E-mobility optimists and sceptics agree on one thing: an emission-free future is largely in the hands of policy makers. In Norway, the country with the highest number of EVs per capita, and China alike, government action has been key in accelerating EV penetration. Regulations drive consumer adoption, help build up charging infrastructure, and push industry players to improve the technology, price, product variety, and convenience of green cars.
The question is how soon and how strongly governments will push, and whether the industry will gain its own momentum. In China, an additional concern is whether regulations will disproportionately favour domestic players, given the target of a home-grown NEV market by 2020. Based on these regulatory trends, our outlook for global automotive companies in China’s electric car market is predominantly positive:
License plate lottery system exemption- In large Chinese cities, car buyers must go through a lottery system to get hold of a license plate. Electric car buyers can bypass this process.
Subsidies- NEVs in China receive grants from the central and local governments. In 2015, China spent US$4.5 billion on NEV subsidies. Last year, a plan to phase out subsidies by 2020 was announced, with the purpose of pushing out small, subsidy-reliant, and fraudulent players. Central government grants for passenger NEVs were cut by 20 percent this year, and local-level subsidies were capped at 50 percent of the value of central grants.
Technical requirements- Stricter technical standards for subsidy approval have been introduced to encourage innovation. Fast-charging e-buses, for example, will receive over 60 percent higher subsidies than those that charge at normal speeds.
Subsidy rollbacks caused a dip in China’s electric car sales in January, but Q1 ended with a 41 percent increase over the same period last year. With thinner subsidies, market consolidation and technology-based competition will be strengthened. So far, subsidies have favoured local players indirectly, because they understand better and act more vigorously on policy, and directly, as the government seeks to promote local technology. Samsung SDI and LG Chem batteries, for instance, were excluded from the subsidies program in favour of BYD and CATL.
Zero-emission vehicle (ZEV) mandate- Taking inspiration from Californiaâ€™s successful ZEV programme, China has drawn up a scheme that would force automotive manufacturers in China to either produce more EVs, purchase carbon credits from peers, or face fines. The rules would require 8 percent of OEMsâ€™ sales to be made up of PEVs by 2018, rising to 12 percent by 2020. A trial will initiate this year, with full implementation planned for 2018.
The proposal has raised concerns for its strict requirements and short time-frames. But a number of OEMs have reacted by increasing rather than reducing their China investments. Following GM and VW, Daimler recently scaled up its EV investments in China through a new agreement with its JV partner BAIC. Toyota has also announced two made-in-China plug-in hybrid models for 2018, shifting away from conventional hybrids that donâ€™t fall into Chinaâ€™s NEV classification.
China targets a 15-fold increase in charging points by 2020: one for every plug-in vehicle on the road. The 13th Five Year Plan introduced incentives for local authorities and private enterprises to construct and/or operate charging stations. This will be crucial for the widespread adoption of EVs and their suitability for long-distance traveling. In this way, China is effectively addressing on a national scale one of the largest consumer adoption hurdles EVs are facing in Europe.
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