Automakers look to overcome hurdles to expand into new market

Dong Yixuan, a 27-year-old electrical engineer in Beijing, has recently been at odds with her father.

For several months, Dong has been trying to persuade her father, a farmer in Jinzhou, Liaoning province, to replace his four-wheel "elderly scooter" with a car.

Known as lao tou le, or elderly scooters, the three- and four-wheel vehicles covered by cabins are a preferred mode of transportation for older people, which is how they earned the nickname.

Even though Dong offered to pay for a new car, she has not succeeded in changing her father's mind.

"He just won't give in," Dong said, adding that her father argues that the 18,000 yuan ($2,505) scooter meets his transportation needs, as he only rides it around his village, and it will last him for several more years.

However, Dong insists he should buy a car for safety reasons. Although they are tolerated on roads in many parts of the country, the elderly scooters, similar to e-bikes, have no regulatory controls.

The scooters' low-level performance means they are not covered by motor vehicle safety standards and they do not require registration, license plates or insurance.

"I am worried about his safety and the safety of others as well," Dong said. "It is really scary to see people driving these scooters when you don't know whether they are qualified to drive," she added.

Statistics from the Ministry of Public Security show that there were 830,000 traffic accidents involving elderly scooters from 2014 to 2019, which killed 18,000 people and injured 186,000 others.

Last year, 138 people died in 131 traffic accidents involving three- and four-wheel scooters in Beijing.

A number of cities, including Wuhu in Anhui province and Binzhou in Shandong province, have instigated policies to phase out the scooters to improve traffic safety.

Beijing's transport bureau announced in July 2021 and reiterated in April that elderly scooters will be banned from the capital's roads from Jan 1, 2024.

Safety priority

It is natural that authorities are tightening controls on three- and four-wheel scooters, said Wang Du, assistant to the president of the China Auto Dealers Association.

"The most basic requirement for a vehicle model to be on the road is that its safety is certified. Yet almost all of such scooters available on the market are not on the list of models promulgated by the authorities," Wang said.

With similar sizes and prices, small electric vehicles from carmakers like Wuling and Chery are strong alternatives to elderly scooters. However, they require insurance and the driver must be licensed, both of which have dissuaded some potential buyers.

Dong said her father has reluctantly agreed to have a test drive of a Wuling Mini EV, China's most popular mini electric vehicle model. She is hoping he changes his mind after the test drive.

"At least I would be more reassured if he has a real car. After all, he is getting old and I would like to make sure that he is safe," said Dong.

In 2020, China started to promote new energy vehicles, including electric ones and plug-in hybrids, in its rural areas to improve traffic safety, cut carbon emissions and stimulate consumption.

This year's promotional campaign of new energy vehicles in rural areas started last month in three cities: Wuxi, in East China's Jiangsu province; Qionghai, in South China's Hainan province; and Jingzhou, in Central China's Hubei province.

The campaign is scheduled to run till December, according to the Ministry of Industry and Information Technology, one of five government departments that launched the event.

A total of 69 NEV models, small and medium-sized ones, are being offered at discounted prices during this year's campaign.

The Ministry of Industry and Information Technology said over 170 promotional events have been held in rural areas in more than 10 provinces since 2020. At the events, 140 models including sedans, sport utility vehicles, multipurpose vehicles and light trucks from 45 vehicle makers with combined sales of 4.12 million units, have been featured.

"Models involved in the campaign have seen their average sales grow at 10 percentage points higher than the overall NEV market," said Xu Haidong, vice-chief engineer at the China Association of Automobile Manufacturers.

NEVs are now a popular choice among car buyers in China, especially in cities.

Statistics from the China Association of Automobile Manufacturers show that NEVs accounted for 25.6 percent of total vehicle sales in the country in 2022. However, NEV sales in rural areas only made up 4 percent of total sales.

"As China advances its rural vitalization strategy, farmers have seen their living standards improve. Rural areas, with a combined population of over 500 million people, will prove to be a huge market for NEVs," said Xin Guobin, vice-minister of industry and information technology.

There is immense potential for NEVs in the rural market, said Cui Dongshu, secretary-general of the China Passenger Car Association. "It is a huge market and represents a major opportunity for automakers. It will also reshape China's consumption structure and lead to more sustainable consumer spending," he said.

Hurdles ahead

A growing number of carmakers are making rural areas a priority in their sales and marketing campaigns, as large cities already have fierce competition for sales.

Farizon Auto, a manufacturer of electric vans and trucks that is part of the Geely Holding Group, said it will develop more vehicles tailored to the needs of rural customers.

Analysts said Farizon is making a good move, as models that are popular with urbanites do not necessarily meet the demands of rural residents.

Mini-sized cars, due to their low prices and easy handling, are the most popular vehicles, according to recent statistics, said Xu from the China Association of Automobile Manufacturers.

Wuling's Mini EV as well as Ora's Cat series vehicles have been among the top sellers since the annual promotion campaign started in 2020.

However, pushing NEV car sales in rural areas also faces hurdles. Although automakers have started to establish dealerships in smaller cities, rural residents usually have to travel lengthy distances to inspect the vehicles.

BYD, China's largest NEV maker, has only two dealerships in Chaozhou in Guangdong province, according to a Beijing Youth Daily report. One of the dealerships opened in 2021 and the other in 2022.

The carmaker has been involved in the campaign to promote NEVs in rural areas for three consecutive years. BYD said it will step up efforts to build more county-level dealerships so that rural residents can learn about its vehicles more easily.

A BYD salesperson in Chaozhou told Beijing Youth Daily that NEVs are different in many aspects from gasoline vehicles so it is necessary for potential buyers to try them.

Charging stations

Lack of charging facilities is another problem that affects rural residents' enthusiasm about NEVs.

China is home to the world's largest charging network for NEVs. By the end of last year, there were 5.21 million charging piles and 1,973 battery-swap stations, according to the Ministry of Industry and Information Technology.

Yet most of them are located in cities, especially large ones, and only 9.45 percent of the piles and stations are in the countryside, said Tong Zongqi, deputy secretary of the China Charging Infrastructure Promotion Alliance. Cui, from the China Passenger Car Association, highlighted the need to promote the development of home chargers for rural families, in addition to the development of public charging stations.

Meng Wei, a spokesperson for the National Development and Reform Commission, told a news conference in May that a lack of charging facilities remains the largest obstacle to the growth of the domestic NEV industry, especially in rural areas.

She said solutions to the problem needed to be found "through innovative measures to promote the building, operation and maintenance of charging infrastructure in rural areas".

The State Council, China's Cabinet, has urged efforts to speed up the construction of charging infrastructure in rural regions to better promote NEVs and facilitate rural vitalization. It has also called for efforts to focus on solving bottlenecks that hamper NEVs' use in rural areas, building more charging facilities, and upgrading their construction, operations and maintenance.

A guideline released by the National Development and Reform Commission and the National Energy Administration in May encouraged local rural governments to offer special incentives for the construction and operation of public charging facilities in their areas.

They were also urged to offer coupons to rural residents to encourage them to buy NEVs.

Wu Jianyuan, Party secretary of Huishan district in Wuxi, where this year's NEVsgoing-rural campaign was launched in June, told reporters that the district will seize the opportunity to boost NEV sales and accelerate construction of charging infrastructure.

For the duration of the campaign, the Wuxi government is offering total subsidies of up to 30 million yuan for NEV buyers.

Many other cities across the country have similar favorable policies in place.

In Zhengzhou, Henan province, authorities have earmarked 50 million yuan in coupons for NEV buyers who place their orders between June 21 and Aug 31.

In Sanya, Hainan province, NEVs buyers are eligible for up to 5,000 yuan if they place their orders before Aug 31.

Incentives to buy

The central government has also taken strong financial measures to boost the sector's development.

In June, the State Council announced the extension of tax breaks on new energy vehicle purchases until the end of 2027.

NEVs bought in 2024 and 2025 will be exempted from purchase tax, with a ceiling of 30,000 yuan ($4,175) per passenger vehicle.

The purchase tax on NEVs purchased in 2026 and 2027 will be halved, which means each passenger vehicle purchase is eligible for a tax exemption of up to 15,000 yuan.

The measures equate to 520 billion yuan in tax exemptions and reductions, said Xu Hongcai, vice-minister of finance, at a news conference in June.

Cui, from the China Passenger Car Association, said the stimuli show the importance the central government attaches to the booming NEV sector.

He added that the four-year extension of the tax exemptions to the end of 2027 will enable carmakers to better plan production and sales targets.

The China Passenger Car Association estimates that sales of passenger NEVs are expected to reach 8.5 million units this year, accounting for 36 percent of total vehicle sales in the country. It also predicts the NEV market will continue its growth momentum in 2024.

China's NEV industry has been developing at a fast speed. In early July, the 20 millionth new energy vehicle rolled off the production line in Guangzhou, Guangdong province.

With this landmark, the sector has entered a new stage of large-scale, globalized and high-quality development, and is becoming an important part of China's modern industrial system, said Fu Bingfeng, executive vice-president and secretary-general of the China Association of Automobile Manufacturers.

In the first five months of this year, Chinese carmakers produced over 3 million units and sold 2.94 million NEVs, up 45.1 percent and 46.8 percent year-on-year, according to the China Association of Automobile Manufacturers.

It estimates sales of NEVs will reach at least 9 million units this year, up from 6.88 million units in 2022.

At the event celebrating the 20 millionth NEV rolling off the assembly, Xin, the vice-minister of industry and information technology, said, "The NEV is the main direction of the transformation, upgrading and green development of the global automobile industry, and is also the strategic choice for the high-quality development of China's automotive industry."