China electrifies auto market
China’s Ministry of Industry and Information Technology (MIIT) has announced plans to end the production and sale of fossil-fuel-burning vehicles. Although the end of gas-burning cars is still a ways down the road — 2040 is the year that France and the U.K. have set for completing the phase-out, with China likely to aim for that same year — the announcement has given the share prices of leading domestic electric car makers like BYD, famously backed by Warren Buffett, and battery makers like Jiangxi Ganfeng Lithium a real jolt.
In June, when the MIIT set aggressive quotas on new energy vehicle (NEV) production for all automakers in China, foreign automakers freaked out, with many looking to get in bed with domestic automakers with larger NEV capacity, the New York Times reports (paywall). New regulations nominally require up to 10 percent of all cars sold in China to be NEVs as early as next year, though a system of credits will allow carmakers without that kind of electric vehicle capacity some time to adjust.
The policy makes eminent sense: The world’s largest automotive market is also the world’s largest carbon emitter, and the market’s reaction to the MIIT’s announcement reassures Beijing that the industry will respond to its policy guidance, and reinforces China’s confidence that it will quickly become the make-or-break market for NEVs, smart cars, and self-driving vehicles.