The following Top 10 news stories are selected by the editorial board of CBU/CAR as the most important events of China’s automobile market in 2016. – Editor
1. Never say never: new records for auto and NEV sales
China selling a record 28 million vehicles in 2016 would have been a far-fetched prediction at the beginning of the year but that’s exactly what happened, thanks to strong passenger vehicle sales driven by the tax break for 1.6L and below vehicles and “gushing” of SUV sales, which rose nearly 45 percent to more than 9 million units.
Equally surprising were NEV sales topping half a million units despite the significant slowdown in growth as a result of the subsidy fraud investigation and the ensuing changes in subsidy scheme announced at the end of the year.
2. Welcome to the party: seven new companies get coveted NEV production licenses
BAIC BJEV, Changjiang EV, Qiantu Motor, Chery NEV, Min’an EV, Wanxiang Group, JMC NEV, in that order, received the nods from the National Development and Reform Commission (NDRC) in a span of nine months from March to December (Jinkang NEV, NEVS and Yudo NEV got theirs in January 2017) for production of new energy vehicles. None of the so-called “internet carmakers” like LeEco, NextEV, CHJ Automotive, FMC, Singulato, WM Motor, etc., however, have received approvals.
3. Rise of Chinese brands: SUVs drive Chinese brand PV sales past 10 million units
Chinese brand passenger vehicle sales hit a new record of 10.53 million units, up 20.50 percent and accounting for 43.19 percent of total passenger vehicle sales. SUVs were the major driver of that growth, surging 57.60 percent to 5.27 million units and accounting for nearly 60 percent of total SUV sales. But that came at the expense of passenger car sales, which fell 3.70 percent to 2.34 million units in 2016, accounting for less than a fifth of total passenger car sales.
4. Surprising new JVs brewing
To everyone’s surprise, or not, a new batch of joint ventures came into the spotlight involving some surprising names and partners. Volkswagen joined forces with JAC aiming to produce low emission vehicles. Once approved (which is forthcoming), it will give the German carmaker a third Chinese JV partner; Shaanxi Auto paired up with Ssangyong Motor in a strange tie-up to produce SUVs, likely becoming the last traditional gasoline vehicle manufacturing JV to be approved; SAIC and Audi? More like a thorn to the side. After the incident with FAW-Audi dealers, it will take some time before the two actually talk business.
5. Shocking: industry rocked by NEV subsidy fraud
The NEV sector was rocked and shocked by subsidy fraud involving five bus makers (and perhaps many more) who tried to cheat their way into getting a combined ¥1 billion ($145.35 million) in subsidies. The findings were made public by the Ministry of Finance in September after several months of investigation. The most serious offender had its production license taken away by the Ministry of Industry and Information Technology. The government is making an example of them, and setting the business straight. Let’s hope this is the end of it.
6. New brands on the block: LYNK & CO, WEY and more
Does China (and the world, for that matter) really need a new car brand? Yes, yes, yes! Geely presented LYNK & CO positioned between its namesake brand and Volvo Cars in October, a month before Great Wall Motor launched the WEY “light luxury” brand. BAIC Group hatched BISU, a sub-brand for BAIC Huansu; SWM Motor was conceived in Chongqing with Brilliance Group and a motorcycle manufacturer, while Hanteng came onto the scene with an operated plant based in Jiangxi Province. The surprising thing was many of them sold pretty well in only a few months on the market. The secret? All of them launched SUVs.
7. More than just PPTs: “internet carmaking” goes “offline”
Rather than just talking the talk, several of the “internet carmakers” have walked the walk by announcing new investment deals or production sites. NextEV confirmed a contract manufacturing tie-up with JAC and another investment to build a plant in Wuhan. CHJ Automotive announced a ¥5 billion deal to build a plant in Changzhou, Jiangsu Province. WM Motor plans to invest ¥6.7 billion in a plant in Wenzhou, Zhejiang Province, AICEV plans to build a ¥13.3 billion site in Shangrao, Jiangxi Province, FMC just announced a ¥11.64 billion investment in a plant in Nanjing, Singulato will invest ¥8 billion in a plant in Tongling, Anhui Province, while LeEco was busy looking for funding for its ¥20 billion facility in Deqing, Zhejiang Province and $1 billion Faraday Future plant in North Las Vegas.
8. Policies galore: key new regulations alter industry development
Key policies, laws and regulations announced during the year included technology roadmap for energy-saving and new energy vehicles, new NEV subsidy policies, tax break for 1.6L PVs to continue in 2017 at the lesser discounted rate of 7.5 percent, GB1589-2016 standards for vehicle dimensions, weights and loads which drove heavy-duty truck sales, China V emissions standards, removal of restrictions on used cars (which helped boost transactions to 10 million units), carbon emissions quotat s, China V emissions standards, removal of restrictions on used cars (which helped boost sales to 10 scheme, new regulations on car hailing services, just to name a few.
9. Outsiders crashing (cashing) in: Gree (Dong Mingzhu) and ZTE announce industry entry via acquisitions
The fact that home appliance maker Gree tried to acquire its way into NEV manufacturing (the move failed but Dong Mingzhu, chairwoman of Gree, ended up personally investing in Yinlong NEV) and telecommunications equipment maker ZTE acquired a bus maker to move into NEV manufacturing proves that the auto industry is still an attractive sector to make investment as the country drives ahead its NEV production and sales goals while companies in other industries look for new sectors to expand into. Don’t be surprised to see more “outsiders” join the fray in the New Year.
10. Wheeling and dealing: Didi-Uber China deal headlines busy mobility space
Didi Chuxing’s acquisition of Uber’s operations in China in August headlined the wheeling and dealing in the increasingly hot and cutthroat mobility space as traditional automakers race to transform into transportation mobility service providers rather than just vehicle manufacturers. Traditional automakers such as SAIC Motor and Volkswagen set up partnerships with mobility service providers such as Didi Chuxing and time-share platforms such as EVCARD, and even invested in their own car-sharing platforms. Look for more such deals this year.