While wealthy cities like Shanghai and Shenzhen have led electric car adoption, uptake in other areas shows how hard gasoline cars can be to ditch, reports Bloomberg.

According to Bloomberg’s report, China’s electric vehicle (EV) revolution is hitting a snag in rural areas. Despite being the world’s biggest EV market, the country is struggling to get poorer, rural cities on board. A recent event in Pengshui, a town about 870 miles inland from Shanghai, showcased this challenge. The three-day event, aimed at promoting EVs, saw little enthusiasm from locals. The event started with a glitzy light show, but the excitement didn’t seem to translate into interest in electric vehicles.

Wealthy Cities Lead the Charge

Wealthy coastal areas and megacities like Shanghai, Shenzhen, and Beijing are driving China’s EV adoption. In 2023, EVs and hybrids accounted for 34% of passenger vehicle sales in China, compared to just 9% in the US. This has put China at the forefront of the move away from the internal combustion engine, driving Europe, the US, and Canada to impose hefty tariffs on Chinese EVs out of concern that a new breed of automakers will outpace traditional giants like VW and Ford.

But the reality on the ground is more complex. “People aren’t spending as much and the economy in Pengshui isn’t doing so well,” said Zhang, a local businessman who declined to give his first name for privacy reasons. Zhang has no plans to switch to an EV from the Volkswagen AG Passat sedan he’s driven for about eight years. He cited range anxiety and the time it takes to charge as the main impediments. Sometimes he needs to make the 286-mile round trip to the nearby megacity of Chongqing for the day, and wouldn’t want to take time out of the journey to recharge.

The Rural EV Challenge

The challenges China faces in driving EV uptake beyond the rich are also seen in the US. Nearly one-third of EV deliveries in the US are going to just three states: California, Florida, and Texas, which are also the most populated regions. California, the birthplace of Tesla Inc., with a progressive culture, tech-minded workers, and sunny weather, has the highest number of EV registrations.

“A slowdown in China means a slowdown for the world,” said Siyi Mi, a BloombergNEF analyst. “It’s challenging now to push EV adoption into small towns and cities,” she said. “From a policy perspective, there’s not many tools left the government can use to stimulate the EV market, and that includes this campaign for uptake in rural areas.”

The City-Country Gap

Data compiled by BloombergNEF and automotive consultancy Passenger Car Retail Sales show just about a quarter of Chinese cities, mostly located in coastal provinces, reached the national average for EV penetration of 42% in the first seven months of this year. The remaining towns — some 250 of them — accounted for roughly 36% of total sales of battery-powered cars.

With Beijing phasing out the industry and consumer subsidies that underpinned the development of China’s EV sector, the city-country gap persists. Financially strained local governments have little scope to offer their own subsidies. For instance, the business hub of Shanghai offers a 20,000 yuan ($2,800) rebate for buying an EV on trade-in, while Chongqing, a further three hours west of Pengshui, gives out up to 3,000 yuan.

Incentives and Innovations

Beijing phased out national EV purchase subsidies in 2022, which at one point reached as high as 60,000 yuan ($8,400) per car. But a 10% tax break for qualifying EV and hybrid purchases has been extended to 2027, and authorities this year also introduced a 20,000 yuan ($2,800) one-off cash-for-clunkers rebate to people who trade in old gasoline and EVs. Restrictions on auto lending have been relaxed, which has led to carmakers like Tesla offering interest-free, five-year loans.

“In terms of finances, that’s obviously going to be a big problem for the implementation of industrial policy,” said Ilaria Mazzocco, a senior fellow at the Center for Strategic and International Studies in Washington DC. “The era of consumer subsidies is probably mostly gone. Cash-for-clunkers is definitely something they can do, but we’ll have to see if that is enough.”

Another key tool that generated demand for EVs was limiting purchases of gasoline-fueled cars in about 10 large cities. In Shanghai, for instance, drivers need to bid for vehicle license plates for a new gasoline car, which can cost up to 90,000 yuan ($12,600), but are free for qualifying EVs. In Beijing, the system is run as a lottery, and the wait can take more than a decade.

Only 26% of Cities Are Above the National Average EV Adoption Level

EV and plug-in hybrids penetration rate among car sales in 2024 shows that while the caps started as a congestion and pollution control mechanism, they ultimately became an important factor for EV demand. But with the auto industry being a big driver of growth, and China’s economy slowing, the government is now discouraging cities from introducing more vehicle restrictions.

“Perhaps one of the more effective tools has been this restriction on license plates, but it’s unclear if it will stay,” Mazzocco said. “Look at a country like Norway, which isn’t really comparable but has extremely high EV sales and penetration. Yes, they provided subsidies but most importantly, they made internal combustion engine vehicles extremely expensive. That’s not a very popular proposition in most countries.”

The caps on gasoline cars have been cited as a reason why two Chinese cities with similar-sized economies and populations — Wuhan in central China and Hangzhou to the east — have a big gap in EV uptake. Hangzhou has a car license plate lottery system for conventional vehicles and as of July, sold 43% more EVs and hybrids than Wuhan, which doesn’t have such a policy, the data show.

Innovative Approaches in Other Cities

Other cities are being more innovative in rewarding EV owners. In Chongqing, electric cars get two hours of free parking. Chen Xueqin, from the Chongqing Automobile Business Association, which was one of the organizers of the Pengshui event, said Chongqing has never been a city to limit purchases of gasoline cars. The acceptance of EVs now comes from consumers being more educated about them and improving technology. To tackle range anxiety, the city government is speeding up building a fast charging network, Chen said.

Chongqing is warming toward battery-powered cars, which made up about 47% of new vehicles as of July — higher than the national average. A local dealer who sells gasoline cars and EVs said deliveries of extended-range EVs such as Aito’s M5 and M7 now make up about 30% of overall sales for the municipal area. These types of plug-in vehicles are now growing faster than pure EVs due to their long ranges enabled by small gasoline engines that kick in when the batteries run out of juice, and relatively cheaper prices.

The Road Ahead

To be sure, China remains the key driver for the global EV market and the segment, although slowing, continues to grow. Plug-ins’ average share of new car sales grew from 34% in 2023 to 42% in the first seven months of 2024. The penetration rate in medium-sized cities is catching up to metropolitan centers, narrowing the gap. And the EV market still reached a major milestone in July and August when deliveries of EVs and hybrids outnumbered gasoline cars, buoyed by the government subsidy for trading in old vehicles for new EVs.

Regardless, it’ll take some persuading to change Zhang’s mind. “If EVs get their range up to 1,500 kilometers, then I’d think about it,” he said.

EVXL’s Take

The struggle to drive EV adoption in rural China highlights a global challenge. Even in the US, EV uptake is concentrated in wealthy, progressive states like California. To truly revolutionize the auto industry, we need to make EVs accessible and appealing to everyone, not just the privileged few.

This isn’t just about incentives and infrastructure, though those are crucial. It’s also about education and innovation. People need to understand the benefits of EVs and see that they can meet their needs. That’s why we’re excited about developments like Lucid’s advanced battery technology and GM’s push for affordable EVs.

But we also need to remember that this is a marathon, not a sprint. As Siyi Mi said, “It’s challenging now to push EV adoption into small towns and cities.” But every challenge is an opportunity. And every mind changed is a step forward.

Innovations in battery technology and charging infrastructure are critical. Companies like Tesla are leading the way with their Supercharger network, making long-distance travel in EVs more feasible. Meanwhile, Volkswagen is investing heavily in affordable EV models that could appeal to a broader market, including rural areas.

The future of mobility is electric, and it’s up to us to make sure that future is inclusive and accessible to all. We need to keep pushing for better policies, more investment in infrastructure, and continued innovation in EV technology. Only then can we bridge the gap between urban and rural areas and ensure that everyone can benefit from the EV revolution.

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The featured image shows a Huawei EV plant in China. Photo courtesy of X.