As China transitions to electric vehicles (EVs), it’s currently the first major market to reach 25% EV sales, there are warnings that it could result in a huge slump in the petrol and diesel vehicle market. This would have a huge impact on many of the world’s original equipment manufacturers (OEMs) in the auto space and potentially the wider economy.
According to Daniel Bleakley from the driven, the are many reasons that there could be a crisis coming because of this. China, which has the world’s largest car market with nearly 27 million vehicles sold in 2022, makes up 34 per cent of car sales globally. As the EV market continues to grow in the country this would take away from the large market share of traditional internal combustion engine (ICE) vehicles.
In 2022, 7 million of the 27 million sales in China were electric vehicles which means 25 per cent of the world’s biggest market has seen a quarter of its ICE vehicles replaced with new zero emissions models. As a result, many automakers have been forced to reduce new ICE car prices by up to 40 per cent.
Jiemian, the Chinese business and finance news site, reported that the Chinese government has had to reduce sales taxes last year by half on ICE vehicles to try and stimulate the market. Even the second-hand market is suffering as a result of the rise in the popularity of electric vehicles.
In 2021, Reuters wrote a news piece suggesting EV sales would hit 35 per cent in China by 2025 but Bloomberg recently forecasted that this figure could be hit by the end of 2023. This means there will be a huge reduction in the ICE market hitting far quicker than expected which would have a huge effect on the market. This could be felt across the globe as OEMs struggle to offload ICE vehicles and transition fast enough to electric vehicles.
Plus, in China, the new 6b pollution standard is expected to come into force within the coming year. This will likely mean a further rise in electric vehicles which would leave many of the big automakers struggling to achieve ICE sales anywhere near what they are now. It could be a ticking time bomb leaving petrol and diesel vehicles as stranded assets.