China’s $4,230 Electric Cars Tap Huge Market Tesla Can’t Reach

China’s $4,230 Electric Cars Tap Huge Market Tesla Can’t Reach

Weng Changqing, a Chinese factory worker, knew he wanted an electric automobile before he even had his driver’s licence. He assumed that conserving money on gas and maintenance would allow him to buy his first car while living in a tiny town in eastern China and planning to establish a family.

He wasn’t in the market for a Tesla Model 3 in China, which starts at around US$38,000 (S$51,000). As a replacement, the 37-year-old bought a 66,900-yuan (S$13,800) crossover from Hozon Auto, a local electric vehicle manufacturer. It’s one of a growing number of cars powered by batteries and electric motors that are gaining popularity in low-income areas of the country due to their inexpensive costs and low operating costs. (Unlike gasoline vehicles, electric vehicles do not require oil changes, spark plug replacements, or the various belts that must be replaced on a regular basis.)

Cheap, dependable EVs like Changqing’s have the potential to extend car ownership—and the enhanced mobility that comes with it—to a whole new class of people who previously couldn’t afford it. Changqing calculates that charging his car for a year will cost less than $400, which is equivalent to 377 litres (100 gallons) of gasoline in China—enough to drive around 6,300 kilometres (3,915 miles) in a 2020 Trumpchi GS3 crossover from Guangzhou Automobile Group Co.

According to BloombergNEF analyst Siyi Mi, “these ultracheap EVs are reaching a completely new buyer in China, as they may in other countries as costs fall down.” According to BNEF, EV prices are on track to reach parity with fossil fuel-powered vehicles within the next 4 to 6 years, at which point yearly sales will begin to surge, hitting 25 million in 2030, up from approximately 2 million now.

According to Selika Talbott, a professorial lecturer at American University in Washington and founding partner of an automotive consulting firm, this shift could have far-reaching social consequences, particularly for people living outside of city centres and in rural areas where public transportation is limited.

China’s $4,230 Electric Cars Tap Huge Market

Automobile expenditures have greatly exceeded income growth in the United States over the last decade, with the lowest-earning fifth of the population spending up to 30% of their earnings on transportation costs. “Given people’s access to transportation, it’s critical to have a wider selection of models, such as EVs, available at the lower end of the price spectrum,” Ms Talbott says.

In China, Hozon Auto’s Neta N01, along with Warren Buffett-backed BYD’s US$8,950 e1 minicar, is one of a flurry of low-cost EVs. There’s also the SAIC Motor-Normal Motors three-way partnership’s Hongguang Mini, which debuted last year with a basic value of under US$4,230 (S$5,700) and quickly became a hit. According to automotive research firm Jato Dynamics, the average retail price of an electric vehicle in the United States in the first half of 2020, excluding incentives, was US$55,233, compared to US$29,895 in China.

Automakers are able to produce the mainland’s affordable EVs by cutting interior and under-the-hood embellishments to a minimal. Frequently, the vehicles are only capable of travelling at low speeds. Changqing’s electric crossover also has a range of roughly 187 miles per charge, which is about half that of a Tesla Model 3 Long Range.

The low prices enable an increasing number of people — typically young, low-income, and living outside of major cities – to purchase their first car. These EVs are especially popular in China’s rural areas, where more than 500 million people live yet only about 1 in 5 has a car. Some outfits are flying off the shelves at a rate that business executives claim they’ve never seen before.

With 15,000 units sold in the month after its launch in July, the Hongguang Mini EV became China’s best-selling new-energy car. In September, it sold over 20,000 units, nearly double the number sold by Tesla Inc.’s Model 3 in the same month.

However, a number of roadblocks exist in the way of an EV-led democratisation of the automotive sector spreading beyond China’s regional districts. In towns, cities, and smaller towns, the country’s low-cost EV industry has benefited from government subsidies and other incentives such to low-interest loans.

As the world’s largest battery manufacturer, China’s EV manufacturers benefit from low-cost access to the most expensive component of a plug-in vehicle. BNEF analysts warn that because automakers and components suppliers in other countries are unable to manufacture at such low costs, they may not be able to offer such low-cost EVs for some time.

Ms Talbott adds that for the rollout of electric vehicles to be equitable, there must be widespread access to charging stations. Charging stations are now concentrated in wealthy metropolitan areas, and some residents who do not have access to off-street parking do not have access to at-home charging.

Nonetheless, over the last five years, low-cost EVs have begun to gain traction in a number of areas. Nissan Motor Co.’s electric Leaf—starting at less than $25,000 for a 2021 model after tax subsidies in the United States—is one of the cheapest cars available today, according to a recent study from the Massachusetts Institute of Technology that mapped more than 1,000 cars available in the United States on the basis of their total lifetime costs (which include upfront, maintenance, and fueling expenses).

MIT professor Jessika Trancik, the study’s leader, says that in the years since her team began examining automobiles in 2016, she’s seen more electric vehicles with greater range fall below the average cost of auto lifetime ownership in the United States. “There are currently electric vehicles on the market that might save clients’ money,” she argues. “That is something that everyone should be aware of.”

“The reality is that having a car is a requirement for every family, regardless of their financial situation,” Changqing explains. “Whether you have a fancy car or can only afford a cheap one, you must have one.” —by Chunying Zhang

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