BEIJING -- China will be the main battleground for electric-car makers for the next two decades, seeing off advances by the United States and Europe, amid a government push toward greener vehicles, according to a new report by BloombergNEF.
Annual electric-car sales in China will reach 2 million units next year, after topping 1 million for the first time in 2018, according to the BNEF report.
While China now accounts for more than half of global sales, other regions will start to catch up and its share will shrink to about 25 percent in 2040, the researcher said.
China's growth means automakers such as Volkswagen Group and Tesla cannot afford to lose focus on the country even as sales start to pick up in other regions. The two brands are among those planning to start EV manufacturing in China, while Nissan is looking for acquisition targets in the local industry. Chinese contenders such as Beijing Electric Vehicle and BYD are fighting to defend their home turf.
China surpassed the U.S. in 2015 to become the largest electric-car market and has kept the title since, helped by the government subsidizing purchases and spurring companies' research efforts.
The country is looking to cut back oil consumption, clear up its air and look for new ways to compete with global automobile powerhouses in Japan, Europe and North America.
Now that the industry is past its nurturing stage, the Chinese government is phasing out purchase subsidies and will eliminate them completely in 2020. That is set to weigh on demand slightly in the next two years, though strong growth will resume after that with sales set to hit 3.5 million electric cars in 2023, BNEF predicts.
Traditional internal-combustion cars will gradually give way to electric vehicles, before being overtaken. Electricity-powered cars will account for 8 percent of China's passenger-vehicle sales next year, 20 percent in 2025 and 68 percent in 2040, according to the report.
Easier registration of electric cars has boosted sales in major cities, while licenses for gas guzzlers remain tightly capped.
The six cities of Beijing, Shanghai, Shenzhen, Tianjin, Hangzhou and Guangzhou accounted for about 35 percent of passenger electric vehicles sold in China last year, according to BNEF.
EV sales in Shenzhen and Shanghai exceeded those in Germany and the UK in 2018.
Sales will be further spurred by China's new stringent rules to promote the production of greener cars, BNEF said. Major automakers will be punished unless they meet quotas for zero- and low-emission cars or buy credits from other companies that exceed the quotas.
Total EV production this year is set to exceed the government's target, but most of the major global automakers are not generating enough credits and will have to buy them from local automakers, BNEF said.