China’s electric vehicle sales surged five-fold in the first 10 months of 2014, powered by Beijing subsidies. In a long-awaited take-off, even unlikely firms like a metals trader and a soda ash producer are pouring money into green transportation.
As China’s demand for luxury and premium cars cools, the Guangzhou autoshow this week hosts a separate event dedicated to green vehicles. But the gold rush is fuelling concern in the industry it may add to overcapacity, leaving new entrants struggling to survive even with state support.
“China’s green vehicle market will be huge,” said Arnold Chan, Deputy Chairman of China Dynamics Holdings Ltd.
The company, more than 11% owned by Chan according to Thomson Reuters data, quit metals trading to start making environmentally friendly electric buses this year after losing money ever since its 2006 Hong Kong listing.
“There are 2 million buses on Chinese roads. A 10% share of that market would be enormous,” said Chan, whose new entrant firm is worth about $440m by market value. It’s unclear how many electric vehicles could in practice replace buses now in service, but as the world’s biggest auto market, China is a magnet for new firms.
Shanghai-listed Tangshan Sanyou Chemicals Industries Co ltd, a Chinese producer of soda ash worth $1.9bn by market capitalisation, entered the green vehicle business in March. At Shenzhen-listed auto parts maker Wanxiang Qianchao Co Ltd, shares have doubled since parent Wanxiang Group acquired bankrupt US electric car maker Fisker Automotive in February.
The concern over potential over-investment stems from orders for electric buses and cars coming from local governments, rather than individual consumers.
Despite a flood of electric car models coming to the market this year, from BMW and Mercedes Benz to Nissan and BYD, many in China are just not yet ready to buy them, according to a survey earlier this year by consultancy AT Kearney.
Some 54% of survey participants said incentives wouldn’t be enough to override other concerns. Fully 60% of consumers said they expect a minimum driving range of 250 kilometres, much further than the range of most electric cars currently on the market.