China unveiled new, significant requirements for automakers to produce electric vehicles as part of its fuel efficiency rules for cars and trucks. As I describe in more detail below, the rules could result in the production of more than one million EVs annually in China by 2020, or about 4% of sales. If that doesn’t sound impressive, consider this: China’s annual production would exceed the entire annual production of the world today.
China’s ambitious plans: Curb air pollution and become a global EV market leader
As my colleague Alvin Lin recently wrote (here), a separate, upcoming ban on the domestic production and sale of petroleum-based vehicles in China reflects the nation’s “broader efforts to curb air pollution, including rising ozone levels, and position itself as the dominant leader in the global EV market.” At a press conference by China’s Ministry of Industry and Information Technology (MIIT) yesterday, officials highlighted they intend the joint fuel efficiency and EV requirements to help enhance China’s international competitiveness, increase its market leadership in electric vehicle technologies, and to catch-up their standards to those of E.U., Japan, and other jurisdictions.
Scaling up the market for electric-vehicles
China’s EV program, which is modeled after similar requirements in California and nine other U.S. states that have their own “Zero Emission Vehicle” requirements, will dramatically expand the global market and drive EV costs down even faster. Owing to China’s enormous auto market, estimated to now be one and a half times that of the U.S. market at 28 million units annually, its requirements could result in 1.2 million electric-drive vehicles annually by 2020 (see note below). That’s eight times more than the volumes expected by the ten U.S. ZEV states, combined.
While China has not set increased requirements for 2021 and beyond, one can expect to see further action taken as officials work to meet the national goals of achieving 20% EV sales by 2025, which would translate to 7 million vehicles annually in China.
Another nail in the coffin for petroleum-based cars?
China’s electric vehicle requirements follow its announcement, earlier this month, to ban the domestic production and sale of petroleum-based cars. This announced ban comes in the wake of other jurisdictions taking similar steps including the U.K., France, India, Norway, and Germany who are taking action in response to the spreading diesel-gate scandal and the resulting impacts to air quality and public health. While it’s far too soon to count out petroleum, trends in the auto industry may be quietly facilitating the beginning of the end as battery costs for EVs plummet and automakers product plans switch to electric-drive technologies. With China’s announcement, the transition to EVs just accelerated in a big way.
Note: The numbers are based on the average electric vehicle generating 3 credits. The range could vary between 2 to 5 credits based on China’s crediting system which scales depending on range and performance of the vehicle.