The Chinese market has hit legislative turbulence

11 January 2019

The sale for petrol cars in China fell in the second half of 2018

major slowdown in the Chinese market traditional vehicles in the second half of 2018 caught automakers by surprise

In early 2019, automakers have faced in China with a Gordian knot of legislative initiatives and the scary uncertainty of market subsidies PEV, i.e. electric vehicles (BEV) and rechargeable hybrids (PHEV).

The main uncertainty that is unnerving automakers, lies in how the Chinese government is winding down subsidies for electric cars and rechargeable hybrids.

I must say that the Chinese government in 2016 strongly hinted that such subsidies will be phased out before the end of 2020.

However, before the end of last year, sales of PEV is still subsidized good enough. For example, the buyer passenger electric car provided flexible grants of up to ¥66 000 ($9710), while the PHEV buyer was entitled only to a fixed subsidy of ¥22 000 ($3237).

The newest PEV models in the Chinese market 2019 

Thanks to generous incentives, cumulative sales of electric vehicles and rechargeable hybrids increased by 68% to 1.03 million, breaking the coveted million bar already for 11 months of 2018. This number came in as 791 thousand electric vehicles and PHEV 239 thousand.
To complete the incentive program deadlines, Beijing will have to significantly cut subsidies this year and completely collapse them within 2020, which in turn, will definitely jeopardize the future growth of PEV sales.

However, Beijing still retains a complete uncertainty regarding the planned schedule of reductions in subsidies.

Moreover, in addition to the uncertainty regarding the fate of public subsidies for PEV in December, the Commission on the national development and reform Commission of the Central economic planning Agency of China revised the basic provisions of the policy of public investment in the automotive industry.

In accordance with the revised policy now rechargeable ("connected") hybrids (PHEV) for the first time translated from the category of electrified vehicles in the category of "vehicles running on fossil fuels." This move has forced many analysts and representatives of the automotive industry to suspect that the Chinese government will soon stop all subsidies for hybrids.

One would expect that the Commission will soon clarify its classification of HEV (non-hybrids) and PHEV, but as she did not bother to say a word.

In the beginning of this January, Beijing made additional program trading emissions of co₂ in the Californian style, aiming to push automakers to increase the production of electrified vehicles.

Under this program the manufacturers, who annually does not produce a sufficient number of vehicles of class PEV, will be able to buy any quota from partners and even competitors that produce such vehicles in excess (on such a scheme already operates quite successfully in California company Tesla Inc., beneficial for selling her entitlement quotas vibrati carbon dioxide).

However, nobody in China even knows what really will sell such quotas on emissions of CO₂, as Beijing has not yet launched a platform for trade in these quotas, but also did not disclose the mechanism of their evaluation.

So that in 2019 for the world's largest market of electric vehicles starts just fine!

Quota for CO₂ – to be or not to be humanity?

 Beijing and Washington on global warming broke up recently diametrally than the views on communism. Compared to other levers, for example, high taxes on emissions and(or) their direct limits (aide a moratorium on the work of the city's factories during the Beijing Olympics 2008), the market of quotas for CO₂ is considered more flexible mechanism that does not cause such a strong rejection of the business. In Europe, for example, the scheme of carbon trading, already operating in industry, aviation and electricity production covers 40% of emissions. The Chinese market of quotas on emissions of carbon dioxide will begin with energy, since each of its existing thermal power plants produces no less than 26 000 tonnes of CO₂ per year (according to calculations, they are responsible for 39% of national emissions). Even these first steps will be sufficient to ensure that the volume of Chinese market of quotas for CO₂ exceeded European. To ensure a stable market, Beijing for the first time for China will implement an emissions monitoring system. Commencement of trading of such quotas was scheduled for December 19, but postponed indefinitely, despite the fact that the Chinese company announced its readiness for such a trade. The original price of a quota in the Chinese market will be about $7.5 per tonne CO₂. This value was established in the course of the experiment in seven provinces. However, in the future it will increase to $45. And yet this is well below the so-called "social cost of carbon" estimate in $125, which is the equivalent of the damage that will cause in the future thrown away today every ton of greenhouse gases. However, while Beijing is not going to require the immediate energy reduction of emissions. Interestingly, the same day when China announced the creation of a market of quotas on emissions of CO₂, the us President signed a new national security strategy, according to which greenhouse gas emissions are no longer considered a threat to the United States to continue a policy of systematic collapse of the fight against global warming. So, some American congressmen believe that the fight against the reduction in emissions it is quite possible to replace, for example, geo-engineering, i.e. by some local impacts on the most disadvantaged in terms of ecological regions. In turn, these broadcast and irresponsible statements came as a shock to the scientific community. She, on the contrary, extremely concerned about possible catastrophic climate change even in the face of Swedish scientists proposes to radically curtail emissions by prohibiting jet aircraft, automobiles with internal combustion engines, as well as universal transition to vegetarianism and birth control (to be understood primarily in third world countries – ed.)..