Photographer: Qilai Shen/Bloomberg

How China's Dirty Cities Are Reshaping Car Design Across World

  • China outsold U.S. in electric vehicles for first time in 2015
  • Ford, GM designing new models according to Chinese regulations

For global automakers, China is becoming the new California.

The U.S. state grabbed the lead a few years ago in establishing fuel-efficiency standards to clean up urban smog. Now, as China struggles with its air-pollution crisis, Beijing increasingly influences the models and technology Detroit, Europe and Japan sell around the world.

In response to government rules and incentives that have spurred electric-car sales in China, automakers are beefing up their global electric-vehicle and plug-in offerings. General Motors Co. plans to make a plug-in hybrid version of every Cadillac model. Ford Motor Co. has budgeted $4.5 billion to develop 13 new EVs and plug-in hybrids by 2020, and China is a big reason for both automakers. Daimler AG’s Mercedes-Benz is selling five plug-ins in China, two of which also sell in the U.S. Similarly, BMW AG is engineering plug-in hybrids it sells worldwide to meet China’s electric-drive mandates.

“Originally we started with California rules, so the starting point for us was clearly the U.S.,” said Klaus Froehlich, BMW’s global head of product development. “Now, China is a key market. It is very important and the regulations are quite difficult.”

Decisions made in Beijing already are affecting cars people drive in Dallas and Los Angeles. That’s because automakers tend to design new models to sell in multiple regions -- and China is the world’s largest auto market. GM engineered its new Chevrolet Bolt electric car for global sales, including in China. Even though the company has so far announced plans only for the U.S., “we did plan for more than just the U.S.,” Pam Fletcher, GM’s chief engineer for electric vehicles, said in an interview at the CES electronics show, where GM unveiled the Bolt. "The Chinese government is very interested in EVs.”

Global Tweak

Even gasoline engines are getting a global tweak to meet Chinese fuel-efficiency standards: Cadillac specifically designed the most powerful engine in its CT6 sedan, a twin-turbo 3 liter, to avoid stiff Chinese taxes on any engine over 3 liters.

“China does influence how we execute the strategy,” said Johan de Nysschen, president of Cadillac. “And China will continue to feature in an ever more prominent role.”

While China wants to boost sales and become a key destination for global automakers to sell new models, it also wants cleaner air. So it now requires that agency- and government-owned companies’ fleets consist of at least 30 percent plug-in hybrids or electric cars. If they don’t comply, they risk losing important subsidies for utilities such as electricity and water. The subsidies can be the difference between profit and loss, said Michael Dunne, president of Hong Kong-based consulting company Dunne Automotive.

Air-Quality Concerns

Commuters wear face masks while riding in the subway in Beijing.
Commuters wear face masks while riding in the subway in Beijing.
Photographer: Qilai Shen/Bloomberg

“Chinese politicians are very concerned about public criticism of air quality,” Dunne said. “They are attacking this from every angle and they are just getting started.”

With about 132,400 EVs and plug-in hybrids delivered through November, China already has sold more electrified vehicles than the U.S. for the first time ever, according to data compiled by Bloomberg. Sales of these models fell 17 percent to 102,600 in the U.S. last year, according to researcher Autodata Corp. -- even as the industry reported record total sales.

EV sales in China probably will continue climbing as the central government hands out incentives of more than $8,000 for EVs and about $4,600 for plug-ins to encourage people to buy so-called New-Energy vehicles, which include hybrids, plug-in hybrids and electric cars. Local governments often match those incentives. The city of Shanghai already gives $13,000 for the cost of a license plate for plug-ins and EVs, and buyers of those vehicles can avoid a long waiting list to get one, said Hui He, senior policy analyst with the International Council on Clean Transportation, an environmental research and analysis organization in Washington.

Incentive Program

Cadillac’s future plug-ins will allow the company to take advantage of the incentive program, de Nysschen said. Models including the CT6 plug-in are developed for both the Chinese and U.S. markets. GM is also planning a Buick version of the plug-in Chevrolet Volt for China, said a person familiar with the matter.

Not only will more plug-ins and EVs soon be plying Chinese highways and byways, they also will go farther on a single charge. Under China’s new regulations, government-controlled companies and agencies won’t get subsidies for their plug-ins unless the cars can travel 50 kilometers, or 32 miles, before the gasoline engine kicks in. The Volt already can go 50 miles just in electric-drive mode.

“There will be a lot of electric vehicles sold in China,” said Kevin Layden, director of electric powertrain engineering for Ford, which will sell its C-Mar plug-in hybrid in China next year. “They seem to not only give incentives for electric vehicles, but they are locking out anything that doesn’t get high fuel economy.”

Stiffer Regulations

BMW is getting ready for ever-stiffer regulations. The German automaker will have six plug-in hybrids and an electric car on the market in China by the end of this year, and its plug-ins will soon be capable of going 60 kilometers, or 37 miles, on a single charge. What’s more, it’s designing the cars with extra space to accommodate larger batteries so they’ll be ready for more stringent requirements expected in a few years.

China is becoming so important for electrified cars that BMW plans to get battery-cell and electric-drive technology from its suppliers there, Froehlich said.

The country already sells far more electric-car models than the U.S., with 30 available now. That will rise to 80 by 2020, though many of them will come from China’s small domestic producers, according to IHS Automotive. The U.S. has just a handful of models now; 44 will be available in 2020.

Still, electric cars have been a tough sell in China because of the lack of charging stations. That soon may change: The government is considering a program to spend $16 billion on stations that could handle 5 million EVs by 2020, Bloomberg has reported. That kind of investment could help stimulate EV sales the way plug-in hybrid sales have been spurred, Dunne said.

“The Chinese government will do whatever is possible to make people feel comfortable with EVs,” he said.

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