Electric Vehicle Sales In China Are Booming; Tesla Motors Inc Amongst Gainers

The Peoples' Republic of China is taking measures to cut its dependency on imported oil. Just one part of this strategy means encouraging the growth of Electric Vehicles (EV) in the world's biggest car market. In 2014, an upsurge in the country's EV market saw the increase in vehicles sold grow 4.2 times compared to 2013. At Bidness Etc, we're taking a closer look at the factors underlying the momentum of green cars in China.

Government Subsidies

China's government is considered to be most generous when it comes to supporting the market for environmentally friendly cars. The country currently has a problem with rapidly rising air pollution and carbon emissions. In 2010, air pollution was the prime factor in 1.20 million premature deaths in the country, says British medical journal, The Lancet. This accounted for 40% of total global premature deaths.

In an attempt to find a solution, central government has encouraged automakers to bring more EVs onto the roads and urged local governments to purchase them. It introduced a target for local officials, stipulating that green cars should constitute 20% of new vehicle purchases, up from 10% a year ago. Generous government incentives for EV makers, as well as consumers, are also spurring healthy activity in the country's burgeoning green vehicle market.

For EV manufacturers, the government provides subsidies of approximately 60,000 Yuan ($ 9,654) on each EV, along with a purchase-tax exemption of up to 10%. Consumers can also get free license plates in major cities including Shanghai and Hangzhou. Each of these license plates cost $12,000, reports Bloomberg, for gasoline-powered vehicles, making environmentally friendly cars price competitive. These schemes also extend to buyers of foreign EV brands such as California's Tesla Motors Inc (NASDAQ:TSLA) and German luxury carmaker BMW (OTCMKTS:BAMXY).

These policies helped the country to boost EV sales last year to 74,763 units, compared to 17,642 EVs in 2013, says the China Association of Automobile Manufacturers. There is more to come. In its 5-year plan, the government wants to put 5 million green cars on the roads by 2020, reaching an annual production of one million EVs and plug-in hybrids by the end of this decade.

This year, the government expects half a million electrically powered cars to be produced, representing a surge of 669% year-on-year (YoY). Even if annual EV sales do not achieve that mark, there could still be impressive annual growth.

Well Performing Local EV Brands

Increased incentives to local brands have accelerated the development of EV technology in the Chinese auto market. The pioneer in the sector is BYD Company (OTCMKTS:BYDDF), which, says Bloomberg, accounts for 35% of total Chinese EV sales. The local EV maker is aiming to triple sales in 2015 to 60,000 units by releasing four new models every quarter. The company is planning a battery plant to match Tesla's 10-million square foot factory being built in Nevada.

Its plug-in hybrid BYD Quin, currently leads the alternate-energy vehicle sales chart, with 12,462 units sold between January and May this year, says China Auto Web. Zotye is ranked second in the EV league, with an 18% share, ahead of Chery with 16%; according to a February report from Bloomberg Analytics.

Source: Electric Vehicle Sales In China Are Booming; Tesla Motors Inc Amongst Gainers