China’s subsidy-induced boom has assisted China in becoming a leading EV manufacturer however, we are seeing fields in China filled with unwanted battery-powered vehicles. There are cities and towns throughout the country where thousands of electric cars have been abandoned and now the weeds are taking over.
Similar fields of abandoned EV’s have been spotted in other cities across China.
This is not the first time that subsidy backed schemes in China have failed, back in 2018 a cycle sharing programme crashed and tens of millions of bikes ended up in rivers, ditches and disused parking lots.
One reason for the abandonment is that the EV ride-hailing companies have when vehicles become obsolete as automakers roll out more and more subsidised EV’s with improved features and longer driving ranges.
Maybe it’s a classic case of the excess and waste that can happen when government capital pours into a new industry to service a perceived demand rather than a true consumer demand.
(Rebates up to $NZ15,000). It was about 10 years ago encouraged by government backed subsidies that most automakers across China, both established and start-ups, jumped into EV manufacturing. They churned out a huge number of no frill urban EV’s with 100-kilometre batteries. Most were bought by ride-hailing companies that were rented like scooters and only small numbers were sold to the consumer market.
This demand over cooked the industry and has continued up until now. China is currently the world leader, producing around 6 million EV’s and plug-in hybrids in 2022 and almost one in every three new cars sold domestically.
China accounts for 60% of the world’s current electric fleet and has the most extensive government backed EV charging infrastructure anywhere in the world. But that super-fast development has brought to the surface a few issues. Many of the ride-hailing companies that were early adopters of EV’s have failed.
From approximately 500 companies in 2019 there are now only about a 100 left, these EV graveyards are a troubling consequence of that consolidation. Not only are the fields an eyesore, but getting rid of EV’s quickly reduces their climate benefit as EV’s are more emissions-intensive to build and only produce an advantage over internal combustion cars after a few years.
The EV battery also contains precious metals like nickel, lithium and cobalt that could be recycled to make China’s EV industry more environmentally friendly. A disturbing fact, according to media reports we have read, a local government in China had promised to dispose of these EV’s, that started to accumulate back in 2019. The news reporters uncovered several sites still filled with abandoned EV’s in some cities after checking many satellite images.
Recently media revealed that some companies began to cheat the subsidy program by falsifying records for EV’s. It was discovered that you could produce an empty chassis that didn’t contain a battery or make a car with batteries that didn’t meet the correct specifications. In 2016 it was reported that dozens of companies had fraudulently claimed more than $NZ2 billion in subsidies.
The government began slashing national subsidies for all EV purchases in 2019 so ride-hailing companies were unprepared for that policy change. The EV graveyards first started to draw public attention later that year when internet users and local media reported on the phenomenon. These subsidies motivated manufacturers to invest in EV related technologies at a time when there wasn’t really a consumer market for them, laying the foundation for a false demand.
This phenomenon concludes the past of China’s new energy vehicle market but speaks little for its future and the law of supply and demand. Is it time to hold our breath a little and not rush in and make the same mistakes?