SHANGHAI -- Electrified vehicle sales in China have kept falling after June’s steep cut in subsidies for EVs and plug-in hybrids.
Despite shrinking demand, Beijing continues to prod automakers to build far more electrified products in the future than before.
That message was spelled out again in a draft “development” plan the Ministry of Industry and Information Technology released Tuesday for the domestic electrified vehicle industry covering 2021-35.
Under the plan, the ministry, which regulates the domestic auto industry, expects EVs to account for 25 percent of annual new light-vehicle sales in 2025, up from the 20 percent target it set in a similar plan in 2017.
The ministry didn’t disclose a target for EV sales beyond 2025.
But the new target for 2025 represents nothing short of a giant leap from the current share of electrified vehicles in China.
In the first ten months of the year, roughly 947,000 EVs were sold in China, accounting for 4.6 percent of total new-vehicle deliveries in the period. The share in 2018: 4.5 percent.
By June, Beijing had scaled back more than 60 percent of the subsidies for EVs and halved subsidies for plug-in hybrids, with plans to wind down the incentive program by the end of 2020.
To ensure the EV target for 2025 can be achieved, the Ministry of Industry and Information Technology laid out a slew of measures in the draft plan.
It pledges to maintain a sales tax exemption and provide preferential financing and traffic management policies for electrified vehicles.
It will also encourage provincial governments to support the use of electrified vehicles by public transport operators and new mobility service providers.
Specifically, the ministry said it will toughen oversight of state-owned automakers to make sure they increase r&d in electrified vehicles.
Among the policy measures in the draft plan, the most significant and consequential appears to be efforts at “optimizing” the carbon credit program.
Under the carbon credit program enacted at the start of the year, passenger vehicle makers must earn one carbon credit for every 100 vehicles they produce. Under the program, a plug-in hybrid earns a fixed two carbon credits. An EV will be allotted two to five carbon credits depending on its range – the longer the range, the higher the credits.
The program requires carmakers to earn an amount of credits equivalent to 10 percent of their annual output in 2019. For example, a company that produces one million cars this year must build enough electrified vehicles to earn 100,000 carbon credits.
The rate will increase to 12 percent next year, according to the program.
The ministry didn’t specify how to “optimize” the carbon credit program. The most likely measure it will take is hiking carbon credit requirements after 2020.
The primary electrified vehicle producers in China are all domestic companies; few global brands can meet current requirements under the carbon credit program.
So as Beijing prepares to ramp up pressure to EV output, most global automakers operating in China will face an uphill battle on two fronts.
One is striving to boost traditional vehicle sales in a market that has stopped growing while still figuring out how to increase EV production.