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China's proposed dual-credit scheme can reshape the EV market – WoodMac

19th January 2018

By: Henry Lazenby

Creamer Media Deputy Editor: North America

     

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VANCOUVER (miningweekly.com) – China's electric vehicles (EV) market has grown exponentially to overtake the US as the world's largest EV market, thanks to heavy government subsidies to spur growth in the emerging automotive sector.

However, research and consultancy firm Wood Mackenzie (WoodMac) warns that these subsidies are scheduled to be phased out by 2020, prompting questions about the sustainability of growth momentum in EVs without the heavy subsidies from the government.

WoodMac's latest research, however, reveals that China's proposed dual-credit scheme can reshape the EV market for a more sustainable development beyond the abolishment of subsidies in 2020. The EV penetration rate is projected to hit 17% in 2035 as a result.

"Early EV policies were mainly focused on growth and less on quality. Most EVs produced in China are adaptations from existing gasoline cars. While development time and cost can be minimised, we end up with an excess of low-efficiency models with smaller batteries and correspondingly shorter electric range," WoodMac's China analyst Yujiao Lei stated in a news release on Thursday.

The new dual-credit scheme, slated to be implemented in April, rewards or penalises automakers with positive or negative credits based on the car model's fuel consumption and driving range. For example, if an automaker does not produce any EV, it will need to buy EV credits from an EV maker to meet the government's goal. Those with surplus credits can sell them in the market.

"Recently we have seen a wave of EV investment announcements. Some of these are joint ventures with well-known international automakers and they are likely to produce mid-range cars or models with real competitive edge. Such EV models with longer electric range will receive more credits. So, the extra cost from the subsidy phase-out can be offset by more credits," noted Lei.

By partnering with international automakers, Chinese EV makers will be able to take advantage of the partner's technology and operational expertise. At the same time, these foreign automakers such as Ford and Volkswagen, which are significant players in the Chinese gasoline car market, can benefit from the credits gained through the partnership, which will help their fossil-fuel car business to meet the scheme's target.

"The partnership trends we are seeing now is good indication that the government's proposed dual-credit scheme is set for a good start. In a nutshell, the scheme will accelerate the elimination of lower-end models and elevate the entire EV scene in China," said Lei.

The accelerating rate of adoption of EVs in world markets has placed significant demand on energy materials used to manufacture lithium-ion batteries, including nickel, cobalt, lithium and graphite.

China will host the China EV100 forum in Beijing this weekend, a future mobility-themed exhibition that will also feature the latest technologies and products of new energy vehicles, smart cars and smart transportation.

Edited by Creamer Media Reporter

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