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February 24th, 2019 by Dr. Maximilian Holland Advertise with CleanTechnica to get your
company in front of millions of monthly
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For a consultant, it’s safe to give a projection which errs on the cautious side,
underestimates the rate of change (and is totally forgettable). It’s riskier to give what might
appear to be an aggressive, bullish projection (which leads your clients to invest a lot of Follow CleanTechnica
money), and then be blamed if actual growth is less impressive.
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What can I say about the forecast here? Make (or don’t make) investment decisions at your
own risk, and if you’re a legacy auto company, by all means keep listening to cautious
consultants if it makes you feel you’re still king of the hill. But you should also know that the
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rise of EVs will quickly create new large players (in all parts of the industry) who steal 42,250 likes
market share from sleeping incumbents.
I’m going to get to details of how I estimate the ramp up of EV production in China in part 3
of the series. Most importantly, we will look at China’s astonishing growth in investments in Like Page Send Message
lithium-ion battery factories and capacity, which are the key enablers of the fast transition to
EVs. Before that finale, we’ll look in part two at consumer culture in China, understand the Be the first of your friends to like this
place of autos in the society, and explore why EVs are quickly stealing market share from
combustion vehicles.
But let’s start in part one, by understanding the motivations of China’s policy push to move Our Electric Car Driver Report
away from fossil fuel vehicles and towards EVs.
China’s Motivations for Transitioning to Read & share our new report on "electric car
drivers, what they desire, and what the
Electric Vehicles demand."
China’s government wields a strong hand of policy mechanisms to steer the market towards The EV Safety Advantage
desired outcomes much more readily than most other societies. Why are EVs, or rather,
NEVs (new energy vehicles) a desired outcome for Chinese policymakers? There are four
main reasons, and a host of supporting motivations.
Read & share our free report on EV safety,
“The EV Safety Advantage.”
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Third, and perhaps most apparent to our senses, we’re all aware of the terrible pollution that
is plaguing China’s metropolises. Although a potion of this is from industrial activity, vehicle
pollution in and around the cities is also a significant contributor. Many large cities have
deliberately reduced the ability of new combustion vehicles to get license plates (via
expensive auctions, like in Shanghai, or lottery systems, like in Beijing) from the start of this
decade (or earlier), in an attempt to reduce road pollution as well as traffic congestion. EVs,
however, are often unrestricted or have a much easier path to getting a license.
The fourth main consideration is that industrial policy also plays a role in the push for EVs.
Although China now has decent purely domestic carmakers, in addition to the local joint-
venture automakers formed from domestic firms partnering with foreign OEMs, vehicle
exports have not been a strong area for China. This is in large part because China has
always been playing catch-up with combustion engine technology compared to the
established international players. Both Japan and Korea have navigated the auto production
and exports path with some success, and China wants a piece of the action.
The EV industry, being based on a new technology, has not yet settled into market
dominance by existing players, so offers China an opportunity to get a head-start. China can
leapfrog from its trailing position in combustion technology to become a major global
producer of EVs, and potentially realise the exports goal.
China is now in a phaseout of the monetary incentives (all gone by the end of 2020), some
abuse of which occurred, which led to investigations and policy tightening in 2016.
This ICCT flowchart only represents a part of the complex new NEV credit system! (Image borrowed from
theICCT.org, but blurred to avoid stealing their thunder. Read their detailed reports to get the full
lowdown)
Starting fully from 2019, an escalating NEV manufacturer credits system is now in place,
with NEV credits linked simultaneously to fuel consumption requirements for the combustion
vehicles that manufacturers produce (the “dual credit” system). This is a complex system
that I won’t try to summarise in detail here. If you want full immersion, check out the ICCT’s
policy update for a deep dive – the image above gives you an impression of their useful
“concept map” of how the dual credit policy works, and there’s the original version and a lot
more detail that the ICCT reports cover.
Suffice it to say that the NEV credits policy further pushes all major automakers selling in
China towards NEVs, gives extra rewards for EV efficiency and range, allows buying and
selling of surplus credits, and has penalties for credit deficit and fines or production bans for
overproduction of inefficient combustion vehicles. This will result in combustion vehicles
getting more expensive to produce, and EVs getting cheaper, and continued fast growth of
the EV industry. The passing grade ratchets up significantly year by year, with the national
government yet to decide the steepness of the ratchet from 2020 onwards, likely watching
closely how the initial 2 year period (from now till the end of 2020) plays out. Initial results
under the new NEV policy scheme seem positive for EVs, with January 2019 sales being
very strong.
BAIC EX360
In addition to the national policy, cities and provinces have their own policies and subsidies,
on top of the license-plate schemes mentioned above. This has sometimes turned into a
local form of industrial policy (and competition between regions). Shanghai favours PHEVs,
which are made in significant proportion by the city’s local auto manufacturer, SAIC, while
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Beijing favours fully electric vehicles, the speciality of the city’s local auto champ, BAIC.
Shenzhen has shown similar support to local BYD. The national government is requiring the
various city and provincial monetary subsidies to be wound down and replaced with
investments in growing charging infrastructure and other means of support. The license-
plate schemes and other local sticks-and-carrots will stay in place.
Since 2015, there’s been an official interim national goal of achieving 2 million annual NEV
sales by the end of 2020, but it looks like that number will be achieved this year. There’s
also been a goal in place of achieving at least 20% market share of total new vehicle sales
by 2025. Though, that will likely also be far surpassed by the pace of change on the ground,
and the fact that overall auto sales have not risen in volume since 2017 (somewhat
unexpectedly). There’s a lot more fine detail to China’s policies to promote NEVs, but this
quick tour should have given you a taste of it.
China is not fiddling around at the edges, or trying to placate large auto companies (catch
that, Angela Merkel?). China is all-in on EVs. So much so that US and European legacy
automakers went crying to their own governments not long ago at the “too difficult” new
NEV policies.
Whatever you might think about China’s political economy, it is not a culture where the
narrow short-term interests of entrenched powerful corporate elites can hold undue influence
over the society’s key decision-making processes to the detriment of others, at least not for
long. The same cannot be said of the US or, apparently, sometimes, Germany.
In part two of this series, we’ll look beyond the policy push and into the demand-side pull for
EVs coming from Chinese consumers. What’s different about Chinese culture and auto
usage patterns that make EVs more attractive in China than in Europe or the US? Check in
again in a few hours.
Tags: China, China EV Batteries, China EV sales, Deloitte study, Elon Musk, EV
forecast, EV market share, NEV policy, Tesla, Tesla China, Tesla Gigafactories, Tesla
Gigafactory 3, Tesla Shanghai, Tesla Shanghai Gigafactory
Dr. Maximilian Holland Max is an anthropologist, social theorist and international political
economist, trying to ask questions and encourage critical thinking about social and
environmental justice, sustainability and the human condition. He has lived and worked in
Europe and Asia, and is currently based in Barcelona.
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