China fuel economy rules set to drive EV production
VW chief highlights concerns over influence of government policy on car industry
January 24, 2018 3:25 am by
Charles Clover in Beijing
The world’s biggest carmakers are under pressure to ramp up production of electric vehicles in China to meet fuel economy regulations due to take effect in 2020, according to
Volkswagen.
Comments by Jochem Heizmann, chief executive of the China operations of VW, have highlighted industry-wide concerns that
government policy, rather than genuine consumer demand, is pumping up the battery-powered car industry in China.
“All companies will have to sell lots of NEVs [cars that are either partially or fully electric] to be able to fulfil fuel consumption targets,” Mr Heizmann, whose company is the biggest foreign carmaker in China, said on Tuesday. “And customers will have to buy them.”
China, already the world’s largest producer of EVs, has made the industry a priority for its
Made in China 2025industrial policy that envisages a significant global market share in 10 high-tech industries. Policymakers also hope that pushing battery-powered cars will help reduce the choking smog that regularly envelopes several major cities.
Experts warn it is
unclear whether EVs, which are
dirty to produce and run mainly on power from coal-fired plants, are better for the environment than combustion engine cars.
But this has not dimmed the enthusiasm of the Chinese government, which is using an array of new regulations to help jump-start production.
The most significant one, say carmakers, is a fuel consumption rule that will mandate that
from 2020, each company’s cars should be able to travel on average 100km on 5 litres of fuel, down from 6.9 litres now. Mr Heizmann said this would be as strict as comparable European regulations.
Beijing also has said each carmaker will be given a quota of EVs they either have to make, or help pay for other companies to make — though these have been softened and delayed in response to industry pressure.
The targets have become a source of anxiety because of the massive investment required to make electric vehicles that companies will struggle to sell.
VW has said it will invest €10bn in EV production in China by 2025, along with its partners. It plans to sell 400,000 EVs there in 2020 and 1.5m in 2025.
“On an industry level, the question of who’s going to buy all these EVs is a pertinent one,” said Robin Zhu of Bernstein in Hong Kong.
Some cities also restrict the number of combustion engine cars, but Mr Zhu said demand outside those places for electric vehicles remained negligible.
Electric cars: China’s highly charged power play
Carmakers privately say they will struggle to sell all the EVs they will have to produce.
Bernstein, the brokerage, estimated last November that the industry would have to
produce 2.4m-2.7m NEVs in 2020 — up from 336,000 in 2016, implying an annual sales growth rate of 64-68 per cent.
Volkswagen has said the key to selling NEVs in China will be car fleets, and is in negotiations to sell EVs to Didi Chuxing, the country’s largest ride-hailing company.
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