China's Economy May Be A Drag On Markets, But It Could Help Automakers

The decline in Chinese markets has wreaked havoc on U.S. share markets, causing investors to panic and bringing share prices violently lower. However, carmakers are looking at the nation favorably as its electric car market is expected to keep its newest offerings in high demand in the coming years.

Increasing Demand

Barclays is expecting electric vehicle sales in China to rise by around 44 percent each year through 2020, outpacing expectations for the market in the United States, according to MarketWatch.

The firm said it believes the Chinese market grew to 220,000 units in 2015, a much greater number than the 120,000 sold in the United States during the same year.

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Government Push

China has been working to improve air quality and cut down on pollution, so a push toward electric car adoption has been evident. Beijing has been trying to transition busses and utility vehicles to electric models, and the government now waives sales tax and licensing taxes for electric cars. All of this has made the vehicles more desirable in China.

Who Benefits?

Makers of fully electric vehicles rather than hybrids will benefit the most from China's expanding market, as Beijing's efforts to reduce pollution depend on completely electric cars.

Companies like Tesla Motors Inc TSLA, which have already put such vehicles on the market, are likely to benefit from China's sales.

Additionally, others like General Motors Company GM (which has plans to release its latest Chevy Bolt electric vehicle later this year) and Ford Motor Company F (which has for its part announced a new line of electric cars to be unveiled in the coming years) are likely to benefit as well.

China based electric car maker Kandi Technologies Group Inc KNDI said it had exceeded its unit sales goal for 2015, as the nation's push for more efficient cars boosted demand for its vehicles.

Still Some Risk

While most electric car makers expect demand to continue growing in the years to come, many warn that much of China's demand for the automobiles is based on government programs like tax breaks and discounts. These types of incentives can change rapidly if policy shifts, so there is some risk that demand growth won't continue at the current rate.