The number of electric vehicles (EVs) sold in China reached 254,000 in Q1 2019, a 118% year-over-year (YoY) jump from the 117,000 sold in Q1 2018, according to new data from CleanTechnica.
At the same time, fossil fuel-powered car sales in the country shrank by almost 15% YoY: Automakers sold over 5.5 million fossil fuel-powered cars in China in Q4 2017, but sold only 4.8 million in the final quarter of last year.
Here’s what it means: The spike in EV sales in Q1 is likely a function of the Chinese government’s bolstering of growth in the country’s electric car market.
The Chinese government is gradually rolling out initiatives to help wean the country off of fossil fuel-powered cars.The government announced an initiative that calls for carmakers that produce more than 30,000 cars annually to make or import at least 10% electric cars by this year.
At the same time, last year China’s National Development and Reform Commission announced a $47 billion fund last year that’s designed to support EV technologies such as batteries and drivetrains. As the government encourages the production of EVs, it will continue to drive adoption higher: Annual EV sales in China are poised to expand to reach nearly 5.5 million units in 2025, according to IHS Markit estimates cited by The Wall Street Journal.
The bigger picture: The EV sales spike and highly promising longer-term market should prompt foreign automakers to accelerate their investment in EV production and assembly in China. Consulting firm Alix Partners projects that global automakers will spend $255 billion on EV research and development through 2023, massive costs they’ll want to recoup in the form of profits sooner rather than later. China will need to be a part of that strategy, especially for US automakers: While 254,000 EVs were sold in China last quarter, less than 50,000 were sold in the US over the same period.
A handful of foreign automakers are already dumping money into the country, both on their own and through partnerships with local players. Tesla is in the midst of building a factory in Shanghai that will reportedly be ready to turn out cars by 2023.
Volkswagen, meanwhile, is reportedly in talks with SK Innovation, a local tech company, to co-develop EV batteries in the country. Automakers should consider their approach to bringing EVs to the Chinese market now in order to take advantage of the significant opportunity that’s starting to take shape.
Interested in getting the full story? Here are two ways to get access:
1. Sign up for the Transportation & Logistics Briefing to get it delivered to your inbox 4x a week. >> Get Started
2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to the Transportation & Logistics Briefing, plus more than 250 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now