How electric vehicles are the new frontier of China’s rural economy

  • Tesla cars are already popular in China’s megacities, but rural areas remain a largely untapped market for electric vehicles (EVs).
  • Panzhiga village has earned the nickname “Tesla village” thanks to wide adoption of electric vehicles after an increase in tourism.
  • However, much more needs to be done to encourage adoption outside of urban areas, especially when it comes to charging infrastructure.

Tesla has had great success in China’s megacities for years, but it is now rapidly expanding to other more remote parts of the country. Indeed, a small mountain town in Yunnan province is now nicknamed “Tesla village”.

Entrepreneur Cai Run, originally from Panzhiga, had worked in major Chinese cities for years when a new bridge was built linking his hometown to a main road, bringing tourism to the area. Seeing an opportunity, he returned to Panzhiga and opened a small hotel, taking his Tesla Model Y with him.

His neighbors were quickly captivated by his Tesla, and now the small village has a fleet of more than 30 Model Ys. These villagers are also entrepreneurs: in addition to using them for transportation, they love using their Model Y in through their local businesses. Hence the nickname “Tesla village”.

Digital transformation of China’s rural economy

The evolution of Tesla Panzhiga Village is another giant leap for the digital transformation of China’s rural economy, since the early years of “Taobao villages”.

In recent years, mobile Internet and digital technologies have had a profound impact on China’s rural economy. There are many villages with a majority of farmers working on Alibaba’s Taobao shopping site – which has earned them the name “Taobao villages”.

A Taobao village is defined by Alibaba as “a village in which more than 10% of households operate online stores and the village’s e-commerce revenue exceeds 10 million RMB (approximately $1.6 million) per year”. According to data from Alibaba, there are more than 1,000 Taobao villages in China.

Of course, “Tesla villages” – or “EV villages”, as Chinese electric vehicle brands are rapidly catching up and competing with Tesla – are still rare. High-end, sleek electric cars are often associated with environmentally conscious urban elites, but that will soon change.

In June 2022, China announced a massive campaign in which 26 automakers will create incentives for people in rural areas of China to buy electric vehicles (EVs). Automakers will be encouraged to work on sales incentive programs, in conjunction with e-commerce platforms, to generate offline car sales in rural areas and lower-tier cities.

To put all of this into context, China sees the development of electric vehicles as strategically important to transforming its automotive industry. First, car ownership in major Chinese cities has already reached saturation point and therefore needs a breakthrough.

Secondly, China is committed to achieving “carbon neutrality by 2060”, and therefore it has declared that by 2035, all new car sales in China must be either full electric vehicles or hybrids (collectively referred to as new energy vehicles). As such, the rural world is an under-explored market with great potential.

However, new energy vehicles still face big hurdles for rural market sales. Here’s why:

First of all, the price-performance ratio needs to improve. Rural populations are particularly sensitive to the price of new energy cars. In fact, millions of low-speed “mini electric cars” are already sold in China each year, which can cost as little as $1,500. They mostly run on cheap lead acid batteries, instead of a much more expensive lithium battery, and they don’t need a driver’s license to operate. Not having undergone the rigors of crash safety testing, mini electric cars can easily break if they run into something, even at moderate speeds. In many Chinese cities, they have been completely banned by local authorities for security reasons.

The advantage of new energy vehicles over mini electric cars is safety. The cheaper end of New Energy Vehicles could be found below 100,000 RMB ($15,000), but the price may have to drop further to get below 50,000 RMB ($7,500) to make electric vehicles appealing to rural buyers.

The price of the electric car can further be offset by multiple use, such as professional use in the case of entrepreneurs in Tesla villages. This means that innovative models of electric vehicles could be designed specifically for rural residents to stimulate this market.

Going forward, the market may see the development of a highly segmented Chinese EV market: a higher tier of vehicles aimed at family and mobile professionals, a lower tier of affordable, youthful-style vehicles for younger buyers, and a cheap level of multi-purpose models for rural buyers.

Second, the lack of charge network of facilities. China has by far the largest number of publicly accessible charging stations, but existing stations are concentrated in top-tier cities. Indeed, the construction of a fast charging station requires a huge down payment. The dilemma is that better access to charging stations will help accelerate the adoption of new energy vehicles in rural areas, but building charging stations is currently not profitable until greater part of the rural population buys them.

So the national push for charging infrastructure has to come from the government. In January 2022, China’s National Development and Reform Commission (NDRC) and nine other government departments issued a guideline to boost electric vehicle charging services to meet demand for 20 million such vehicles. by 2025. The country will move faster to establish an intelligent, efficient, well-balanced and moderately advanced network of battery charging facilities as per the guidelines.

These have focused on building a network of charging facilities in rural areas. As part of the country’s rural revitalization efforts, China plans to equip all counties with charging stations and all villages with charging stations. And, according to the June promotion announcement, departments will also partner with provincial governments to put in place supports that will encourage more people to buy electric vehicles, such as more investment in charging infrastructure. public.

Third, the shortage of maintenance service facilities. Like charging stations, new energy vehicle service shops are concentrated in major cities where there are already critical masses of EV owners. In rural areas, many after-sales services promised by car manufacturers, such as emergency charging and equipment repair, are not as readily available to rural populations as those in coastal cities. The wait time difference can be days instead of hours.

In the aforementioned multi-ministerial guidelines, the government also planned to strengthen maintenance and internet services around charging facilities. It should be noted that the country still has hundreds of millions of non-internet users – mostly villagers, due to the lack of internet infrastructure in remote areas.

Since 2020, China has launched the promotion of “digital villages”, which can provide central government financial support for internet infrastructure investment in remote areas. Better internet connection is essential for the “online promotion, offline sales” strategy envisioned by the promotion campaign, and we may see many “digital villages” and “EV villages” emerge together.

The market for rural electric vehicles remains untapped

In summary, innovative models of electric cars will meet the demands of consumers in rural areas, which is a large market yet to be tapped. But to bring electric vehicles deep into the countryside, there’s still a long way to go.

According to current trends, emissions from mobility will double by 2050. Passenger vehicles represent 70% of greenhouse gas emissions from these types of mobility and are the source of more than 50% of air pollution. air in town. With 60% of the population expected to reside in cities by 2030, we need new solutions fostered by public-private collaboration now to ensure healthier cities for tomorrow.

The Forum’s Global New Mobility Coalition (GNMC) seeks to accelerate a synchronized transition to shared, electric, connected and autonomous mobility (SEAM) solutions. Zero-emission urban mobility can help reduce carbon emissions, improve mobility efficiency and free up public space while improving access to sustainable mobility and creating new business opportunities.

GNMC advances industry-led actions and policy change through multi-stakeholder engagement, outreach and action. GNMC’s current efforts focus on: accelerating the electrification of city fleets, aiming for 100% by 2030; develop strategies for rapid pilot deployment of electric vehicle fleets and infrastructure through funding; and fostering the global transition to sustainable mobility.

Despite the challenges, there are still some advantages when it comes to the adoption of electric vehicles in rural China. Compared to residents of large cities, rural residents can find parking spaces more easily and can install charging stations at their homes. In lower-tier cities and rural China, e-bikes and e-scooters are already widely used, so EVs may soon become popular there as well.

China’s “digital village” and “electric village” pilot initiatives could therefore also become a valuable benchmark for the world to bridge the digital divide and tackle climate change. When governments across continents focus on digitally transforming their rural economy, they could also find a huge user market for new energy vehicles.

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