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Why foreign automakers in China feel no pressure to develop EVs
Yang Jian | 2018/11/23

SHANGHAI -- Despite Beijing¡¯s plan to push automakers in China to ramp up local output of electric vehicles, foreign car manufacturers are in no rush. 

Why?

Because they have gamed the government¡¯s carbon credit program that takes effect at the start of next year. As a result, they can avoid racing into China¡¯s EV market with their proprietary brands.

How did they do it? 

By taking advantage of a rule in the program that entitles them to some of the carbon credits earned by EVs built at their joint ventures with local companies. 

The carbon credits generated by the joint ventures will be calculated based on the interest a foreign automaker holds in the partnerships, according to the program.

Foreign automakers generally have taken one of two approaches to obtaining carbon credits from local joint ventures. 

Some -- VW Group, Ford Motor Co. and BMW Group -- have established EV joint ventures with new local partners. 

Last year, VW formed a joint venture with Jianghuai Automobile Co., while Ford Motor struck a similar deal with Anhui Zotye Automobile Co. In July, BMW signed a joint venture agreement with Great Wall Motor Co.

These partnerships will first assemble low-priced EVs that will be marketed under new brands. 

Most other foreign automakers have opted to build EVs at their existing joint ventures and distribute them under the partnerships¡¯ brands.

Among them, General Motors is the only one that has developed a new EV model. GM developed a two-seat microcar for its SAIC-GM-Wuling Automobile Co. joint venture that arrived last year under the Baojun brand. 

Other foreign automakers have simply arranged for their joint ventures to build EVs developed by local partners and distribute them under new brands. 

For example, PSA Peugeot Citroen launched sales of a compact electric car, the ES500, under the Fukang brand this month. The vehicle, produced at the French automaker¡¯s joint venture with Dongfeng Motor Corp., was adapted from Dongfeng¡¯s Aeolus-badged E70.

Meanwhile, Toyota Motor Corp., Honda Motor Co. and Fiat Chrysler Automobiles will follow Mitsubishi Motors to build a rebadged electric crossover developed by Guangzhou Automobile Group Co. at their joint ventures with the state-owned Chinese automaker.

EV buyers qualify for government subsidies of up to 75,000 yuan ($10,820) per vehicle in China now. Beijing plans to phase out the subsidies by 2020 to ease its fiscal burden. 

Most foreign carmakers, skeptical of local consumer demand for EVs without government subsidies, are sticking to their global plans on EV output, and won¡¯t produce many of their own EV models in China or other major markets until late 2019 or 2020.  

That was something the Chinese government has expected but obviously failed to change with the carbon credit program it proposed in 2016 and finalized last year. 

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