Thomas F. O'Neill
People who come to visit China can’t help but notice the smog filled skies in the country’s bustling cities. That is one of the reasons why China has been pushing for affordable electric cars it would be a way to cut back on China’s air pollution.
The country has set a goal of having 3 million new electric driven cars on China’s freeways by 2025.
One major hurdle for China’s electric car industry is that many companies in China lack the sufficient know-how to produce quality auto-mobiles. China is plagued by too many companies lacking that technical expertise to make electric or hybrid cars that measure up to those from Tesla Motors Inc. or General Motors Co.
It has been announced by the Chinese media that Billionaires in China like Jack Ma, Terry Gou, Li Ka-shing and Jia Yueting are among investors who’ve poured at least $2 billion into building alternative-energy vehicles as China tries to combat the smog choking its cities.
China’s car-makers are now seeing pressure on their profit margins with the spread of cheap models, while stringent fuel-economy and emissions targets are being set to raise costs.
China surpassed the U.S. last year, according to various Chinese media outlets, to become the world’s biggest market for new-energy vehicles -- comprising electric vehicles, plug-in hybrids and fuel-cell cars. Domestic automakers sold 331,092 units in 2015, according to the China daily news.
The Chinese government is now offering to subsidize electric automakers in order to make the cars more affordable. The government is offering subsidies that can total 60 percent of an electric-car’s sticker price. Currently there are about 4,000 new-energy vehicle, or NEV, models in development.
The government, however, is placing more mandates on the Chinese automakers, as the government introduces stricter quality-control measures. In the past China has ignored the universal safety standards when it came to producing cheap affordable cars.
The new safety standards include - a control system that determines the performance and stability of the New Electric Vehicle, an information system that tracks the sources and conditions of key parts, and a process for recycling or reusing batteries.
The Hyundai Motor Co. and Daimler AG’s Mercedes-Benz is in the process of building a factory in the capital city of Beijing that’s capable of making 70,000 EVs a year. It will be subsidized by the Chinese government in order to reduce the cost of producing and selling the vehicles to the consumer.
Karma Automotive LLC, announced they will be producing a hybrid vehicle that will use solar power. The cost of producing such a vehicle will be more than $115,000. They are planning to build their $375 million factory in Hangzhou.
The Chinese firm LeEco will invest 6 billion yuan in an electric car factory with an initial capacity for 200,000 cars a year. Many critics argue that producing the cars is one thing but reducing the cost of the vehicles for the average consumer will be quite a challenge. The average consumer in China spends approximately $13, 000 for a new vehicle with a five year bank loan. Most of the electric cars in China, if not all, will be far from the average Chinese person's price range.
There is a huge potential for the Electric Car industry not just in China but globally. The problem in China, however, is the rush to produce the vehicles without the adequate consumer market.
China has announced that its government will stop subsidizing the auto-makers by 2020. That announcement comes after billions in investments have been poured into producing the electric vehicles. Many investors are now worried that they may be contributing to an investment bubble that’s ready to burst due in part from not adequately finding the buyer market for their electric product.
The electric auto industry has been around for many years, however, the average consumer has not reaped the benefit of owning such a product due mostly to the price range.
China’s electric car industry could very well be a huge bubble ready to burst. But, in China, unlike America when the bubble bursts there will not be a government bailout in the horizon.
Always with love from Suzhou, China
Thomas F O’Neill
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