26 May Driving Large Scale Electrification of China's Automotive Industry

Gao Feng Insights, May 2017

China’s automotive industry is entering a period where discontinuities and disruptions are likely to reshape the competitive landscape – and this represents an opportune time to guide the development in alignment with China’s overall industrial development goals.  With the issuance in April 2017 of the Automotive Industry Mid to Long Term Development Plan, the Ministry for Industry and Information Technology (MIIT) provides “guiding principles” for the development of China’s auto industry for the next decade.

Leveraging new energy and connected vehicle technology as entry points for accelerating auto industry development and transformation, the policy’s objective is to transform China from the largest auto market to a global leading automotive production base.  Specifically, the guideline sets a goal for Chinese new energy vehicle[1] (NEV) companies to be among the Top 10 NEV companies worldwide by 2020, and to further expand their global impact and market share by 2025.  A target has been set for the domestic NEV sales to reach 2 million units by 2020, and 7 million units by 2025 (20% of total vehicle sales).

Chinese automakers have struggled to reach a global leadership position in the automotive industry due to their relatively short history and lack of technical experience in advanced automotive technologies centered on the internal combustion engine.  The NEV market opens a window for China to potentially level the playing field and assume a more competitive position versus the global industry, as multi-national players have not yet established a sustainable market leadership position.

[1] New Energy Vehicles include Plug-in Hybrid (PHEV) and Battery Electric Vehicles (BEV)