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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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China’s Electric Vehicle Market Is Unbeatable

Tesla assembly line

Ford Motor Co. just announced an ambitious electrification strategy for China. The global Mondeo sedan will see the Mondeo Energy plug-in hybrid launched there early next year, followed by an all-electric small SUV a few years later that will go about 280 miles on one charge.

The Detroit automaker sees 70 percent of all Ford nameplates coming with an electrified option to China by 2025; that will include all of its products manufactured jointly through Ford’s state-mandated joint venture partner, Changan Ford JV. Ford will be adding manufacturing facilities to meet the targets.

Ford is taking a more tepid approach to the U.S. market with a small number of electric models for sale. Ford CEO Mark Fields has also asked President Donald Trump to take a more conservative approach to federal fuel economy and emissions guidelines than enacted by the Obama administration shortly before leaving office.

Tesla reported making $1 billion of its total $7 billion in 2016 sales in China. CEO Elon Musk has said it will become its largest global sales market in years ahead.

Volkswagen brand CEO Herbert Diess recently told analysts that its new I.D. electric vehicle concept has the China market in mind. The German automaker will be launching the I.D. crossover concept next week at the Shanghai motor show.

Diess said that China will play the biggest part in VW meeting its aggressive goal of selling one million electric vehicles per year by 2025.

Chinese electric carmaker BYD, backed significantly by Warren Buffet and Berkshire Hathaway, is making a splash in the U.S. through electric buses and trucks serving commercial and government clientele. But China is still No. 1, and BYD remains aggressive about holding its top place in the world’s largest electric vehicle market. Related: Will Shale Kill Off The Oil Price Rally Again?

Analysts point to a few market indicators to explain explosive growth in EV sales in the China market in recent years. It also points to why global automakers are raising the bar on China’s importance.

Generous government subsidies – going to manufacturers to build what are called “new energy vehicles” in China, and to consumers to shave off a sizable portion of the purchase price – are considered to be the compelling factor. While the government is cutting back this year on available funds, incentives won’t be going away anytime soon.

Another driver has been the pressure that the national government has been putting on the transport sector to clear the air in increasingly crowded megacities such as Beijing. It was during the 2008 summer Olympics in the capital city that worldwide awareness grew and the government pushed to clean up its image and air quality.

Cutting back on oil imports also very much appeals to the national government. Related: U.S. Oil Rig Count Hits 2 Year High

Auto analysts see two major segments purchasing EVs in China. One is the up-and-coming wealthy segment of the population. They’d like to drive a luxury EV such as a high-end Tesla Model S with its long range, performance power, and hip image. They’d also like to see what Mercedes-Benz, BMW, and Audi have to offer.

The other demographic dynamic is the burgeoning population moving to megacities for education, training, and their first jobs off the farmland. They now have cash to spend on personal items, and would like to have another option besides rail and bus rides to get from Point A to Point B. They’re most interested in generous incentives and getting a good deal on a smaller, compact electric car that can be nimble in these increasingly congested city streets.

Last year, the Chinese government started cracking down on electric carmakers and manufacturers of plug-in buses and commercial trucks for violating new energy vehicle funding programs. Numbers were getting inflated on production schedules and output, and manufacturers were penalized and fined for their infractions.

Global automakers expanding their presence in China are likely to take a more cautious approach.

By John LeSage for Oilprice.com

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