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Deal on China e-car quota

May 24, 2017

Germany's top diplomat Sigmar Gabriel is expecting Beijing to relax its new rules on electric cars. After China announced strict e-car quotas, Berlin sought compromise to protect the interests of its powerful carmakers.

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China | Bundesaußenminister Gabriel besucht China
Image: picture-alliance/dpa/G. Fischer

Chinese officials reassured Gabriel that "German wishes will be respected," Foreign Minister Sigmar Gabriel said while visiting Beijing on Wednesday. The talks on softening the ambitious e-car quota were "on the right way," he added.

Earlier this year, German Chancellor Angela Merkel discussed the issue in a telephone call with Chinese Premier Li Keqiang. Berlin also sent a high-level delegation to Beijing for talks on a compromise. On Wednesday, Gabriel said that the informal deal between Merkel and Li was expected to hold.

China had offered incentives for e-car purchases to help fight chronic air pollution. Last year, sales of so-called "new energy vehicles" (NEVs) jumped 53 percent to 507,000 units. But Beijing has begun scaling back those inducements, cutting subsidies 20 percent this year with the goal of eliminating them by 2020. Instead, the government intends to force the hand of manufacturers.

Tall order

Under original plans, automakers in China were required to shift eight percent of their car sales in China to electric and hybrid vehicles next year. The quota would then increase to 10 percent in 2019 and to 12 percent in the following year.

China's new e-car quota shocks automakers

The move threatens to sink the lucrative Chinese auto market for international carmakers, hitting Germany's premium brands like Mercedes, BMW, and Audi especially hard as they dominate the segment.

But German carmakers were not the only ones complaining that the quota would put them at a competitive disadvantage in China.

Many large Chinese automakers also said they were far from being in a position to fill a substantial portion of their sales with e-cars and hybrids. The Chinese car industry association CAAM demanded that the quota be delayed by a year and then introduced at lower levels.

Compromise

The details were still unclear on the deal struck between Beijing and Berlin. Reportedly, it envisages the introduction of the eight percent target for NEV sales to be pushed to 2019.

Another idea circulating in the media is a reduction of the quota by two percent, meaning cutting the 2018 requirement to 6 percent to be followed by 8 percent in 2019 and 10 percent in 2020.

Two people familiar with the discussion at government level told the news agency Reuters there was still disagreement between China's Ministry of Industry and Information Technology (MIIT) and the country's top state planner, the National Development and Reform Commission (NDRC).

MIIT, which regulates manufacturers, supports a more flexible credit trading system favored by automakers. The NDRC is more aggressive in promoting a transition to electric vehicles, pushing the introduction of the stricter quotas.

Chinese President Xi Jinping and Premier Li Keqiang are due to visit Berlin in the coming weeks. They are expected to discuss the e-car issue with German officials, Gabriel said on Wednesday.

uhe/mds, dj (Reuters, dpa)