China has announced that, in furtherance of upgrading its auto industry, curbing pollution, and reducing reliance on imported oil, it will rely on “mass entrepreneurship and innovation to make key technological breakthroughs” in electric vehicles (EVs) and related technologies. After falling short of its 2015 goals for EV adoption, the central government is expanding its efforts to achieve five million EVs on the road by the end of the decade.
“China will be the epicenter for electrification of the auto industry globally,” said Bill Russo, Shanghai-based managing director at Gao Feng Advisory Co., who estimates that China will invest 100 billion yuan ($15.5 billion) by 2020 on new-energy vehicles.
Today’s announcement by China’s State Council lays out the following steps:
- Achieve “revolutionary” breakthroughs in batteries through private investment and research institutes (with breakthroughs to be financially rewarded by the central government).
- Improve the infrastructure for battery charging, especially in residential districts, workplace parking lots, and airports. The central government says it will provide capital, including through special bonds on power distribution networks.
- Expand deployment of EVs through government support, especially in urban areas and in taxi fleets. Where expansion is particularly encouraged, the central and local governments should account for more than 50 percent of total EV purchases.
- Improve the overall experience of driving electric vehicles, such as by improving quality and comfort, and by integrating the Internet of Things.
- Enact or continue financial subsidies and policies such as encouraging private investment in charging facilities and battery recycling, and exempting EVs from certain traffic control measures and purchase quotas (license plates for non-EVs are issued via a bimonthly lottery; with the odds of winning these lotteries worse than winning at roulette, buying an EV can save drivers years of waiting).
Meeting the national government’s goals are critical for companies doing business in China. With regard to electric and hybrid-electric vehicles, “There is really no choice for the automakers, if they are required to meet the more stringent emission standards by 2020,” said Steve Man, an analyst with Bloomberg Intelligence. “Other technologies with the stringent emission standards won’t get you all the way to target.”
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