China Is About to Shake Up the World of Electric Cars

China is set to unleash a seismic shakeup of the automotive industry when it introduces stringent rules to promote new-energy vehicles. From 2019, major manufacturers will be punished unless they meet quotas for zero- and low-emission cars or they buy credits from other companies that exceed the quotas. The so-called cap-and-trade system is designed to spur the market for electric cars at the expense of gas guzzlers, all part of China’s quest to clean its air and reduce dependence on imported oil. Another major driver: Helping develop a homegrown electric-vehicle industry.

China is not only the biggest global car market but the world leader in electric cars, with sales seen topping 1 million this year for the first time. Since the first models hit the streets more than a decade ago, the country has overtaken other markets partly through its sheer size and partly by luring consumers with subsidies and tax breaks. Nonetheless, electric vehicles account for just 3 percent of sales, leaving ample room for growth. Having previously focused on stimulating demand, the government is changing lanes and shifting policy toward propelling supply.