Can electric cars make China the new Detroit?
Around the globe, automakers and governments are making big plans for electric vehicles, lining up billions of dollars for the investments needed to replace the world’s carbon burning cars and trucks. But there’s one place that stands out for the number of EVs actually hitting the road: China, where the government has put its might behind establishing the country as a leader in this revolution. The result might not only be cleaner air, but a reshaped global auto industry.
What’s happening in China?
Sales of new energy vehicles (NEVs), a broader category that includes plug-in hybrids, rose by about half in 2017, while electriconly sales roughly doubled. And for the first time, electric-only global car sales exceeded 1 million; China accounted for more than half and is targeting sales of 7 million by 2025. Local brands include Geely and BYD, which is backed by US billionaire investor Warren Buffett. Startup NIO is positioning itself as a top-end challenger to technology entrepreneur Elon Musk’s Tesla.
Why the big push?
It’s a key part of China’s plans to cut the air pollution that chokes many of its cities, and to meet the carbon reductions it pledged as part of the 2015 Paris accord to tackle climate change. One caveat: China’s electricity grid still derives two-thirds of its power from coal, which itself pollutes and emits carbon. China’s leaders also aim to reduce the country’s heavy dependence on imported oil, which they view as a strategic vulnerability. A government plan released last year envisages NEVs making up all the future sales growth in China.
What’s China doing to make this happen?
Using both sticks and carrots. For automakers, there are tougher vehicle emission rules and quotas for producing zero or low-emission cars from 2019. For consumers, there’s been a 10 per cent tax rebate as well as subsidies from provincial governments. (Combined, they cut $11,000, or one third, off the price of a new BYD e5 sedan.) China spent about $1 billion on subsidies in 2017, but it’s preparing to eliminate them by 2020.
What about automakers outside China?
They all have plans for non-gasoline cars. Volkswagen AG intends to spend 70 billion euros ($81 billion), most of which is the cost of batteries, to offer electric versions of all its models by 2030. General Motors Co. plans 20 all-electric models by 2023. Volvo Cars will begin phasing out automobiles that run just on fossil fuels in 2019. Tesla delivered the first of its mid-market Model 3 sedans in mid-2017, although it’s struggled to meet production goals.
How much are other govts supporting EVs?
US consumers get a $7,500 tax credit for buying an electric vehicle, though that gets phased out once a company has sold 200,000; Tesla has already hit that mark and Nissan Motor Co. and GM aren’t far behind. Elsewhere, countries including Norway, France, the UK, Germany and India have either set or are discussing deadlines for ending sales of new vehicles with internal-combustion engines, that is, the kind that burn fossil fuels.
How dependent are EV sales on subsidies?
The evidence suggests heavily. In the US, sales in Georgia were growing briskly until the state cut its $5,000 tax credit in June 2015. They crashed from as many as 1,400 a month to fewer than 100 the month after the incentive was axed.