The Strategist

China goes electric

03/02/2017 - 13:28

Chinese authorities are trying to increase number of electric vehicles in the country. China already ranks third by the number of electric vehicles after the US and the EU. In the past year the figure reached 1 million, and around 400 thousand electric vehicles were sold in 2016. The Chinese government is considering introduction of quotas for electric vehicles by 2018. According to the new rules, all automakers operating in the country, including foreign, will have to produce at least 8% electric cars of the total volume of production.

Frank Hebbert via flickr
Frank Hebbert via flickr
It turned out that efforts of Chinese authorities have brought tangible results, which is proved by Tesla's performance in the country over the past year. Number of Tesla electric cars sold in 2016 has tripled to $ 1.07 billion. Now, the Chinese market accounts for about 15% of Tesla’s total revenue, and the US is still the largest market for the automaker. The company’s revenue there doubled to $ 4.2 billion.

This week, China Radio International reported that China has allocated 6.15 billion yuan (about $ 900 million) for construction of new facilities for production of electric vehicles. The money will be spent on construction of two plants in the province of Fujian and Tianjin city. Their combined production capacity is expected to reach 115 thousand EVs per year.

New enterprises will be built to meet rapidly growing demand for electric vehicles in China. Over the past three years, their sales jumped sevenfold. 75 thousand electric cars were sold in 2014, and by 2016 the number grew by 507 thousand. By 2020, size of the Chinese fleet of electric vehicles is expected to reach 5 million units. Such popularity of electric cars is obliged to generous support of the authorities. Automakers received a 110-thousand-yuan subsidy for each manufactured car to reduce cost of the vehicle. As a result, market price of electric vehicles became more than acceptable. The government spent 33.4 billion yuan ($ 4.8 billion) to subsidize EVs production in the period from 2009 to 2016. However, size of the subsidies will be reduced by 20% this year, and the maximum compensation will number 66 thousand yuan. By 2020, subsidies will be canceled completely.

The Chinese government decided to draw down the support programme for producers after a scandal happened in 2016. Then, the subsidy recipients took money, but produced no electric cars. Such a practice was implemented by at least five automakers that sucked $ 151 million from the budget but never produced or sold cars.

It is widely known that China, together with the US, India, and Russia, is among the leaders by emissions of carbon dioxide into the atmosphere. Wanting to radically improve the situation, the authorities have ratified the Paris Agreement on the climate, encouraging development of renewable energy and promote carbon sequestration. Electric cars are just one of the ways to reduce the anthropogenic impact and improving the environment.