Equity China Consumer


Owing to the sheer size of its population, China is the single largest consumer market on the planet. With the gradually opening Chinese economy, attributed to the government’s agenda in developing China into tech and services based economy on par with global standards (spurred by Made in China 2025), an opportunity for investors to cash in on a rapidly developing industry has presented itself. 

As of now, China is the single largest electric vehicle (EV) market. Just last year, it dominated the sphere with around 60% of a total of 1m car sales across the world. China also boasts a massive fleet of 1.23m electric cars in use*

Most industry estimates suggest China’s EV industry is set for an upward growth trajectory. 

What is the growth forecast like?

The number of EVs that will be sold is set to explode globally. Bloomberg’s EV Outlook report cites a tenfold increase in global sales from 1.1m in 2017 to 11m by 2025 and 13m by 2030.

The International Energy Agency (IEA) predicts** EV ownership to increase to 125m by the year 2030 driven predominantly by government policies favouring sustainable energy. In this respect, the IEA predicts an increase to 220m by 2030 if there is a greater commitment by global leaders to adopt pro green energy policies.

This global growth in the EV industry will see China at its helm as the largest market in the years to come. The Japanese market research firm Fuji Keizai Group predicts*** China will account for 57% of the global EV sales by the year 2035 which equates to around 6.4 million EVs.  

Policy lead market growth

With amendments made to the EV subsidy program, the Chinese government will be phasing it out with eventual termination by 2020. However, new initiatives are currently coming into play and there are two important policies that require attention.

The “Dual Credit Policy” took effect as of April this year and is expected to ensure sustainable long term growth for the EV industry. Consultancy firm Wood Mackenzie expects EV penetration rates in China to reach levels 17% by the year 2035 as a consequence of this credit system. In addition to this new credit system, the Chinese government is currently eyeing a potential ban on Internal Combustion Engines (ICE).

Although it is not entirely clear as to when this ban might take place, given UK and France’s announcement to ban ICE vehicles by 2040, China might aim to implement this ban earlier. Given China’s status as the second-largest oil consumer after the US, a complete ban on ICE vehicles would have a significant impact on oil prices in addition to the fact that a complete ban may be quite difficult to achieve. 

It is highly likely therefore, that China might adopt more aggressive pro-EV policies in the future in an attempt to boost EV adoption rates. The implementation of effective policies allowed China to surpass the US as the dominant player in the EV industry. 

Needless to say that the stats show an immense growth in the global EV industry and China has already positioned itself as the EV leader for the next decade or so. Given US President Donald Trump’s current stance on climate change, with his administration withdrawing the US from the Paris climate change agreement China has essentially lead the charge and it’s by far investors’ safest bet.  

Reference links:

*Statista - https://www.statista.com/chart/14098/electric-car-sales-are-surging-in-china/
**CNBC - https://www.cnbc.com/2018/05/30/electric-vehicles-will-grow-from-3-million-to-125-million-by-2030-iea.html
***Inside EVs - https://insideevs.com/forecast-predicts-china-will-account-for-57-of-electric-car-sales-by-2035/




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