China’s auto sales could be heading for a rare fall this year, but one bright spot is in so-called green cars, where sales have almost quadrupled so far in 2015.
With a part-carrot, part-stick strategy of incentives and targets, Beijing is pushing car makers to develop battery electric cars, seeing this as its best shot at closing a competitive gap with global rivals who have a 100-year headstart in traditional combustion engines.
Electric powertrains are simpler to develop, and driving a push to green cars fits President Xi Jinping’s policy goal of reducing pollution.
With an eye on both big subsidies and looming fuel economy targets, automakers in China are earmarking at least 50bn yuan ($7.86bn) this year for developing and making ‘new energy’ vehicles, a Chinese catch-all term for electric and highly electrified cars, data compiled by Reuters shows.
“Some time ago, Xi Jinping explained it very well, saying that developing new energy vehicles is the Chinese auto industry’s only road to grow from being big to being strong,” Xu Heyi, chairman of Beijing Automotive Group and a high-ranking Communist Party official, told reporters recently.
Electric and plug-in hybrid car sales jumped 270% to 108,654 cars in January-August, the China Association of Automobile Manufacturers (CAAM) said on Thursday, and China is on track to overtake the United States as the world’s leading producer, making more than 130,000 such cars this year, according to consultancy LMC Automotive.
The government has set a goal of annual production of 1 million new energy cars by 2020, though industry researcher IHS Automotive forecasts output then at nearer 791,000.
Fuel economy goals
As for the carrot, drivers in Shanghai, for example, can save up to 182,600 yuan ($28,600) over a traditional gasoline-powered car, by taking advantage of free license plates for some green cars and other subsidies, according to official data and analysts’ estimates.
However, Beijing said in April it would roll back subsidies faster than expected, and may now lean increasingly on fuel economy requirements that grow progressively stricter to 2020.
Authorities haven’t yet spelt out how these requirements will be enforced, though a feasibility study released by Great Wall Motor Co last month suggested automakers could face big fines for failing to meet the requirements.
The central government plans to roll out a California-style system that rewards manufacturers and drivers for going electric, while punishing those who rely on traditional gasoline cars, Beijing Auto’s Xu said in July.
Chinese automakers are leading the charge to invest in green cars, with domestic brands such as Geely Automobile Holdings and Great Wall raising money in private share placements or building factories specifically earmarked for new energy vehicles.
Among foreign automakers, General Motors Co’s joint venture with SAIC Motor Corp said in April it would invest 26.5 billion yuan in new energy technologies and increased electrification by 2020. A spokeswoman said this was still on track.