The rate of subsidy for new energy vehicles is declining, and the sales volume of the market is growing. What is the point?

On June 12, 2018, the transition period of new energy subsidy policy in 2018 was over. The new subsidy standard began to be implemented, and the subsidy standard's decline rate was quite large. Take the 10m pure electric bus as an example, the new subsidy started on the 12th The standard decline has reached 40%. Some professionals are worried that China’s new energy vehicles will definitely fall sharply after they leave their financial subsidies. In fact, the situation is that the subsidy rate of new energy vehicles is declining, and the market sales volume will increase. What is the reason?

I. The production and sales of new energy vehicles have all completed 328,000 in January-May 2018.

On June 11th, the China Automobile Association announced that in May, the production and sales of new energy vehicles completed 96,000 vehicles and 102,000 vehicles respectively, an increase of 85.6% and 125.6% respectively over the same period of the previous year (see Table 1).

1 The production and sales of pure electric vehicles completed 77,000 vehicles and 82,000 vehicles respectively, an increase of 75.9% and 112.8% respectively over the same period of last year;

2 The production and sales of plug-in hybrid vehicles reached 19,000 units and 20,000 units respectively, an increase of 138.8% and 196.8% respectively from the same period of the previous year.

Table 1 New Energy Vehicle Sales from January to May in 2018

From January to May in 2018, the production and sales of new energy vehicles all completed 328,000 vehicles (see Table 2), of which:

1 The production and sales of pure electric vehicles were all completed 250,000 vehicles, an increase of 105.1% and 124.7% respectively over the same period of the previous year;

2 The production and sales of plug-in hybrid vehicles reached 79,000 units and 78,000 units, respectively, an increase of 207.3% and 218.4% over the same period of the previous year.

Table 2 Production of New Energy Vehicles from January to May 2018

Second, the policy is guiding the development of new energy vehicles.

At the same time as the new energy production and sales report was released in May, Assistant Secretary-General Chen Shihua of the China Automobile Industry Association stated that according to the current market conditions, the production and sales scale will exceed 1 million units in 2018. Is this accurate? According to the author's many years of follow-up research, CAFA's pre-judgment at the beginning of the year is accurate. At the beginning of 2016, China Autos Association expects to have 500,000 vehicles at the beginning of the year. At the beginning of 2017, China Autos Association expects to have 700,000 vehicles at the beginning of the year. The final results at the end of the year are basically consistent with the prediction. At the beginning of 2018, the China Automobile Association’s annual pre-judgment will be 1.2 million. The result at the end of the year must also be this number.

The author understands that it is the policy to guide the development of new energy vehicles in China. At the same time, the pre-judgment of CAAM at the beginning of the year is also the number of plans. What is the reason? Policies to support the development of new energy vehicles have a core content, subsidies for subsidized models. There must be a total subsidy quota plan in advance. Next, the comprehensive total subsidy quota plan must be clearly decomposed, and it must be instructive production and sales plan data. Although this guiding plan data is not mandatory, it is strictly enforced by grassroots enterprises.

In a word, not at the beginning of the year, China Automobile Association expects all standards to be accurate, but the grass-roots enterprises arrange production and sales according to the data of this plan.

Third, the decline in subsidies for new energy vehicles is designed based on market sales growth.

The central target of subsidies for new energy vehicles is "power batteries." New energy vehicles, according to different types of vehicles, models, according to a mileage requirement, how much power battery to match it? It can be calculated. In other words, under the premise of market sales, what is the total power battery demand for each year? It can be calculated.

What are the basic factors for the growth of sales of new energy vehicles? One is product quality, and the other is product sales price. By 2020, China's new energy vehicles will achieve a sales volume of 2 million years, which is a target number (planned number). The total amount of financial subsidies is also arranged. Each year, the subsidies must be decomposed.

The question is: Under the premise that the amount of financial subsidies is set, can the annual sales target be achieved? The key here is whether the goal of power battery cost reduction can be achieved? If this can be achieved, the annual sales target for new energy vehicles is achievable.

The key item for the cost of new energy vehicles is the power battery. The cost of the power battery is already more than 40% of the total vehicle cost. Therefore, it is a key item to lower the cost of power.

By 2020, the cost of the power battery system will have to drop to 0.8WH/KG (excellent company is 0.6WH/KG). This goal has been achieved and all financial subsidies have been eliminated.

The most successful development of new energy vehicles in China is the successful creation of a globally competitive Chinese power battery industry. In a word, will China's development of new energy vehicles ultimately succeed? The key is that the power battery cost cannot reach 0.8 yuan/WH (excellent company is 0.6 yuan/WH).

According to the author's understanding, many power battery companies use lithium iron phosphate batteries as an example. The specific energy of single batteries can reach 170wh/kg in 2018 and 1.1 yuan/wh for downstream customers.

The lower the subsidy for new energy vehicles, the higher the market sales volume. What is the reason? In a word, the decline in subsidies for new energy vehicles is positively related to the decrease in the cost of power batteries.

Fourth, the conclusion

Before 2020, China's new energy vehicle subsidies will not be interrupted, but the subsidy standards will decline year after year. The decline is linked to the drop in power costs. In 2020, China's new energy vehicles can achieve 2 million vehicles. why? The automobile is an industry that the Chinese government must grasp. The market economy emphasizes competition among business entities. The author understands that China’s development of new energy vehicles is, on the macro level, the government’s leading (planned economy) and, on a micro level, business participation (market economy).

In a word, the development of new energy vehicles in China in 2020 is a planned economic model, so it is not a problem to say that the scale of 2 million new energy vehicles in China will be achieved. The policy guides the development of new energy vehicles. The China Automobile Association has a pre-judgment at the beginning of each year and there is no problem.