Rural China Is Anticipated to Become a Growth Market of NEVs

Whether rural China will become a “blue ocean”–new market area– for new-energy vehicles (NEVs) has been a hot topic in China since mid-July 2020. The impetus was the Chinese government’s July 14 announcement of a policy on rural sales expansion of NEVs as the latest campaign to support the automobile market. The implementation period was set until the end of 2020. Some small battery-electric vehicles (BEVs) were also selected to be covered by the campaign manufactured by BAIC BJEV, Great Wall Motor, Changan NEV Technology, Chery New Energy Automotive Technology, Jianghuai Automobile, BYD, Dongfeng Motor, SAIC-GM-Wuling and by emerging manufacturers such as Hozon New Energy Automobile. The specific implementation measures will be left to each local government, but depending on the model, prices are expected to be reduced by 2,000 to 8,000 CNY. There is also a high possibility that preferential measures will be given for maintenance, installation of chargers, and other related areas.

The previous measure to promote automobile consumption for rural areas dates back to from March 2009 to December 2010. It was implemented as part of the economic stimulus measures after the Lehman shock, and the support was for the purchase of small cars with a displacement of 1.3 liters or less. It was intended to replace tricycles and low-speed trucks with light trucks. Partly due to the effects of other automobile industry promotion measures implemented at the same time, the Chinese automobile market has become the largest in the world.

Currently, worsening political and economic conditions in China and abroad prompted the Chinese government to expand domestic demand in rural areas. China's rural population has declined from its peak level of 860 million in 1995 to 550 million in 2019 due to the accelerated urbanization in recent years. Even so, China’s rural population is equivalent to about 40% of the country’s total population and so it cannot be ignored due to its market size.

The possible scenarios of promoting NEVs in rural areas are as follows. 1 Rural residents want to “go out” more than before. Many rural residents in China live on a self-sufficient basis, but with the recent economic development, the demand for moving to nearby small and medium-sized cities is increasing. 2 In some areas such as Shandong and Hebei, low-speed BEVs have been used habitually for many years. Users are not so reluctant charging them on a daily basis. As of the end of 2019, the number of low-speed BEVs owned in China was said to exceed 6 million units. In recent years, the purchase of small cars in the A and B segments has been on the rise thanks to the rising income of rural residents. 3 It is easier to install a charger than a gas station. Since there are fewer automobiles in rural areas, the number of gas stations is fewer as well. In addition, the quality of the fuel varies in some areas. In contrast, small BEVs have the advantage of being able to be charged at home.