According to BBC, China is aggressively supporting the Electric Vehicle market- and so far, their policies work. In the country where the largest numbers of cars in the world are being sold and manufactured, car industry is in decline (with a recent 18% decrease reported by Bloomberg).

So-called New Energy Vehicles (NEV), however, saw a 138% increase in sales last January. NEVs include pure-battery, plug-in hybrids and fuel-cell models and their sales are being subsidized by the Chinese government. In fact, the subsidy program is expected to end by 2020, and this is further kindling the interest of potential buyers who hurry to get a new NEV while the subsidies are still available.

Image credit: Imaginechina via AP Images

Chinese support to NEVs, though, does not end with the subsidy program. Both to address air pollution and to support their NEV industry, the government provide incentives favouring NEV production.

The policies of the National Reform and Development Commission prohibit the establishment of new companies that only make combustion-engine cars. Even existing companies cannot open new facilities if they only produce conventional models; they need to receive at least 3000 credits for the production of NEVs, and NEVs are credited more when they can travel further before they need to be recharged.

To avoid fines, non-NEV-producing companies can purchase credits from NEV-manufacturers with surplus of credits, subsidizing indirectly the NEV industry. That is also an incentive for global manufacturers to strengthen their position in the Chinese market. On the other hand, Chinese NEV manufacturers Kandi Technologies recently received approval from the National Highway Traffic Safety Administration to enter the U.S. electric cars market, and their shares went 40% up last week.

The next steps should include electrification infrastructure and steps for renewal energy production to fuel the NEVs.

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