Audi’s Bid In China’s Promising Electric Vehicle Market To Lift VW – Forbes
Volkswagen AG is expected to cross a record 10 million unit sales this year, and surpass Toyota as the world’s largest automaker in doing so. The automaker, which boasts a diverse portfolio of brands, including passenger vehicle divisions Skoda, Audi, Porsche, Bentley, Bugatti, Lamborghini, commercial vehicle brands Scania and MAN, and its own branded cars and trucks, is also mindful of the growth opportunities in the global electric vehicle market. Volkswagen launched its e-Golf, an all-electric car, in the U.S. at the tail-end of last month, and its line-up in Europe, comprising the e-Up!, e-Golf and the newly launched Audi A3 e-tron, holds 8% market share. Although sales of pure-play electric and plug-in hybrid electric vehicles, taken collectively as electric vehicle sales, remain a small percentage of the net automotive sales worldwide, demand for these environmentally-viable vehicles has been steadily rising in certain markets such as the U.S. and Europe. The U.S. forms approximately 40% of the net EV sales, which stood at roughly 230,000 units worldwide in the first nine months of the year. EV sales in the country have risen by roughly 24% through September. On the other hand, nearly 69,000 EVs have been sold in Europe in the first nine months of 2014, as compared to 67,000 unit sales in the whole of 2013.
China’s EV Market Growth Is Slow But Strong
Demand for electrically powered vehicles is rapidly rising around the world mainly due to a relatively less harmful impact on the environment, rising concerns over global warming and lower running costs, as compared to gasoline-powered engines. In addition, governments around the world provide various incentives to boost electric vehicle sales. Moreover, electric vehicles also have lower battery prices, adding to their appeal. Due to these reasons, global light-duty plug-in electric vehicle volumes are expected to grow at a CAGR of 24.6% through 2023, compared to only 2.6% growth in the overall light-duty vehicle market. Although steady sales for EVs in the U.S. and Europe underscore this estimate, demand for EVs in China has been lower than expected. Alarming pollution levels prompted China to encourage sales of electrically-powered vehicles in the country, but despite the provision of subsidies and other government incentives for the purchase of such vehicles, the absence of a well established battery-charging infrastructure and weak efforts to expedite building of charging networks has hurt EV sales in the country.
China had earlier in 2012 set the target of reaching 500,000 unit sales of electric vehicles by 2015, and over 5 million EV sales by 2020. This means that China aimed for EVs to constitute around one-seventh of all vehicle sales in the country by the end of the decade. However, plug-in electric vehicle sales stood at only 17,600 in China last year, comprising 14,604 pure electrics and 3,038 plug-in hybrids. Although this market grew by an impressive 38% year over year, reaching the aggressive figure of 500,000 sales by next year seems improbable. What does seem probable is high growth in this market, even if it doesn’t come at previously estimated exorbitant levels.
Sales of EVs in China have quadrupled in the last year or so, reaching nearly 43,000 units through the first three quarters of the calender year. In fact, although electric vehicles form a very small portion of the country’s automotive market at present, their share in the overall market grew to 0.33% in September, up from 0.08% last September.
Audi Looks To Launch Electric Vehicles In China
Volkswagen has identified the growth potential of China’s electric vehicle market, and is looking to launch over twenty electric and plug-in hybrid electric vehicles in the country over the next few years, ranging from small-sized cars to large SUVs. China is Volkswagen’s single largest market, constituting more than one-third the net volumes for the German automaker. The luxury subsidiary Audi holds the lead in the country’s premium vehicle market over compatriots BMW and Mercedes-Benz. Audi’s China sales have risen by over 16% through October, while the overall automotive market has grown by under 10% during this period. Luxury demand remains high in China, and as automakers around the world ramp-up their operations in the country, Audi’s unassailable lead could be threatened. Ford launched sales of its luxury vehicle brand Lincoln in China last month, GM expects a massive 40% growth in Cadillac sales in the country this year, and Jaguar Land Rover is looking to enter the high volume compact saloon segment to compete with the likes of Audi A3 and A4 next year. BMW and Mercedes are also expanding local production and opening more dealerships to compete better on a pricing front and penetrate deeper into China. All of this is a looming threat to Audi.
While Audi sales continue to remain strong in China, the growth potential of the luxury EV segment, albeit small, is not to be missed. BMW launched its i3 and i8 in the country in September, starting at approximately $73,000 and $325,000 respectively. BMW aims to sell around 1,000 combined units of the i3/i8 by the end of 2014. And then there is the luxury sedan Tesla Model S, which has sold nearly 3,000 in China so far this year. Volkswagen announced earlier in the year that together with its Chinese automotive partner FAW, the company will develop the Audi A6 e-tron, specifically designed for the Chinese market, at the Changchun plant. The current green lineup for Audi in China includes the Q5 hybrid quattro SUV, the A6 hybrid, and the long-wheelbase A8 hybrid, and with the anticipated launch of the A3 and A6 e-trons in the country by next year, the luxury brand will further expand its presence in China’s luxury EV market.