China Flexes Its Muscle — Go BEV or Go Home

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We have seen a lot of announcements for many new electric cars from the big carmakers. Some say it is #dieselgate that opened their eyes. Others think Tesla and Musk are threatening their sales. Occam’s razor tells us to look at the easiest explanation first. China’s New Energy Vehicle (NEV) mandate might be the easiest explanation.

China did give the Californian ZEV system a long hard look, and decided it would work for them too. In fact, CleanTechnica spoke with a China-linked professor in California who worked on both plans and walked China through the details. China adjusted the policy for its specific situation. The Chinese system is based on a NEV credit system, analogues to the Californian Zero Emission Vehicle (ZEV) credit system.

China mandates that a carmaker has bought or earned NEV credits equal to 10% of its fossil fuel vehicle (FFV) sales in 2019 and 12% in 2020. For example, if a carmaker sells 100,000 FFV in 2020, it will need 12,000 credits. Credits are earned by selling NEVs. A NEV is worth up to 2 credits for a long-range PHEV and up to 6 credits for a long-range BEV. They expect an average of around 3 credits per NEV in 2019.

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The percentages for the years after 2020 have yet to be decided. The expectation is that the percentages will increase fast, very fast. China has suggested that they hope to get to 100% of BEV sales in (or before) 2030.

A carmaker that sells many cars in China will need a lot of credits in the not so distant future. Foreign automakers tried to slow down the timeline, but didn’t have much effect. The Volkswagen Group sells about 4,000,000 vehicles in China and needs 400,000 NEV credits in 2019.

Buick - China - Inspire crossover concept

For GM, it is 1.5–3.5 million vehicles, depending on consolidation of their joint ventures in China. The other large western carmakers — Ford, Toyota, Nissan, Honda, and Hyundai/Kia — are all selling between 1 million and 2 million vehicles each. They have announced plans to launch many new electric or electrified models in the next few years. Most of these new models will be for their Chinese customers. (Europe will then get priority before US customers.)

The Chinese market is expected to see 25 million FFV and 2 million NEV sales in 2019. With an average of 3 credits per NEV, there will be 6 million NEV credits generated. Only 2.5 million credits will be needed for the sale of 25 million FFV. There will be enough credits for sale by the many dozens of Chinese NEV makers for the big western carmakers, at a nice price.

The next year, 2020, will be no problem either, but after that year, the number of credits needed will increase fast. For VW, GM, and the others, there is a simple choice: “Make NEVs or leave the Chinese market.”

If Occam’s razor is right, this is the clearest reason for why all of these new, very ambitious electrification plans are announced.

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Maarten Vinkhuyzen

Grumpy old man. The best thing I did with my life was raising two kids. Only finished primary education, but when you don’t go to school, you have lots of time to read. I switched from accounting to software development and ended my career as system integrator and architect. My 2007 boss got two electric Lotus Elise cars to show policymakers the future direction of energy and transportation. And I have been looking to replace my diesel cars with electric vehicles ever since. At the end of 2019 I succeeded, I replaced my Twingo diesel for a Zoe fully electric.

Maarten Vinkhuyzen has 280 posts and counting. See all posts by Maarten Vinkhuyzen