When China first announced its plans to slap EV production quotas on local carmakers back in 2017, the news got a lot of coverage.
The media placed emphasis on the fact that the country was already the largest EV market, and an EV quota of 10 percent would go a long way towards boosting global EV adoption, giving EV proponents one more thing to boast about.
Initially the quotas were scheduled to take effect this year, but the introduction of the quotas was postponed until 2019.
With the quotas once again on the horizon, the fate of China’s EV production is poised for a change.
According to a Bloomberg analysis of the changes, EV sales in China will rise but not by a lot. Currently, Bloomberg New Energy Finance has calculated, EV sales in China represent just 3 percent of the total.
By 2020, these will probably rise by one or two percentage points, which is not a lot in statistical terms, but is quite a few cars in absolute terms, given the size of the market.
The reason is the rules for the quotas are complex rather than straightforward. Here’s how Bloomberg explains them:
“Vehicles are awarded credit scores depending on their green credentials, such as how far they go without needing a charge. The least eco-friendly NEV will receive a credit score of two, while the greenest will get a maximum credit of six.
So, to meet the 2019 credit target of 10 percent, a carmaker producing 100,000 gasoline-based vehicles would need 10,000 credits.
Those could be earned by manufacturing 2,000 cars with an NEV score each of five. If the automaker produced more than 2,000, it could sell the extra credits; fewer than 2,000, and it would need to buy credits.”
Besides opening up a potentially lucrative market similar to the carbon emissions one, the changes will boost the sales of companies that already make EVs, as common sense would suggest.
It will also benefit foreign carmakers that have been vying for a larger presence on the Chinese market as long as they manufacture EVs that comply with the requirements set for EV credit awards.