The China Syndrome: Is the World Ready to Play the Game?

Gas guzzlers.  The phrase itself sounds antiquated, as are the cars it describes.  Now their day has come, at least in China.

In an ongoing effort to reduce pollution in its biggest cities, and conforming to the government’s long-standing position in support of a shift to battery- and hybrid-electric vehicle production, China has announced it is suspending the production of more than 500 car models that don’t meet its stringent fuel economy standards.

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The number includes models from both domestic carmakers and foreign joint ventures like FAW-Volkswagen and Beijing Benz and counts several models from Audi, Chevrolet, and Mercedes-Benz.

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China is the world’s largest automotive market, but without its own sources of oil to produce its own gasoline.  So nearly all of the country’s fossil fuel is imported.  And China is on the path to be the dominant player in the EV market.  Those factors are behind the announcement recently made by the Xinhua News Agency (New China News Agency), the official press agency of the People’s Republic of China.

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China produced 28 million vehicles in 2016, including small volumes from dozens of small-scale makers, and consolidation of the industry is also likely behind the government’s decision. Michael Dunne, president of Dunne Automotive, a Hong Kong-based consultancy on China’s clean car market, commented, “They’re sending a signal to everybody that this is for real. . .this shows their emissions standards have teeth.”

“The simple fact that China is the biggest market means automakers will be accommodating,” said Michelle Krebs, an analyst at the AutoTrader Group.

Meanwhile EV sales in the U.S grew from 158,614 units in 2016 to 173,941 through the first 11 months of 2017.  Major manufacturers including GM, Nissan, and BMW are launching new or upgraded EVs in 2018, and analysts say future adoption of the technology will mean more growth in the market sector, especially as the cost of EVs declines and increased battery range develops.  For example, Toyota recently said it would offer “more than 10” electric vehicles worldwide by the early 2020s.  And some research shows Germany poised to produce about 1.3 million electric vehicles in 2021.

According to EVvolumes.com, “the electric vehicle world sales database,” volumes of plug-ins “more than tripled since 2013 and continuing on last year’s growth rate of 42% would mean 8 out of 10 cars sold in 2030 would be Plug-ins.”  Some markets have already topped the 1% market share threshold: Norway had 35% plug-in share in Q2, Iceland 9% and Sweden around 4.5%.

The global trend to electrics, though still relatively small, is gaining traction, and EVs should be a bigger game player in the future.

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