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China Seen Laying Down $15 Billion Bet on Electric Vehicles

December 18, 2015
Chinese President Xi Jinping has designated electric vehicles as a strategic initiative in a bid to upgrade the auto industry and create challengers to Toyota Motor Corp. and General Motors Co. The government is increasing spending after signs that the combination of research grants, consumer subsidies and infrastructure investments is starting to yield results. New-energy vehicle production surged fourfold to 279,200 units in the first 11 months, even as oil traded near levels last seen during the global financial crisis.
 
The Chinese government is not alone in setting aggressive targets for alternative-energy transportation. President Barack Obama in 2011 called for one million electrified vehicles in the U.S. by 2015, a target that the administration scaled back in March after low gasoline prices reduced the cost advantage of plug-in and hybrid vehicles.
 
China, though, has stood out in terms of the scale of the state’s financial support. The country has invested about $5.5 billion into the new-energy vehicle segment over the past five years, according to Gao Feng’s Russo, who estimates the government will devote another $9.5 billion yuan by 2020.
 
The central government on Dec. 16 released a plan detailing funding for local governments to construct charging facilities, tied to the number of new-energy vehicles they sell.
 
Automakers will have to play by China’s rules if they want a piece of the market, even if they don’t believe in electric cars. The government has mandated the lowering of average fuel consumption to 5 liters by 2020, from 6.9 liters per 100 km this year.
 
"There is really no choice for the automakers, if they are required to meet the more stringent emission standards by 2020," said Steve Man, an analyst with Bloomberg Intelligence. "Other technologies with the stringent emission standards won’t get you all the way to target."
 
 

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