China Hybrid Cars

China to focus on the production of hybrid cars, eases green rules

To further battle the CO2 emission crisis, the Chinese government moved to re-classify the gas-electric hybrid vehicles making it easier for automakers to meet environmental standards and sales quotas. The move also gives gas-electric vehicles the ability to offer more choices compared to conventional petroleum-fueled vehicles.

China, the world’s biggest CO2 contributor has some of the strictest rules on producing and using fossil-fuel vehicles and machinery as it battles pressure on containing its worsening air pollution in its populated cities.

The country’s demanding rules in battling air health hazard have pushed local and foreign automakers and investors, including Tesla Inc TSLA.O and Volkswagen AG VOWG_p.DE, to spend billions of dollars on research, development, and production of environment-friendly vehicles such as hydrogen fuel cell vehicles and all-electric, plug-in hybrid cars.

Current and new automakers who have interests in the Chinese market are obliged to make new energy vehicles (NEV) to win “points” to make up for a portion of the negative points they incur when they produce petroleum-fueled vehicles.

The system, however, has been criticised by many manufacturers for offering few incentives to improve gas-only cars’ efficiency. Without incentives, gas-only cars would still use conventional technology that continues to contribute to CO2 emissions.

The policy published on Monday by China’s Ministry of Industry and Information Technology allows automakers to gradually produce more gas-electric hybrids and less of the more expensive all-electric vehicles from 2021 through 2023.

Gas-electric hybrids would still be considered fossil-fuelled but re-classified as “low fuel consumption passenger vehicles”. Significantly, the number of negative points incurred for making gas-electric hybrids will be less than for petrol-only vehicles.

Industry experts and officials said petrol-powered vehicles could be replaced by gas-electric hybrids because when automakers produce hybrids, they would not have as many negative points to make up for compared to the producing fossil-fueled vehicles.

Toyota, Honda, as well as Chinese automakers Geely Automobile Holdings Ltd, Guangzhou Automobile Group Co Ltd and supplier Hunan Corun New Energy Co Ltd, are expected to benefit more from the new policy because they are already leading the manufacturing of hybrid cars. 

The Chinese government hopes that local customers will buy more NEVs that would account to at least a quarter of all vehicles sold in the country by 2025.

China is the largest automobile market worldwide, both in terms of demand and supply but the risk associated with all of its internal combustion engines running on the streets daily also accounted for the biggest carbon emission. China hopes that the new policy could impact both economy and health.