Un-Teslas driving electric car boom in China, price beats luxury

China wants 5 million plug-in cars on its roads by 2020 and the pedal's to the metal.

More electric cars are already sold in China than in the rest of the world combined, Reuters reports.

The catch is that they are mainly locally branded models that are cheaper with a shorter range than the vehicles offered by foreign plug-in car makers like Tesla and Nissan.

The Chinese-branded electric vehicle (EV) market is propped up by substantial government subsidies as part of Beijing's policy to become a global leader in clean energy.

China has spent billions of dollars on subsidies to help companies - including Warren Buffett-backed BYD and BAIC Motor - achieve large-scale production of plug-in vehicles, which are gaining traction among urban drivers, taxi fleets and government agencies.

China's domestic EVs don't have the fast, long-range, luxury status of a Tesla. They sell on price.

In Shanghai last year, a two-door battery electric Chery eQ cost around 60,000 yuan ($8,655) after subsidies. Without subsidies, the eQ would cost an additional 100,000 yuan ($14,500) or so. At last week's Detroit auto show, General Motors showed off its latest Bolt EV, with a $30,000 price tag (after a $7,500 federal tax credit).

"EV cars are very cheap (in China)," said Xie Chao, who works for a chemical company in Shanghai. "You'll only spend a little money to buy a car. If you just go to work or use an EV in the city, it's OK for using within 100 km (62 miles)."

Chinese electric cars tend to come with identical specs, so price is the deciding factor, said Dawei Zhang, CEO of EVBuy, a dealer.

"It's a transport tool," he added, "purely for mobility rather than for showing off."

Some EV buyers in China's big cities mainly buy plug-in vehicles because it's easier to get a license plate. China's biggest cities tightly control license plates for gasoline cars, but freely award plates for plug-ins.

Still, cost is the name of the game.

"I only considered BYD and BAIC. I definitely can't afford the 300,000-600,000 yuan price of a luxury-style Tesla or Denza," said Qu Lijian, a 31-year-old government worker in Beijing, who eventually opted for a BYD Qin pure electric.

Denza is a Chinese brand produced by a joint venture between BYD and Daimler.

China's cocktail of pro-electric policies is a challenge for global automakers, as foreign manufacturers can access subsidies only via joint ventures with local partners, producing cars under new made-for-China brand names such as Denza.

The version of the Leaf that Nissan's joint venture with Dongfeng Automobile offers in China, under the Venucia brand, "isn't selling very well," Nissan's global chief Carlos Ghosn told Reuters in November. Chinese EV buyers don't want to spend much more than $8,000, after incentives, and the Nissan vehicle is too expensive, Ghosn said.

The playing field for foreign brands in China should, though, gradually even out as subsidies are phased out by 2020.

Local EV manufacturers have, with the help of subsidies, been able to build economies of scale, pushing down their cost per unit and allowing them to spend more on R&D, Li Yunfei, BYD's deputy chief of branding, told Reuters.

"By 2020, China will have no subsidies, but your scale has expanded, your costs have come down, and you'll be able to hit a price that consumers can accept," he said.

While China has grabbed early-mover advantage, global automakers plan to quickly ramp up their plug-in offerings in the world's biggest market. GM's local joint venture, for example, promises to spend $3.8 billion on electrification and developing 10 "new energy" models by 2020.

It won't be one-way traffic.

Chinese brands such as GAC Motor and BYD are looking to advance on global rivals' home turf.

GAC Motor debuted its pure electric GE3 sport utility vehicle at the Detroit show last week, announcing plans to enter the US by 2019.

Shenzhen-based BYD already sells its electric buses in Africa, Europe and South America and has a factory in the US. The company is preparing "on all fronts" to enter foreign passenger car markets, Li said, without elaborating.

"Because Chinese companies have this large Chinese market, when they have big enough scale and their power grows, their products improve and they increasingly understand foreign markets," he said.

"In the future, they will definitely take the world stage. The potential is huge."

Contact the writer at chrisdavis@chinadailyusa.com.

(China Daily USA 01/18/2017 page2)