Discussion on China’s Decision to Ban Petrol Vehicles

In September last year, China joined the UK and France in announcing that they would ban petrol and diesel car sales. Unlike the European countries who stated that 2040 was the year for the ban, the China announcement is open ended. There are a couple of comments to make on this.

Firstly, China is a big player in electric vehicles (EV) and the battery technology that underpins the cars so they could enforce a ban quite quickly that would ensure that they have a significant presence in the global EV market. Secondly, they have an existing announcement that by 2025, 20% of all new car sales must be EV with sales expected to be about 50% of the market a few years later.

In 2016, over 400,000 pure electric vehicles were sold in China – an increase of over 60% on the year before. This was helped by a Government mandate to build 12,000 new charging stations by 2020 to help with the overall increase in demand. Fundamentally, that doesn’t seem like enough stations if several 100,000 cars are sold each year and China moves to apartments like many Asian countries are. Apartment blocks typically don’t have enough parking spaces to accomodate all the residents, so many cars would end up on the street competing for the scarce charging stations.

China’s BYD and Geely are at the forefront of building cars – and Geely owned Volvo have already stated they will be selling cars with electric motors in the near future either as a hybrid or full electric. Along side these manufacturers, there are many smaller companies building cars thanks to Government subsidies, however along with the announcement to move to electric vehicles came the balancing statement: those subsidies will get wound back in the years heading towards the overall ban coming in.

I think the issue for China is the pollution caused by the generation of the electricity to service a rapidly growing market. China is also a leader in solar power generation so with any luck that will become the provider of the power and this would then reduce China’s historical reputation of smog in cities like Beijing. I’ve been to Beijing many times and some days you couldn’t see the building next door, the smog was so bad. China has pledged to reduce carbon based power generation by 20% over the next few years so they are on the way to reducing their emissions.

Most of the new power generation today though is coming from nuclear plants rather than solar or hydro, which is in some way better than coal. Clearly renewable sources would be much better!

It is also clear that the Government would like Chinese cars to dominate the global market – either as complete vehicles or components on every other vehicle. I still feel that no Government will implement a blanket ban, even if they have given manufacturers 20 plus years to only build electric cars.

There is too much revenue at stake from carbon fuels and I could see a gradual change over between carbon fuels to biofuels or electricity. China is the world’s second largest consumer of oil, so a reduction in usage will hit Government revenues. Maybe we will see China show the world how to make the change-over.