SHANGHAI -- China's new-vehicle market will decline for the second straight year after ending the first half of 2019 with a 12 percent slide, the China Association of Automobile Manufacturers warned on Wednesday. And it again urged government officials in Beijing to adopt measures to boost vehicle demand.
But the group's pleas may go unheeded as the government is eager to shore up electrified vehicle sales, not the overall vehicle market, where the bulk of cars and light trucks still run on fossil fuel.
The days are gone when China's leaders pursue economic growth at any cost. When it comes to describing economic policies, the catchphrase used by government officials these days is ˇ°switching from old to new economic drivers.ˇ±
Under the new approach, traditional gasoline-powered vehicles, in general, are deemed an ˇ°oldˇ± economic driver that results in air pollution. While they support economic growth, they need to be improved to reduce emissions, the thinking goes.
That's why the central government is pushing China's cities and provinces to upgrade vehicle emissions standards, ahead of schedule, regardless of the cost to carmakers and dealers.
By contrast, the electrified vehicle sector is seen as a ˇ°newˇ± economic driver capable of boosting economic growth without inflicting damage on the country's environment.
Electrified vehicles have won key support from the top echelon of the Chinese government. Last week, an international conference on electrified vehicles in the south China island province of Hainan received something industry forums rarely encounter -- a congratulatory letter from President Xi Jinping.
At the event, the World New Energy Vehicle Congress, senior Chinese government officials took turns pledging continued support to expand the country's electrified vehicle market.
And they have walked the talk.
Fearing that such vehicle sales, which remained robust in the first half, will tank after subsidies are phased out at the end of 2020, the government proposed this week to increase electrified vehicle output quotas for automakers after 2020.
Under the current carbon credit program, which is essentially a quota system, passenger vehicle manufacturers in China must accumulate enough credits by producing enough electrified vehicles to hit a threshold equal to 10 percent of annual sales in 2019. The level will rise to 12 percent for 2020.
The government now wants to raise the level to 14 percent, 16 percent and 18 percent of sales in each of the next three years, according to its proposal.
The government is also proposing to slash the carbon credits each electrified vehicle is eligible for. For example, the credits for an EV with a range of 400 kilometers will be lowered to 2.8 from currently 5.6 while credits for a plug-in hybrid will be reduced to 1.8 from now 2.0.
The proposed changes to the carbon credit program, once implemented, will force automakers to keep ramping up electrified vehicle output beyond 2020.
New-car demand in China is widely expected to remain subdued in the near future. However, as long as it can continue to prop up electrified vehicle sales, the Chinese government isn't expected to come to the rescue of the overall vehicle market with a heavy dose of incentives.