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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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Is China Inflating Its EV Sales?

While China is being applauded as the world’s leading market for battery electric and plug-in hybrid vehicle sales, automakers are becoming frustrated over how to actually carry out a profitable long-term strategy for that market.

A new draft proposal, posted this week on the website of the Legislative Affairs Office for China's cabinet, mandates automakers to sell a high level of plug-in electrified vehicles (called “new energy vehicles” in China). That would equate to each automaker building credits equivalent to 8 percent of sales by 2018, 10 percent by 2019, and 12 percent by 2020.

Sales figures report that more than 28 million new vehicles were sold in China last year. About 351,000 were new energy vehicles, making for only 1.25 percent of the total.

Holding onto these high-level clashes with a compromise between Chinese Premier Li Keqiang and German Chancellor Angela Merkel made earlier this month. China was going to back down from these mandates and extend the timing. Sources told Reuters that the two leaders had agreed to delay the 8 percent requirement to 2019, and allow automakers that missed the quota in early years to make up for it later on.

Another meeting has been setting the tone for these government decisions. Last week, California Governor Jerry Brown visited Chinese officials to encourage them to follow California’s zero emission vehicle mandate requiring automakers hit targets for selling electric vehicles in the state.

Brown is also encouraging China to adopt the ZEV policy’s credit trading scheme, where automakers who don’t sell enough clean vehicles can purchase credits from companies like Tesla that have accumulated excess credits.

The latest draft by China's Ministry of Industry and Information Technology (MIIT) is largely unchanged from one issued in September that drew criticism from global automakers.

China has not changed its stance since last year, said Dominik Declercq, China representative for the European Automobile Manufacturers Association.

"That's what it looks like: no compromise, no concession," Declercq told Reuters.

"It seems that the political leadership has understood that this is a problem but there seems to be a disconnect between them and the working level at MIIT," said German Ambassador to China Michael Clauss.

Related: Canada Pushes For Zero Emission Vehicle Strategy

China registered about 351,000 new electric vehicles in 2016, compared to only 159,000 cars registered in the U.S. during the same time period (more than half of which were in California).

Questions have been raised about how accurate those China sales figures are. Last year in September, the Chinese government fined five automakers for defrauding it of one billion-yuan ($145 million) worth of green-car subsidies. Four auto makers inflated their sales numbers, while one did not manufacture any electric cars.

The government plans to tighten up the generous subsidies paid to automakers this year. That will include tightening up eligibility requirements, setting caps for central and local government subsidies, and reducing subsidies for electric buses. Subsidies paid to car buyers are also scheduled to come down starting this year.

There’s also concern about how serious Chinese car buyers are about purchasing new energy vehicles beyond generous government subsidies. Consumers have yet to show clear indications over what types of electric vehicles they prefer and why they’re buying them.

It may be that getting a good deal on the electric car is the key driver, which could mean softening demand if the government continues to cut back on subsidies and switches over to mandates automakers must meet.

China continues to be seen as the growing market for plug-in vehicles, which should be supported by California Gov. Jerry Brown's trip collaborating on zero emission vehicles. But there are many questions coming up - such as what electric cars are Chinese consumers interested in buying beyond generous subsidies? There's concern over China's sales numbers being inflated and deceptive practices by automakers. Major automakers like Daimler would like to see China back off mandating stringent sales targets for ZEVs, which appears to be happening.

By Jon LeSage for Oilprice.com

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  • Ben Rob on June 16 2017 said:
    China should continue to expedite EV target to 100%. If germany and Japan lose business, they can go to hell. They suppose to fix their shitty cars polluting this world.

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