SHANGHAI -- Major market changes are unfolding in the Chinese new-vehicle market with the steady rise of hybrids contrasting with slumping demand for electrified vehicles.
With Beijing set to phase out subsidies for EVs and plug-in hybrids by the end of 2020, gasoline-electric hybrids, which have been excluded from the subsidy program, are poised to grab more market share.
In the three-month period ending June 25, the Chinese government slashed by more than 60 percent subsidies for EVs and halved incentives for plug-in hybrids.
The sharp cut in subsidies has sent demand for the two types of electrified vehicles plunging for three months in a row.
In September, combined sales of EVs and plug-in hybrids tumbled 34 percent to roughly 80,000, after falling 16 percent in August and 4.7 percent in July, according to the China Association of Automobile Manufacturers.
CAAM does not disclose hybrid vehicle sales in China. But according to Turboinsight, a Beijing-based consultant that tracks sales of hybrids as well as EVs and plug-in hybrids, demand for hybrids is picking up.
Even with the changeover to introduce the latest Toyota Corolla hybrid, the top-selling hybrid car in China, overall hybrid deliveries remained stable at 22,700 in July and August.
In September, when the short-term impact from the launch of the redesigned Corolla hybrid started to subside, industrywide hybrid sales regained growth, rising 9.6 percent from a year earlier to approach 28,840.
Hybrid sales in China will reach 300,000 in 2019, an increase of 4.3 percent from 2018, Richard Sun, head of Turboinsight, predicts.
By contrast, demand for EVs and plug-in hybrids is widely expected to keep shrinking as subsidies diminish.
Until now, two Japanese automakers, Toyota Motor Corp. and Honda Motor Co., have been the main drivers of hybrid sales in China.
In the first three quarters, the hybrid version of the Corolla alone generated sales of 38,540, accounting for nearly 20 percent of total hybrid deliveries during the period.
The hybrid variant of the Honda Accord generated sales of 28,950, or 15 percent of the total hybrid sales.
Nissan, General Motors, Ford, Hyundai Motor Co. and Volvo Car Corp. also sell hybrids in China. For example, GM sells the hybrid Cadillac XT5 and Buick Regal while Ford markets the hybrid Mondeo.
Geely Automobile Holdings, the largest domestic Chinese carmaker, has also rolled out hybrid versions of two sedans and one crossover under the Geely brand.
Sales for these hybrids have remained limited, but their prospects may be changing.
Beijing is requiring carmakers to cut average fleet fuel consumption to 5 liters per 100 kilometers (47 mpg) in 2020 from 6 liters (39 mpg) in 2016. By 2025, automakers must further reduce fuel consumption to 4 liters per 100 kilometers (58.8 mpg).
The Ministry of Industry and Information Technology, China’s chief auto regulator, is tweaking a carbon credit program to allow manufacturers of energy-saving vehicles a small deduction from quotas required under the program.
The proposed rule change likely will prompt automakers to accelerate the introduction of hybrids, which command clear competitive advantages over EVs and plug-in hybrids on price and driving range.
Hybrids have already grabbed more market share than plug-in hybrids in China. In the first three quarters, 194,350 hybrids were sold vs.179,000 plug-in hybrids.
To be sure, hybrids still trail far behind EVs in sales. In the same period, EV sales in the country approached 692,000.
But given the change in Bejing policy to subsidy and carbon credit programs, it may be only a matter of time for hybrids to catch and surpass EV sales.