China's electric car sales slump, squeezing automakers

Looking for a new car, Yang Zhibo considered an electric but balked at prices that are thousands of dollars higher after Beijing wound down multibillion-dollar subsidies that made China the biggest market for the technology.

The 27-year-old employee of a beverage distributor picked a gasoline-powered Chevrolet instead.

"I am afraid the technology is not mature and the price is too high," Yang said.

China's leaders are promoting electric cars as a cornerstone of efforts to transform the country into a creator of profitable, advanced technologies, but sales are stalling as thousands of buyers make a similar choice.

That is squeezing automakers that are spending heavily on development as regulators shift the burden to them by imposing mandatory sales quotas.

The wrenching transition is revealing the difficulty of luring mainstream buyers to a fledgling, expensive technology.

An industry shakeout lies ahead as novice Chinese producers that rushed into the market are forced to merge or close.

Development costs are so high that global competitors including Volkswagen and Ford are teaming up to split the burden.

"China is recognising you don't need 400 EV companies. You need maybe 20," said Bill Russo, CEO of consulting firm Automobility Ltd. and a former Chrysler executive.

"That means some have to fall off the competitive landscape."