XPeng CEO details 'explosion' of electric vehicle adoption in China

Grace O'Donnell
·Editor, Special Projects
·4 min read
11

China's electric vehicle (EV) market has seen tremendous growth so far in 2021.

“This year we certainly saw an explosion of EV penetration,” Brian Gu, president and vice chairman of XPeng Motors, a Chinese EV maker, told Yahoo Finance Live (video above). “So let's say a year ago, it's a roughly 5% penetration. And as of late, [that] figure… is close to 19%. That's a dramatic increase over the course of probably 15 to 18 months.”

In November, Chinese consumers purchased 339,000 new energy vehicles (which includes both battery-electric and plug-in hybrid passenger cars), up 16.8% from October 2021. Between January and November 2021, nearly 3 million electric cars were sold in China as EV adoption grew by 177.6% versus the prior year.

Electric passenger car sales in China have risen dramatically in 2021. (Source: China Association of Auto Manufacturers)
Electric passenger car sales in China have risen dramatically in 2021. (Source: China Association of Auto Manufacturers)

A number of electric automakers are vying for share in the colossal Chinese EV market. U.S.-based Tesla (TSLA) leads the way, though Chinese startups like Nio (NIO), Li (LI), and XPeng (XPEV) are becoming more established players.

In November, Tesla delivered 52,859 vehicles that were made in China (21,127 were for export). Meanwhile, the numbers for XPeng, Li, and Nio were 15,613, 13,485; and 10,878, respectively.

China was considered the world's largest EV market until it was narrowly overtaken by the European market this year, according to the IEA.

Tesla China-made Model 3 vehicles are seen during a delivery event at its factory in Shanghai, China January 7, 2020. REUTERS/Aly Song
Tesla China-made Model 3 vehicles are seen during a delivery event at its factory in Shanghai, China, January 7, 2020. REUTERS/Aly Song

EV infrastructure in China is ‘blossoming’

Generous government support of EV startups like XPeng — coupled with subsidies for consumers, manufacturers, and infrastructure — have built China's electric vehicle market from the ground up.

Many of China’s major cities have implemented additional EV promotion policies such as easier access to license plates, reduced cost (or free, in Chongqing's case) parking, infrastructure use subsidies, and direct purchase subsidies.

Gu credited the jump in sales to “product strength" as well.

“I think what really moved this penetration rate is actually the availability of very good, smart EV products coupled with acceptance, and also the user behaviors that should actually welcome these products,” Gu said. “Because the subsidy in China actually has come down pretty dramatically from two to three years ago. And this has become a very small portion of the sales price."

Li Haifeng, a XPeng's P7 car owner, drives his car on a street in Shanghai, China March 11, 2021. Picture taken March 11, 2021. REUTERS/Aly Song
Li Haifeng, a XPeng's P7 car owner, drives his car on a street in Shanghai, China March 11, 2021. Picture taken March 11, 2021. REUTERS/Aly Song

China first implemented its New Energy Vehicle credit in 2017. The mandate incentivizes manufacturers to develop new technology breakthroughs and vehicles with longer ranges, denser batteries, and improved fuel economy.

For consumers, the subsidy caps out for vehicles priced over 300,000 yuan, or about $47,000 USD. A standard range Tesla Model 3 sells for 266,740 yuan in China (around $41,980) and would be eligible for a subsidy of 15,840 yuan (~$2,487), according to one estimate.

The private credit was supposed to expire in 2020 but due to the pandemic-induced economic slowdown, its gradual phase-out was extended through 2022. In 2021, the subsidy was cut by 20%.

China has also developed a robust network of publicly available charging infrastructure, which helps make up for the relatively small distribution of private charging.

China leads in the supply of publicly available EV charging infrastructure. (Source: IEA)
China leads in the supply of publicly available EV charging infrastructure. (Source: IEA)

"The number of charging stations and also the toll roads and also the city roads are also really geared to welcome more and more EV usages," Gu said. "So the combination of these factors really propelled the conversion in penetration rates.”

The share of new energy vehicles this year nearly hits the New Energy Automobile Industry Plan's goal of achieving 20% of passenger car sales by 2025. Chinese President Xi Jinping also pledged to achieve carbon neutrality by 2060, which would entail a continued rollout of electric vehicles.

“I think the EV industry is definitely a very key component to decarbonization because we are producing zero-emission vehicles,” Gu said. “But also, we actually focus on manufacturing processes from starting from the raw material, [trying] to be as green as possible.”

Grace is an assistant editor for Yahoo Finance.

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