SHANGHAI – In China’s light-vehicle market, micro electric vehicles attract much less media attention than bigger EVs such as the Tesla Model 3 and Model Y or the flagships under domestic EV startups.
In reality, they have not only become the main force driving EV sales, but they also generate a precious resource coveted by automakers: the carbon credits required by government regulators.
In the first seven months of this year, sales of electric passenger vehicles in China spiked 240 percent to top 1.1 million, according to the China Passenger Vehicle Association.
But deliveries of micro EVs soared 514 percent to exceed 385,400. The volume made micro EVs the largest segment of the Chinese EV market during the period.
SAIC-GM-Wuling Automobile, General Motors’ light-vehicle joint venture with SAIC Motor Corp., is the largest micro EV maker.
The Hongguang Mini EV, a four-seat sedan marketed under the Wuling brand, has remained the top-selling EV in the market since its July 2020 sales debut.
In the first seven months, 188,645 Hongguang Mini EVs were delivered across China.
Two small hatchbacks -- Changan Automobile Co.’s the five-seat Benben EV and Chery’s four-seat eQ -- also ranked among the ten best-selling EV models for the period, with sales of 38,743 and 36,336 units, respectively.
The three EV models are marketed at very low prices. How can an automaker make money on them?
Consider the Hongguang Mini EV, which has a starting price of 28,800 yuan ($4,458).
While it is hard for an automaker to generate profits with such a low-selling price, it can deliver valuable credits under China’s carbon credit program, according to Caitong Securities, a securities firm based in the east China city of Hangzhou.
Beijing adopted the carbon credit program in 2019 to push automakers to expand EV output. The program requires passenger vehicle makers to earn one carbon credit for every 100 vehicles they produce. It allots two to five credits to an EV depending on range -- the longer the range, the higher the credits.
Under the program, carmakers must earn an amount of credits equivalent to 14 percent of their annual output in 2021, up from 12 percent in 2020 and 10 percent in 2019. The rate will rise to 16 percent next year and 18 percent in 2023.
The program also allows a carmaker to buy carbon credits from peers if they cannot earn sufficient credits on their own.
With regulatory requirements becoming increasingly tough, the average price of carbon credits increased to 3,000 yuan at the end of 2020 from 800 yuan a year earlier, according to the China Auto Dealers Chamber of Commerce, a Beijing-based dealer group.
The Hongguang Mini EV, with a range of 120 kilometers on one charge, can generate 1.07 carbon credits for SAIC-GM-Wuling, Caitong Securities noted in a research report.
That’s tantamount to 3,210 yuan, which is more than enough to cover the vehicle’s production costs, Caitong Securities concluded.