China wants to DRIVE GREEN!
China is driving down a new road after emerging at the forefront of the New Energy Vehicles market.
Because of its strong economic growth and considerable effort to get vehicles powered by non-traditional fuel, such as electric and hybrid cars, off the ground, Chinese production and sales of new energy vehicles (NEV) is evolving rapidly. According to the China Association of Automobile Manufacturers (CAAM), China reached about 1.6 million NEVs by the end of 2017, and nearly half of them were sold in 2017. The Chinese auto manufacturing sector has never been an effective competitor, due to its late entry in the global market, but nowadays national manufacturers are leading the development and manufacturing of NEVs. In fact, Chinese car manufacturers are opening factories that only produce electric cars, and it can be estimated that, in five years, non-fossil fuel cars will account for about 5% of all new cars in the country.
Therefore, China is regarded as a promising trade partner for giving impetus to the new era of zero emission mobility. Its market expansion offers opportunities for business worldwide, besides benefits on health, climate and national economy. In 2018, China established a national center for new energy vehicles to coordinate the development of the industry, which is composed by 21 of China’s leading NEV manufacturers and R&D institutions, including Baidu (The Chinese “alternative” of Google) and Tsinghua University. Furthermore, by 2022, foreign car manufacturers will be able to produce in China without being forced to make partnerships with local companies and maintain a minority share. The National Development and Reform Commission note explains that it intends to remove the limits on foreign ownership of JVs in the automotive sector within the next four years. Especially for the new energy vehicles sector, the limits to foreign capital are going to be cut down this year.
However, China’s green transition did not happen fully by choice, but by necessity. As the largest carbon emitter in the world, lowering energy emissions from transportation (accounting for 10% of China’s greenhouse gas emissions) is a core part of its war against pollution and part of “China 2025” Plan. Even more importantly, the development of the NEV market is an important part of China’s efforts to champion domestic manufacturing in leading edge technologies. The Chinese firms, BYD and CATL, are two of the top five global manufacturers of the lithium batteries required to power electric vehicles. Domestic consumers were originally skeptical of electric cars until the Chinese government launched a program of green finance, in the form of national and local subsidies for purchases, to rise sales. In fact, in the past three years, China has emerged as a trendsetter in the growing field of green finance. China added green finance to the agenda of the G20 under its leadership in 2016 to help create the international framework for sustainable finance. President Xi Jinping has called for an “ecological civilisation”. China’s green shift supports this claim by striving to transition to alternative energies and become more energy efficient.
Luca Masoero