China mulls major drive to replace gasoline cars with new energy vehicles

A view of traffic on Beijing's Second Ring Road on April 14, 2017. Photo: Getty Images

China has announced major steps to fulfill its pledge to combat the chronic pollution problems and have its carbon dioxide emissions peak by 2030 - phasing out the cumbrous subsidies for new energy cars and considering an all-out ban on the production and sale of traditional energy cars.

Four government agencies including the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Science and Technology and the National Development and Reform Commission are planning to cancel the current subsidies for new energy cars by 2020, when policies on restricted purchase of traditional energy cars, tax differentiation and free charging could be possibly introduced, according to domestic media reports.

Launched in 2010, the existing subsidies for new energy cars have helped China become the world's largest new energy automobile market, with the cumulative sales of one million cars, accounting for half of the global total. However, some automakers have been fined for cheating on the government's program to subsidize electric and plug-in hybrid vehicles, casting a shadow over the country's drive to use subsidies to combat heavy pollution.

The plan to phase out the subsidies for new energy cars comes as the government is studying the timetable to completely ban the production and sale of vehicles powered by fossil fuels.

At a recent forum in Tianjin, Xin Guobin, vice minister of industry and information technology, said that the ban on fossil-fuel vehicles would be designed to partly fulfill the government's pledge to increase the share of non-fossil fuels as part of its primary energy consumption to about 20 percent by 2030 and peak greenhouse gas emissions by the same year.

Several countries including Britain, France and Germany have announced their timeframes to ban traditional energy cars, with Dutch politicians even voting through a bill calling on the country to ban sales of petrol and diesel cars starting in 2025.

In addition, the Ministry of Industry and Information Technology put forward last year a stringent quota proposal requiring that 8 percent of automakers' sales should come from battery-powered cars or plug-in hybrid vehicles in 2018, rising to 10 percent in 2019 and 12 percent in 2020. The quota proposal is still under discussion partly due to car manufacturers' opposition.

Investment spree

With the Chinese government stepping up efforts to promote the production and sales of green energy cars, many Western automakers have unveiled plans to develop and build electric cars in partnership with domestic partners.

In August, Ford Motor and Chinese firm Zotye Automobile signed a memorandum of understanding to set up a joint venture to develop and produce electric cars in China, which will be under a new brand. Ford had outlined plans aimed at making hybrid or fully electric versions of 70 percent of its models built in China with another local joint venture partner Changan Automobile by 2025.

In the same month, the Renault-Nissan Alliance also announced plans to work with Chinese automaker Dongfeng Motor to establish a 50-50 joint venture named eGT New Energy Automotive to develop and sell electric cars in China

In July, General Motors announced plans to put into production a pure electric car in China in the next two years, with a mission to sell 150,000 new energy cars in the country by 2020 and possibly in excess of 500,000 by 2025.

Two months before General Motors unveiled its China-focused electric car development blueprint, Volkswagen received an official approval in May to establish a new joint venture to produce electric cars in collaboration with Chinese carmaker Anhui Jianghuai Automobile Group.

Industry experts said that the establishment of the electric car-focused joint ventures would help the foreign automakers reach their sales targets in the Chinese market as soon as possible and would bring in advanced technologies needed for the upgrade of China's new energy car industry.

Battery production

The pending ban on the production and sales of traditional energy cars in China would also bring huge business opportunities to battery makers, which are struggling to enter the electric car industry chain.

Chinese battery producer Contemporary Amperex Technology Co. (CATL) is in negotiation with Volkswagen to become a supplier of the German automaker's Modular Electrification Toolkit (MEB) program, Caixin cited CATL's European region chief Matthias Zentgraf, who was attending the Frankfurt Auto Show last week in Germany. The MEB is a modular system for manufacturing electric vehicles which is currently being developed.

If successful in bidding for the battery supply contract, CATL would gain huge benefits because Volkswagen plans to spend $24 billion to build electric versions of all the 300 models in the group's lineup.

Volkswagen has also said that it will develop the next generation of a solid-state battery with a range of 1,000 kilometers.

In this aspect, Daimler has taken a further step in China by working with Beijing-based automaker BAIC Group to open a car battery plant in July, a move that can reduce the costs of producing batteries.

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