Automakers trying to capture a slice of the Chinese vehicle market will have to ensure that 10% of the cars they sell are electric or low-emission vehicles by 2019, after the country confirmed plans to phase-out diesel vehicles.
The Chinese Government confirmed that a cap-and-trade policy would be introduced in two years time, that requires automakers to obtain a new-energy vehicle (NEV) credit score of 10% or higher. This credit score would then be extended to at least 12% by 2020.
China had previously suggested that implementation of the policy would begin next year, a target that was met with criticism from automakers, who believed it was too ambitious. However, some car manufacturers have since welcomed the delayed timeframe.
“Political considerations must have weighed in on the decision to delay the commencement date by a year,” Auto Investment Management’s chairman Cao He said. “Local automakers will likely benefit from this as they will have more buffer time to get ready on the technology front.”
The China Association of Automobile Manufacturers notes that 200 Chinese manufacturers built 379,000 electric and hybrid vehicles in 2015, four times more than 2014. Sales of these vehicles quadrupled in 2015 to 331,000, mainly spurred on by welcoming subsidies to manufacturers and consumers.
Incumbent automakers have since partnered with Chinese car makers to produce electric vehicles (EV) in the country. Ford is currently discussing a joint venture to expand its EV portfolio into China with Anhui Zotye Automobile, and German carmaker Volkswagen (VW) has set up a partnership with Anhui Jianghuai Automobile Group.
The success of Chinese EV automakers to date has allowed some to expand to other countries. Geely raised funds through green bonds priced on the offshore market in the Chinese automobile industry to support the development of the zero emission taxis in the UK.
China’s diesel phase-out follows similar pledges from the UK and France, and also builds on the nation’s pledge to cap its carbon emissions by 2030 and reduce spiralling air pollution levels.
The country’s new cap-and-trade policy is a far cry from Europe’s troubling policy alignment in relation to low-emission vehicles. Last week, it was revealed that European countries spend more than €112bn each year subsidising oil, gas and coal production or consumption – including tax breaks on highly-polluting diesel.