Why China for NEV

China's new energy vehicle sales volume has occupied the first place globally for five consecutive years.

In 2018, over two million new energy passenger vehicles were sold around the world; about 1.05 million were sold in China, more than the sum of units sold in all other countries. China took five spots in the top 10 best-selling NEV brands in the world which accounted for a total of 31.7 percent of the global market share.

In 2019, affected by the NEV-subsidy program, the sales volume of NEVs in China was 1.21 million, down four percent year-on-year. Since the sales of NEVs in China were more than half of global sales, China is still the world's largest NEV market and still enjoys great development potential.

From the perspective of penetration rate, the sales volume of NEVs in China in 2018 reached 1.26 million, accounting for 4.5 percent of the country's total vehicle sales; as of June 2019, the number of NEVs in China was about 3.44 million, while the number of traditional fuel vehicles reached 250 million.

The penetration rate of NEVs was less than 1.4 percent, indicating broad space for growth.

Moreover, sales of NEVs are expected to make up about 25 percent of total new car sales in the country by 2025, according to a December 2019 draft plan on promoting the industry for the 2021-2035 period prepared by the Ministry of Industry and Information Technology (MIIT).

There are three major trends in policy making:

1.the subsidies are declining at an increased rate and will be eliminated after 2020 with financial support converting to operation and infrastructural facilities;

2.the requirements for energy consumption will be improved and a long-effect mechanism will be built based on a regulation setting targets on sales of NEVs and energy consumption;

3.and restrictions on the ratio of foreign shares will be eased and the vehicle and power battery industries further opened to foreign investors to encourage high-quality competition.

On July 9, 2019, The MIIT started soliciting public opinion on a revised regulation on scoring the fuel consumption of traditional passenger cars and NEV outputs for automakers and importers. The new scoring policy follows financial subsidies as a stimulant of the industry's development and is expected to increase output of new energy passenger vehicles by 700,000, 750,000 and 800,000 in 2021, 2022 and 2023 respectively.

The National Development and Reform Commission and the Ministry of Commerce unveiled a negative list for foreign investment in June 2018. The list, with the official name "Special Administrative Measures on Access to Foreign Investment (Negative List) (2018 Version)," stipulates that the restrictions on foreign equity ratios for special purpose vehicles and NEVs would be removed starting July 28, 2018.

This policy has greatly encouraged foreign-invested NEV enterprises to build factories in China.

In July 2018, US electric car maker Tesla’s Chief Executive Elon Musk came to China and signed an investment agreement on a pure electric vehicle project with Lin-gang Special Area of Shanghai. The 50-billion yuan ($7 billion) Tesla Shanghai Gigafactory has been put into production in late 2019.