Electric car trend: China decides where to place their “outdated” vehicles

Global leader in electric vehicle production 

The implementation of programs by the Chinese authorities to stimulate the production of electric vehicles has made the country a world leader in the production and sales of vehicles powered by new energy sources.

“China accounts for more than 60% of the global production and sales of new energy vehicles,” said Li Qiang, Premier of the State Council of China, in March at the session of the National People's Congress.

The head of the Chinese government noted a 30% increase in the export of the “new trio” electric vehicles, which are powered by lithium-ion batteries, and photovoltaic products.

Among the measures taken by the Chinese authorities, it is worth mentioning the progressive development of the corresponding infrastructure, in particular, the construction of a network of charging stations across the country. Last year alone, their number increased by 930,000.

The problem of “overcapacity”? 

The automotive industry in China has not faced the problem of excess capacities, and even now, automakers have to encourage companies that produce components to increase their production capacities to meet the growing domestic demand, stated the directors of leading Chinese automakers during a recent press conference organized by the Chinese Association for Public Diplomacy in Beijing.

“As automobile manufacturers, we encourage our suppliers to increase their production capacities to ensure that high demand does not affect our production and sales. Sometimes we even provide some financial support to encourage them to expand their capacities,” quoted ChinaDaily, a leading employee of the Chinese automotive company BAIC (Beijing Automotive Group) Wang Zhang.

He added, “In a market economy, we, the companies, do not blindly expand capacities without market demand, as overcapacity would lead to economic losses.”

Zhao Yuhui, Vice President of electric vehicle manufacturer Zeekr, highlighted that the success of the NEV industry stems from extensive experience in long-term scientific research and development, along with operating in a fiercely competitive market.

“This not only leads to significant technological progress in the market but also offers consumers a wider choice,” he said.

According to data from the China Automobile Industry Association, PRC exported 4.91 million vehicles in 2023. The massive growth is due to a sharp increase in NEV exports, which last year increased by 77.6% to more than 1.2 million units. Electric vehicle exports grew by 80.9%, and hybrid exports by 47.8% compared to 2022.

What about outdated cars?

The trend towards electric vehicles has created a problem in Chinese cities with the accumulation of “outdated” transport due to purchases of more advanced models. What are the solutions to this problem?

According to industry experts, one solution is to export “used cars” abroad. In an interview with the “Zhengmingwan” agency, Xue Haidong, Deputy Chief Engineer of the China Association of Automakers, said that the Chinese export of used cars has great potential, explaining that they need new markets due to the huge number of vehicles and the rapid phase-out of cars. In 2023, there were 435 million vehicles in China.

The export of used cars from China grew by more than 350% year-on-year to 69 thousand units in 2022. These figures are provided by the “Zhengmingwan” agency, citing data from Chinese customs. Moreover, a significant portion of China’s export of used cars consists of vehicles powered by new energy sources.

Lo Lei, Assistant President of the China Association of Automobile Dealers, mentioned that due to the collective efforts of the entire industry, used cars from China are now exported to over 140 countries and regions. For these purposes, the procedures for exporting Chinese used cars have been simplified.

In July 2023, the State Development and Reform Commission and other agencies adopted a series of measures to stimulate car consumption, including support and encouragement for the export of used cars that meet quality standards. In September 2023, the Ministry of Commerce of the PRC published a draft guide for comprehensive support for the export of used cars. In February 2024, the Ministry of Finance of the PRC, together with interested agencies, issued a notice on conducting operations for the export of used cars nationwide.

“The opening of businesses for the export of used cars throughout the country aligns with the trend of modernization and replacement in the domestic car market and helps meet the demand for used cars in other countries,” the publication notes.

Prospects of the Chinese electric vehicle market

Chinese electric vehicle manufacturers will continue to strengthen their positions both in domestic and foreign markets. It is forecasted that in 2024, NEV sales in China will reach 11.5 million units.

In July 2023, the State Council of China extended the favorable tax policy for the purchase of vehicles powered by new energy sources until the end of 2027. For example, during the years 2024-2025, NEV car buyers will be exempt from paying the corresponding tax up to $4,200. This step is aimed at supporting the development of the NEV sector and stimulating the consumption of electric vehicles. By the end of 2023, NEV cars accounted for 31.6% of the total volume of vehicle sales in the domestic Chinese market, amounting to 9.58 million units. To increase domestic consumption of NEVs, China also plans to launch more trade-in programs.

The Chinese “Development Plan for the New Energy Vehicle Industry for 2021 – 2035” includes reducing the average energy consumption of electric vehicles to 12 kWh per 100 kilometers and increasing the share of NEVs in the sales volume of new cars to 20% by 2025, a target that has already been met ahead of schedule. By 2035, fully electric cars are expected to become the main direction in new car sales in the country.

Authorities in Hainan province aim to completely phase out gasoline-powered cars by 2030. As SCMP reports, the Chinese island of Hainan, with its extensive network of charging stations and the introduction of new battery manufacturing technologies, may serve as an example for other provinces transitioning to electric vehicles.

As Wei Wei, Associate Professor at the Hong Kong University of Science and Technology, explained, electric vehicles play a crucial role in ensuring energy security and achieving the “dual carbon goals” (reaching a peak in carbon emissions and achieving carbon neutrality).

“The Chinese NEV industry consistently offers affordable and high-quality capacities, which will make a significant contribution to global “green” development,” she said.

The leading economic news agency “Jingji Zhibao” emphasizes that vehicles powered by alternative energy sources are the main direction of transformation and modernization in the global automotive industry and “green” development, as well as a strategic choice for the qualitative development of China's automotive industry. Automakers expect that sales of NEVs in China will continue to show rapid growth, with the market share of new energy vehicles expected to approach or even reach 60% by 2025, with annual sales amounting to about 17 million units.