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Chery’s EV commercialization efforts: QQ3 EV and M1 EV

“We’ve thought about taking the government subsidy for our QQ3 EV. But does such a best seller need them?” Liu Xinwen, president of Chery New Energy Automotive Technology Co., asked d1ev.com.

Liu’s confidence is well-founded. Chery sold 3,000 electric QQ3 in 2011, and figures from China Association of Automobile Manufacturers show that the QQ3 EV topped the March sales charts of China’s major new energy vehicles by 452 units.  According to Liu, Chery has established 45 4S stores nationwide to deal with new energy vehicles, and accumulated sales of the QQ3 EV have reached 4,000 since the model hit the market in March 2011.

The QQ3 EV is based on Chery’s gasoline-powered QQ3, and QQ lines are Chery’s best-selling series. In 2011, sales of the QQ family exceeded 1 million. “Many of the customers don’t know about Chery, but they know QQ. So we decided to make an electric car based the popular model,” said Liu.

Liu noted that the QQ3 EV and the traditional QQ share the same production lines. The electric small car is powered by lead-acid batteries, which are cheaper than the prevailing lithium batteries, making the price of the QQ3 EV only ¥49,800 ($7,800).

“With no product promotions, and no purchase subsidies, the electric QQ3 is popular simply because it is affordable, is of good quality and has low use cost,” Liu added.

Strategic effects

“The electric QQ3 belongs to the low-speed EV family, which is controversial in the industry,” said Liu. “Sales of the QQ3 EV prove to us that the low-speed EV market is considerably large.”

Chery has established 45 new energy vehicle dealerships across the country since 2011 and that number is expected to be increased this year. Half of the QQ3 EV sales were contributed by Shandong Province, which has the most robust low-speed EV market in China.

Statistics from the Shandong Association of Automobile Manufacturers show that sales of low-speed EVs in the province were 64,000 units in 2011. Shifeng Group, one of the country’s leading manufacturers of agricultural machinery and low-speed trucks, sold over 30,000 units, or close to half of the province’s total low-speed EV sales.

“The good momentum of low-speed EV development in Shandong helps create a favorable market environment for Chery’s QQ3 EV products,” noted Liu.

Low-speed EVs are currently manufactured and sold as off-road sight-seeing vehicles. They have been operating in rural areas without a legal status.

Although neither the National Development and Reform Commission nor the Ministry of Industry and Information Technology (MIIT) have officially prohibited the manufacturing and sales of low-speed EVs, they have not been included in MIIT’s Catalogue of Vehicle Manufacturers and Their Products, China’s official licensing of automobiles.

Liu said when Chery decided to manufacture the QQ3 EV, there were disputes on both the vehicle and battery technology routes. “What Chery wants to do is simple: we equip QQ3 with mature lead-acid batteries which become acceptable to customers.”

Chery did not attach any strategic importance to the QQ3 EV in the first place, according to Liu. But gradually, the product has given rise to strategic effects. “QQ3 EV sales have given Chery much experience in planning sales channels, networks and services. More importantly, it has created a favorable environment for the whole supply chain.”

In the early days after the QQ3 EV was launched, the supply chain lagged far behind, because it was “based on scientific research institutions or enterprises that lacked experience in EV parts and components manufacturing,” Liu explained. But the manufacturing technique and quality guarantee have been all enhanced thanks to the advent of the QQ3 EV.

Liu continued to say that Chery will not give up the research and development of low-speed EVs. “The technology achievements we made on low-speed EVs have been used in our development of the later M1 EV and even next-generation electric cars.”

Craving for a pilot program

Chery has long been craving for the chance to be part of the national new energy vehicle demonstration scheme, as other EV makers such as BYD, Zotye and JAC have all benefited from the program.

But Wuhu, Chery’s urban base, is not included in the national NEV pilot program. Thus Chery’s more advanced lithium-battery-powered M1 EV does not have the chance for trial operation.

Due to the high cost of lithium batteries, price of the M1 EV is about ¥170,000, triple that of the lead-acid battery QQ3. Being excluded from the pilot program means Chery cannot be benefited in sales from government subsidies amounting to up to ¥120,000.

But Chery has established NEV dealerships in Shanghai, which is one of the NEV pilot cities. As the city has not finalized its detailed subsidy plan, Chery has to pay the subsidy in advance to sell its EV products to customers at a price less the subsidy.

“But local EV maker Shanghai Automotive Industry (Group) Corp. will launch its Roewe E50 this October, so there will be not much room left for Chery,” Liu lamented.

Wuhu and Shanghai are the first two destinations for Chery to crack the EV market. Before Wuhu obtains the qualification for NEV pilot program, Chery plans to launch internal sales of the M1 EV at the subsidy-reduced price. “Sales will start in the next half of this year and we will provide an installment payment service.”

In the next phase, Chery plans to introduce the M1 EV to Hefei, Wuhu and Bengbu, all in Anhui Province. After that, the M1 EV is expected to enter pilot cities outside of Anhui such as Nanchang and Hangzhou.

 

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