China has been going back and forth with its plan to require foreign and domestic car manufacturers to have a certain percentage of electric car sales or face significant fines. The cap-and-trade plan was scheduled to go into effect on January 1, 2018, but there were loud complaints from the industry that the target date was too ambitious.
In June, there were reports that the date would be pushed back by a year. Then just two weeks later, other reports said Chinese officials would stick to their original timetable. In the end, everybody got a little bit of what they wanted.
Carmakers will have until the start of 2019 to meet China’s electric car targets, but there’s a catch. The original plan required 8% of sales to be qualifying electric cars (the plan assigns different weights to each car, depending on whether it is a plug-in hybrid or fully electric car, while conventional hybrids are excluded from consideration).
The percentage was scheduled to rise to 10% in 2019. That part stays the same, so automakers will have to comply with the higher percentage when the requirements take effect. “Political considerations must have weighed in on the decision to delay the commencement date by a year,” said Cao He, chairman of Quanlian Auto Investment Management Co. “Local automakers will likely benefit from this as they will have more buffer time to get ready on the technology front.”
Colin McKerracher, a London-based analyst at Bloomberg New Energy Finance, says, “China is sending a clear signal to large automakers that had been dragging their feet on EVs that it’s time to get on board.” He thinks the goal is achievable. It rises to 12% in 2020, but because electric cars qualify for multiple credits under the scheme, that translates to only 4–5% of actual vehicle sales. The targets look achievable for the industry as a whole, McKerracher said.
Manufacturers are all smiles, having bought another 12 months to get their new energy vehicle portfolio in order before the new rules kick in. “We are expanding our NEV product portfolio in China, with both plug-in hybrid electric vehicles and battery electric vehicles in the pipeline,” says Patrick Morrissey, a spokesperson for General Motors. “Continued joint efforts by the government and companies are essential to build broad-based consumer acceptance for NEVs.”
China is anxious to start dialing back its generous EV incentives as it phases in the new quota system. Soon it will be time to find out if Chinese customers will step up and buy electric and plug-in hybrid cars in enough volume to meet the targets set by the government. Carmakers have been saying for years that people just aren’t that interested in buying EVs. Once the incentives get backed off and the mandates kick in, we will find who is right — regulators or manufacturers.
For much more on the Chinese electric car market, see: “China Electric Car Sales Score Record Month (China Electric Car Sales Report).”