In a move which may surprise many people, the Chinese authorities are currently considering introducing a system similar to that in California which obliges car manufacturers to produce a set number of electric cars. This mandate will also allow those who are not able to produce electric cars in sufficient numbers to purchase “carbon credits” from their competitors. Whether manufacturing more electric cars or acquiring carbon credits this would have the same impact upon the industry going forward.
So, why is China considering this new mandate and would it be successful in the longer term?
Does the California system work?
California has been a leader in the eco-friendly transport sector for many years now having controversially introduced an array of mandates for automobile companies looking to sell in the state. In effect this was a move from state subsidised transport systems to a more businesslike approach which was described as “catalysing cleaner cars”. While the mandate certainly has its critics there is no doubt it has increased the focus on electric vehicles and eco-friendly systems to the benefit of all concerned.
So, would this work in China and why is the Chinese government even considering such a monumental move?
State subsidies can’t go on forever
The Chinese government has spent around $2.3 billion since 2009 encouraging manufacturers and customers to climb aboard the eco-friendly transport bandwagon. While $2.3 billion is significantly less than that spent by the US government it is still a sizeable amount of money. The real problem is that some politicians in China believe that once the subsidies end then there is no real incentive for automobile manufacturers to continue investing in electric vehicles. However, by threatening fines for those unable to reach carbon dioxide emission targets this will encourage the acquisition of carbon credits or the manufacture of actual vehicles.
If you sit back and look at the situation from a distance, the Chinese authorities do have a valid point regarding subsidies. Unless there is a real “incentive” for automobile manufacturers to continue when subsidies are reduced then all of the government investment of years gone by will mean nothing.
China is serious
There is no doubt that the Chinese government is serious about the introduction and take-up of electric vehicles. Sales expectations are high with a target of 3 million vehicles a year by 2025. Even though this is probably a little adventurous at this moment in time the introduction of a mandate on the amount of electric vehicles produced could be a game changer, in more ways than one.
As we mentioned in one of our recent articles, the Chinese electric vehicle market could be the main contender to the US throne. The US government has invested significant funds into the industry but perhaps the Chinese authorities have been more practical in their approach? Over the next few years we will see which particular approach is more successful and this could dictate which country leads the electric vehicle market forward. In other words, this is a battle royal!