China replaces e-car subsidies

[[MC]Ronin[MC]]

The government's goal is to achieve a 25 percent share of e-cars in total sales in 2025.

 

Yesterday (and this morning) was poisoned in the capital. This has been the case in the Chinese capital for a decade, but the measures taken to address this are truly impressive. This is another government move that will replace the subsidies with allowances that car makers have to cover if they want to sell in China.

Electric car sales in China continue to decline after state subsidies for e-cars and plug-in hybrids were cut in June.

Despite this decline, Beijing continues to push manufacturers to produce much more electrified products than ever before. This message was again sent to the companies a week ago when the Minister of Industry and Information Technology announced his plan to develop the native automotive industry for the period 2021 - 2035.

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The minister, who regulates the auto industry, expects the share of e-cars to reach 25% of annual passenger car sales in 2025. This is an increase of 5% compared to the previous plan of 2017, which set a target of 20% . Nothing is said for after 2025.

The new measure is a huge leap from current levels. In the first ten months of the year, 947,000 electric vehicles were sold in China, equivalent to 4.6% of total deliveries during the period. In 2018, this percentage was 4.5%.

In June, Beijing cut its subsidy for e-cars by 60% and plug-in hybrids by 50%, with a plan to end the 2020 subsidy program.

The Minister promises to keep the e-car tax abolished, as well as to provide preferential financing and traffic management policies for electrified vehicles. More measures are also being proposed, but the key is that the government will impose quotas for the production of e-cars and plug-ins on companies.

Politicians call this an effort to "optimize" the credit program for CO2 emissions.

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This program was launched earlier this year. At its core is the rule that passenger car manufacturers must earn one CO2 credit for every 100 cars they produce. According to the program, the plug-in hybrid brings the company 2 fixed credits. The electric car carries between 2 and 5 credits, the number depends on the autonomous mileage (longer mileage - more credits).

The program requires manufacturers to earn credits equivalent to 10% of annual production in 2019. This means that if the company produced one million cars this year, it would have to earn 100,000 credits.

By the end of 2020, it will already have to earn 12% credits. There are very few Western companies currently able to cover this program. This means that these companies will face serious problems in the years to come. The first is related to the sale of conventional cars, whose growth has stopped and is beginning to decline. Then they will have to figure out how to increase e-car production. All this against the backdrop of the US-China trade war.