Page 54 - Bloomberg Businessweek - November 19, 2018

Bloomberg Businessweek The Year Ahead 2019 Consumer

Electric Vehicles

▷ China’s new emission rules will force global carmakers to redraw their road maps

The world’s biggest market for electric vehi- The world’s largest automaker is certainly tak-
cles wants to get even bigger, so it’s giving auto- ing notice. Volkswagen AG, which sold just under
makers what amounts to an ultimatum. Starting 40 percent of its vehicles in China last year, says
in January, all major manufacturers operating it will introduce about 40 locally produced
in China—from global giants Toyota Motor and NEV models in China within the next decade.
General Motors to domestic players BYD and “Volkswagen Group China will meet the govern-
BAIC Motor—have to meet minimum require- ment’s targets,” the company said in a statement.
ments there for producing new-energy vehicles, The formula for doing so is algebraic, and the
or NEVs (plug-in hybrids, pure-battery electrics, 10 percent credit target in the first year won’t
and fuel-cell autos). A complex government necessarily equate to 10 percent of cars sold. For
equation requires that a sizable portion of their example, a pure- electric vehicle with a range
production or imports must be green in 2019, topping 300 kilometers (186 miles) will generate
with escalating goals thereafter.
The regime resembles the cap-and-trade sys-
tems being deployed worldwide for carbon
emissions: Carmakers that don’t meet the quota
themselves can purchase credits from rivals that
36
exceed it. But if they can’t buy enough credits,
they face government fines or, in a worst-case sce-
nario, having their assembly lines shut down.
“The pressure is mounting,” says Yunshi Wang,
director of the China Center for Energy and
Transportation at the University of California at
Davis. “This could be a model for other countries; ◀ Volkswagen workers
it could be a game changer globally.” build a Golf electric car
The message coming from the world’s larg- at a factory in Dresden
est emitter of greenhouse gases is clear: Even as
President Trump withdraws support for alterna-
tive fuels, attempts to gut mileage requirements,
and begins the process of pulling out of the Paris
Agreement on climate change, China is dead
serious about leading the way to an electrified
future. That would help it reduce a dependence
on imported oil and blow away the smog choking
its cities. It would also help domestic automakers
gain more expertise in a car manufacturing seg-
ment that’s burgeoning globally.
Given the size of the Chinese market, the larg- more credits than one with lesser performance or
est for cars overall and for EVs, auto companies than a gasoline-electric hybrid. The rules apply
will have to rapidly accelerate their development to all companies that manufacture or import JENS SCHLEUTER/GETTY IMAGES; DATA: BLOOMBERG INTELLIGENCE
and manufacturing efforts to meet the targets. more than 30,000 cars annually. The floor rises
By 2025, China’s leaders want 7 million cars sold to 12 percent in 2020, then keeps increasing in line
every year, or about 20 percent of the total, to be with the government’s ultimate plan to eliminate
plug-in hybrids or battery-powered. “This is prob- fossil fuel vehicles by a still-unspecified date.
ably the single most important piece of EV legis- BMW AG, which sells more cars in China
lation in the world,” Bloomberg NEF said in May. than anywhere else, makes two plug-in hybrids