China’s electric vehicle policy will make it global automotive powerhouse

With Beijing’s policymakers and regulators intent on transitioning from fossil fuel powered vehicles to more electric vehicles, China is set to become the automotive powerhouses in the world.

In a development aimed at accelerating the adoption of electric vehicles, automakers from across the globe are planning a $300 billion surge in their spending on electric vehicle technology over the next 5 to 10 years. Nearly 50% of that amount is targeted at China, where the leadership wants to rapidly transition from fossil fuels battery and electric powered vehicles.

This level of spending, much of it coming from Volkswagen AG, is driven in large measure by government policies which revolve around their respective pledges to slash carbon dioxide emissions.

The surge in expenditures is also likely to extend technological advances, including reduced battery costs and charging time, which are likely to make EVs more appealing to consumers.

For China, this can be a game changer since its policies has largely positioned it as the lead country to have widely adopted electric vehicles, say industry executives.

“The future of Volkswagen will be decided in the Chinese market,” said Herbert Diess, chief executive of VW. He went on to add, China “will become one of the automotive powerhouses in the world.”

“What we find (in China) is really the right environment to develop the next generation of cars and we find the right skills, which we only partially have in Europe or other places. We have very clear policies established here in China. Policymakers and regulators are requiring” a shift to electric vehicles.

Countries across the globe are increasingly placing more restrictions on conventional gasoline and diesel engines, thus forcing automobile companies to accelerate the shift to electrification.

In 2018, global automakers stated, they planned on spending $90 billion on electric vehicle development. This is peanuts to the current $300 billion that automakers have earmarked for spending on electric vehicles in China, Europe and North America.

VW’s staggering EV budget dwarfs that of its closest competitor, Daimler AG which has committed $42 billion. In comparison, General Motors Co, the biggest automaker in the United States, said it plans to spend a combined $8 billion on electric and self-driving vehicles.

Nearly 45% of the global industry’s planned EV investment and procurement spending, which is more than $135 billion, will be spent on China, which is heavily promoting the production and sale of electric vehicles through a system of government-mandated quotas, credits and incentives.

Alliances between VW and its Chinese partners are likely to spur innovation in the global rollout of electric vehicles.

According to VW’s CEO Diess, VW is “evolving from the model where we have been developing and bringing European technology into this market to a new phase where we will co-develop part of the automotive technology in China for the rest of the world. I think this is a significant step change.”

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