Tesla’s Butterfly Effect? China’s New Energy Vehicles’ Bounce Back, and What Will be the Next?

Tesla, the pioneer of new energy vehicle industry has launched its Model 3 in July. Coincidentally, China's new energy vehicle industry rebounded in June after months of sluggish growth. The output of vehicles increased by 44% and the sales by 34% YoY.

(Source: DataYes RoboR Research Platform)

Does the June growth indicate a roaring back of the industry? It is still hard to tell. According to the chart below, the sales ratio of China’s new energy vehicles shows a remarkable periodicity—usually the ratio hit the annual peak in December while bottomed out in January. This is mainly affected by the government subsidies, which was reduced by 5%-20% annually over the past few years.

NEV-Auto Sales Ratio.PNG

(Source: DataYes RoboR Research Platform)

The decrease of the subsidies does not mean the industry will lose the government’s support. Instead of maintaining a universal incentive system, subsidies tend to favor the best-performing carmakers before this program ends in 2020. By then, a new carbon credit-based trading system will be set up to encourage the manufacturers to produce more electric vehicles.

With the policy improving and technology upgrading, many believe the industry will be prosperous in the foreseeable future. The government expected 2 million new energy vehicles sales in 2020 and 5% of total car sales in 2025.