BYD electric car at a car show in ChinaCopyright of the image
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Rules to reduce pollution should boost sales of electric car manufacturers such as BYD

Outside of China, few drivers have heard of brands such as Hit BYD or Beijing Automobile Works. But they are two of the biggest players in the world's largest electric car market.

For a decade, the Chinese government has persuaded buyers and builders to enter the electric vehicle market through subsidies and other incentives.

The figures suggest that the strategy worked: according to the International Energy Agency, China buys more than half of the world's new electric cars.

At present, the government is about to shift the burden to manufacturers through a new "cap-and-trade" system and rules that complicate the creation of a new car manufacturing facility. combustion engine.

The rules were supposed to have come into effect on January 1 of this year.

Small but growing fast

China is both the largest manufacturer and the largest car market in the world.

But after two decades of rapid expansion, sales fell 6% in 2018 to settle at 22.7 million units.

The most recent figures show that new energy vehicles (NEVs) – a category that includes electric and hybrid models – have defied this trend, developing considerably over the last year.

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  • However, the China Association of Automobile Manufacturers (CAAM) has announced that 601,000 nuclear motor vehicles have been sold in the first three quarters of 2018, which means that they still only account for $ 40,000. a small fraction of the market.

    How do the new rules work?

    The National Commission for Reform and Development said that it would not allow the creation of new companies that only manufacture combustion engine cars.

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    China wants more electric cars on the road to fight against pollution

    It also imposed additional conditions on existing companies considering setting up a factory for non-NEV cars.

    New quotas on electric vehicles should also have an impact on manufacturers.

    With a new "cap-and-trade" system, any company that manufactures 30,000 cars or more must get enough credits to reach 10% of its production.

    Thus, a car company producing the minimum should earn 3,000 credits.

    But not all cars are treated equally. An NEV can receive between two and six credits depending on the distance that it can travel before being recharged.

    Thus, if a manufacturer manufactures 30,000 cars, he could reach his quota by manufacturing 1,000 cars with three credits each.

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    Elon Musk at the official opening of the Tesla gigafactory in Shanghai

    Any company that does not meet its quota faces a fine, but automakers who are waiting for it to fail can buy credits from excess builders.

    This means that car manufacturers who do not reach their quota directly subsidize manufacturers who do.

    Analysts say this could be very attractive for foreign manufacturers, who are currently producing the most efficient VNEs.

    "If Tesla starts manufacturing in China, he will get the highest credit.So they sell a sufficient number of vehicles, they will be able to sell to others. [manufacturers] on credit, "according to Vivek Vaidya of Frost and Sullivan Consulting.

    China at the forefront

    China has embarked on the fight against VNEs, both to reduce air pollution and to develop a strong industry.

    The Chinese government has had subsidies in place for nearly a decade, and these have been supplemented by grants from regional governments.

    In some cities, public transport has also paved the way.

    Shenzhen's fleet of 16,000 buses is now 100% electric and its fleet of taxis is also almost entirely electric.

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    Media captionHow VW, BYD and Jaguar are trying to break into the Chinese market?

    In addition to a robust local industry, many global manufacturers are already present in the Chinese new vehicle market, mainly through joint venture agreements including Nissan, Toyota, VW, BMW and Volvo.

    GM said it is on track to provide 10 VNEs by 2020 and plans to double that number over the next three years.

    Tesla has just cracked its gigafactory, just outside Shanghai.

    An end to subsidies?

    This latter move seems at least in part to be an attempt to dispel the subsidy market.

    "This law is really meant to replace the subsidy that the Chinese government is now offering for the purchase of motor vehicles in China and this car makers responsibility," said Tu Le, of the Sino Auto Insights research company. .

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    Rows of Electric Cars at Kandi Electric Vehicles in China

    In Beijing and Shanghai, for example, drivers who buy a NEV vehicle are currently allocated a license plate free of charge, while other drivers must participate in a lottery in Beijing or at an auction. in Shanghai.

    In other Chinese cities, subsidies and rebates are granted to buyers who buy VNEs.

    Growth pains

    A number of problems could, at least in the short term, create difficulties.

    It has already been reported that Chinese electric car manufacturers have been hit at first by the stock market for fear of removing subsidies.

    According to Tu Le, the lack of electrification infrastructure could also weigh on sales and the trade war could be a joker.

    "If the trade war is not resolved in the first quarter of 2019, it could then have significant negative effects on global car sales and the willingness of customers to try their luck with new technologies," she said. he declared.

    How will this affect the electric car market?

    Vivek Vaidya hopes the new plan will succeed, mainly because manufacturers will have a strong incentive to manufacture more electric and hybrid cars.

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  • He also thinks that some Chinese market leaders could extend their reach beyond the continent. But unless you live in a developing market, it's unlikely that a Chinese electric vehicle will drive into your street any time soon.

    "Chinese vehicles have very competitive prices, but this is not an apple-to-apple comparison.They may not dominate a market like Germany, but they could target Asian markets as well." India and Indonesia, "he said.