Shanghai Daily: Nudging green agenda forward, step by step
China’s determination to lead the world in clean-energy vehicles is not just talk. The government is actively adopting regulations that push the campaign forward.
Several weeks ago, China’s top ministries issued a regulation requiring 10 percent of automakers’ sales to be electric or plug-in hybrid vehicles in 2019, rising to 12 percent in 2020.
The regulation includes targets for average fuel economy and a credit-trading system aimed at saving energy and promoting green cars. That followed an April edict stipulating that 20 percent of car sales by 2025 must be electric and plug-in hybrid vehicles.
“The new policy shows the government’s determination to push new energy vehicles and reduce dependence on fossil fuels,” said Xu Qian, China head of automotive practice at AlixPartners. “Car manufacturers need to put more focus on the development of new energy vehicles.”
Government’s regulation and development plans are something automakers cannot ignore. So many of them are actively working out corporate strategies to meet the requirements.
Arthur Wang, a partner at McKinsey & Co, said in an email to Shanghai Daily that the 2019 target date in the newest regulation has some leeway.
“Car manufacturers will be allowed to use new-energy vehicle sales quotas generated in 2020 to compensate new-energy vehicles credits in 2019,” he wrote. “It gives major car makers two years to prepare for the new regulation, which is good news for them.”
He added, “Those two years are key to manufacturers’ getting prepared. Auto makers need to improve and complete a series of steps, including research and development of vehicles, testing, selection of suppliers, retooling of production lines, dealership training, after-sales service and charging facilities.”
The strategies carmakers adopt may differ from company to company.
Some foreign manufacturers are stepping up alliances with domestic partners, such as green car pacts between Volkswagen AG and Anhui Jianghuai Automobile Group, and Ford Motor Co and Anhui Zotye Automobile Co.
“Companies can ascertain the government’s direction for new-energy vehicles even before regulations are issued,” said Jeff Cai, general manager of Auto Product Practice at J.D. Power China. “In order to address regulations quickly, foreign companies are finding it advantageous to link up with domestic carmakers.”
Foreign carmakers are also planning to introduce models from the US or Europe market into China market in order to shorten the development process.
“The traditional development process is relatively long for car manufacturers,” Cai said. “It takes three to five years to develop a car model. US firms already have new-energy vehicle models in their home market, and they can introduce those products to China very quickly. It takes one year to 18 months for a car manufacturer to introduce models from abroad. They need to be aware of the importance of localization of those models.”
It’s even more difficult for Japanese motor giants, he noted.
“They are focusing on developing mild hybrid vehicles, which are not included in the recommendation list of the Ministry of Industry and Information Technology,” he said.
China’s regulations on new-energy vehicles are expected to have a positive impact on Chinese car buyers, giving them more choices in electric vehicles and plug-in hybrids.
“Consumers like me want choices,” said Tong Xiaoli, a student at Tongji University. “I want to be able to choose an electric model that exactly fits my needs. And with more models available, prices should be more affordable.”
Choice is becoming more obvious by the month.
Volvo Car Group has just unveiled its new brand Polestar, which focuses on high-performance electric vehicles in China. The company will build a manufacturing site in Chengdu, Sichuan Province, with plans for its first model, the Polestar 1, to roll off the assembly line in 2019.
“All future cars from Polestar will feature a fully electric drivetrain, delivering on our brand vision of being the new stand-alone electric performance brand,” said Thomas Ingenlath, chief executive officer of Polestar. “We aim to provide electric models of high-performance, digital connectivity and good road performance.”
Shanghai-based electric car startup NIO is going to introduce a high-performance electric sports-utility vehicle called the NIO ES8 by the end of this year. BAIC Group’s electric-carmaking arm, Beijing Electric Vehicle Co, launched its electric model, called the EU400, this month in Shanghai.
“Consumers will benefit from a wider array of new-energy vehicles and competition between carmakers,” Cai said. “Manufacturers will improve quality in order to attract consumers and boost sales. The prices of the vehicles also come down.”
Makers of clean-energy cars will be targeting all consumer groups, from those on a tight budget to those willing to splash out big money.