Editorial Board

How China Should Go Electric

To gain the full benefits, the country needs to clean up its grid and open its auto market to real competition.

Chinese carmakers stand to benefit.

Photographer: Brent Lewin/Bloomberg

With China’s decision to phase out gas- and diesel-fueled vehicles, the end is nearer for the internal combustion engine. For their nation to reap the full benefits of this revolution, Chinese leaders will need to continue to be bold.

Nations that account for almost 80 percent of the world auto market are now planning or considering plans to end over the next few decades the sale of cars and trucks powered by fossil fuels. Big carmakers, many of whom have responded only tepidly to previous government mandates to develop electric vehicles, should now be more inclined to spend money on designing and producing new models. As costs come down, even American drivers may be tempted to switch their gas guzzlers for plug-ins (assuming they can find somewhere to charge up).

QuickTake Choking China

China itself, though, needs to consider a few other issues. First, simply forcing consumers to buy electric won’t necessarily eliminate the smog that chokes cities such as Beijing, where auto and truck emissions are responsible for nearly a third of air pollution. More electric vehicles mean more demand for electricity, which in China is still predominantly generated by burning coal. While electric vehicles produce fewer carbon dioxide emissions even when that’s taken into account, according to Bloomberg New Energy Finance, it’s important that the government expand on its ambitious plans to clean up China’s electricity grid.

Second, the Chinese auto sector would benefit from less state interference. Officials have targeted electric vehicles as one of the 10 industries of the future China hopes to dominate. Generous subsidies have encouraged sales, but also a profusion of small and inefficient automakers -- more than 200 of them, with even the biggest players claiming only a small share of the market. Many churn out models of poor quality and range. Chinese officials are phasing out subsidies and trying to prune the sector. Their efforts to pick winners and losers, however, aren’t likely to fare any better with electric vehicles than they have with traditional cars. 

Finally, China should rethink the onerous restrictions placed on foreign automakers, which are currently required to form joint ventures with Chinese partners if they want to avoid heavy import tariffs. More important, they are required to share their advanced technology. The fear is that as Chinese automakers gain expertise from these partnerships, the government will restrict the market to foreign competition.

China easily represents a third of the world auto market, so many carmakers may be willing to put up with the rules. Not all will, though, reducing competition and depriving Chinese consumers of access to the best technology. Moreover, such restrictions have already spurred a growing political backlash in Washington that could yet lead to a damaging confrontation over trade and intellectual property protections.

Like India, the U.K. and other nations that have decided to phase out gas-powered vehicles, China deserves credit for its forward-looking policy. But it’s important to remember that the purpose of that policy isn’t just to protect China’s auto industry -- it’s to help protect the planet.

    --Editors: Nisid Hajari, Michael Newman.

    To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net .

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