Economy

China Gets Its Wires Crossed With Electric Car Boom

A rash of state subsidies in China has helped multiply electric car sales, but it has also warped industrial policy and undercut the market.

An electric fueling station in Beijing
An electric fueling station in Beijing
Geng Huili, Wang Guoxin and Li Fang

BEIJING â€" China established itself as the world leader of plug-in electric and hybrid cars in 2015, with production and sales of more than 330,000 units, a three-fold increase over the previous year.

The numbers are a direct result of the "New Energy Vehicle" support plan that the Chinese government introduced three years ago. The initiative involves heavy subsidies for those producing electric automobiles, and has had the effect, on the whole, of upgrading China's sustainable automotive technology level to current international standards. Still, at the same time, the initiative has also generated much speculation among carmakers, and exposed widespread examples of dangerous battery production.

The problem, for starters, is that the subsidy policy tries to tackle the issue with too broad a stroke and thus contains loopholes that manufacturers tend to exploit. It has also been slow adapting to automotive industry developments.

For commercial vehicles, including medium-size vans or public buses, for example, the subsidies are classified depending on the length of the car body, explains Ouyang Minggao, a professor at Tsinghua University. "So automotive companies swarm to build whatever model squeezes out the most subsidy," he said. "For two years it was the 10- to 12-meter commercial vehicles, whereas last year nearly 80% rushed to build 6 to 8-meter vehicles."

The 2013-2015 subsidy policy established sums of 300,000 RMB ($45,600) per 6 to 8-meter electric vehicle and 400,000 RMB ($60,800) per 8 to 10-meter vehicle. Local governments add their own matching subsidies, meaning automakers were getting as much as 600,000 RMB (more than $90,000) per 6 to 8-meter vehicle, which is more than the cost of manufacturing. Producers, as a result, have been able to sell electric vehicles for lower prices than conventional ones.

Throughout the world, no other country has been so financially generous in encouraging electric cars. In the West, most electric vehicle promotion policies are implemented through "green tax" measures. Subsidies in those countries are mainly used to encourage research and development, and to build public charging points.

Safety concerns

In an effort to close these loopholes, the Chinese government revamped its subsidy policy effective Jan. 1. The first change in its new five-year plan was to raise the subsidy threshold by requiring electric passenger cars to have a top speed of 60 miles per hour and longer mileage effeciency.

But as Zhu Jun, deputy director of SAIC Motor, points out, producers can meet the efficiency requirement simply by increasing the number of battery packs, an added security risk that the regulations fail to account for.

"China's electric vehicle industry may have seen explosive growth in 2015, but there was also an increase in false claims of mileage efficiency, and in questionable practices such as blindly increasing the number of battery packs," he says.

In recent years there have been various reports of batteries causing fires in cars and public buses. "Not only does this do great harm to companies that strive to raise quality through research and design, but it also puts China's electric car development into a vicious circle," says Zhu Jun.

The government's new plan also calls for reducing direct subsidies to electric vehicles and encouraging nation-wide construction of charging facilities, particularly in areas with high levels of air pollution. State subsidies have to be "withdrawn gradually," Xin Guobin, the deputy minister of industry and information technology, said during a recent electric vehicle forum. "The companies themselves need to become the main driving force of industrial development."

Zhu Jun reckons that China, which has been unable to compete with U.S. and European automakers with regards to conventional vehicles, will be able to match up on the electric car front. "But the imperative will be to grasp core technology and not rely on subsidies," he says. "Only if our products are competitive can our development be sustainable."

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The Olympic torch is lit at the Archaeological site of Olympia in Greece.

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Asham!*

Welcome to Tuesday, where Pyongyang test fires a suspected submarine-launched missile, Colin Powell is remembered, Poland-EU tensions rise, and yay (or yeesh): it's officially Ye. Meanwhile, our latest edition of Work → In Progress takes the pulse of the new professional demands in a recovering economy.

[*Oromo - Ethiopia and Kenya]

🌎  7 THINGS TO KNOW RIGHT NOW

• North Korea fires missile off Japan coast: South Korea military reports that North Korea has fired a ballistic missile into the waters off the coast of Japan. The rocket, thought to have been launched from a submarine, is the latest test in a series of provocations in recent weeks.

• Poland/EU tensions: Polish Prime Minister Mateusz Morawiecki has accused the EU of "blackmail" and said the European Union is overstepping its powers, in a heated debate with EU Commission President Ursula von der Leyen over the rule of law. The escalation comes in the wake of a controversial ruling by Poland's Constitutional Tribunal that puts national laws over EU principles.

• Colin Powell remembered: Tributes are pouring for former U.S. Secretary of State Colin Powell, after his death yesterday at age 84. Although fully vaccinated, Powell died from complications from COVID-19 as he was battling blood cancer. A trailblazing soldier, he then helped shape U.S. foreign policy, as national security adviser to President Ronald Reagan, then chairman of the Joint Chiefs under Presidents George H.W. Bush and Bill Clinton, and served as the nation's top diplomat for George W. Bush. Powell's legacy is, by his own admission, "blotted" by his faulty claims of weapons of mass destruction to justify the U.S. war in Iraq.

• Russia to suspend NATO diplomatic mission amid tension: Russia is suspending its diplomatic mission to NATO and closing the alliance's offices in Moscow as relations with the Western military block have plunged to a new low. Foreign Minister Sergei Lavrov announced the move after NATO expelled eight diplomats from Russia's mission for alleged spying. Relations between NATO and Russia have been strained since Moscow annexed Ukraine's Crimean Peninsula in 2014.

• Ecuador state of emergency to battle drug crime: President Guillermo Lasso declared a state of emergency amid Ecuador's surge in drug-related violence. He announced the mobilization of police and the military to patrol the streets, provide security, and confront drug trafficking and other crimes.

• Taliban agrees to house-to-house polio vaccine drive: The WHO and Unicef campaign will resume nationwide polio vaccinations after more than three years, as the new Taliban government agreed to support the campaign and to allow women to participate as frontline health workers. Afghanistan and neighboring Pakistan are the last countries in the world with endemic polio, an incurable and infectious disease

• Kanye West officially changes name: Some say yay, some say yeesh, but it's official: The-artist-formerly-known-as-Kanye-West has legally changed his name to Ye, citing "personal reasons."

🗞️  FRONT PAGE

The Washington Post pays tribute to Colin Powell, the first Black U.S. Secretary of State, who died at 84 years old from complications from COVID-19.


💬  LEXICON

Jashn-e Riwaaz

Indian retailer Fabindia's naming its new collection Jashn-e Riwaaz, an Urdu term meaning "celebration of tradition," has been met with severe backlash and calls for boycott from right-wing Hindu groups. They are accusing the brand of false appropriation by promoting a collection of clothes designed for Diwali, the Hindu festival of lights, but giving it a name in Urdu, a language spoken by many Muslims.

📰  STORY OF THE DAY

Work → In Progress: Where have all the workers gone?

After the economic slowdown brought on by the coronavirus pandemic, companies all over the world are taking advantage of loosened lockdowns and progress on the vaccine front to ramp up operations and make up for lost productivity. But the frenetic spurts of the recovery are getting serious pushback. This edition of Work → In Progress looks not only at the coming changes in our post-COVID economy, but also the ways our world is re-evaluating professional obligations.

🗓️ Hail the 4-day week Across the planet, the shorter work week trend is spreading like wildfire. Four is the new five. Spain began experimenting with the concept earlier this year. New Zealand launched a similar trial run in 2020. And in Iceland, efforts to curb working hours date all the way back to 2015, with significant results: 86% of the country's workforce gained the right to reduce work hours with no change in pay.

🚚 Empty seats In the United States, meanwhile, a severe lack of truck drivers has the country's transportation industry looking to hire from abroad. The only problem is … the shortage is happening worldwide, in part because of the e-commerce boom in the wake of worldwide quarantines. The Italian daily Il Fatto Quotidiano reports that companies will be scrambling to fill the jobs of 17,000 truck drivers in the next two years. The article blames low wages and the dangerous nature of the job, stating that Italian companies are making moves to employ foreign workers.

💼 Key help wanted It's all well and good to question current working conditions. But what about 20 years from now? Will we be working at all? A recent article in the French daily Les Echos posed just that question, and posits that by 2041 — and with the exception of a few select jobs — automation and digitalization will decimate employment. The piece refers to the lucky few as "essential workers," a concept that originated with COVID lockdowns when almost all labor halted and only a minority of workers capable of performing society's most crucial in-person tasks were allowed to carry on.

➡️ Read more on Worldcrunch.com

📣 VERBATIM

I'm worried for my Afghan sisters.

— Nobel Peace Prize recipient Malala Yousafzai Nobel Prize tells the BBC that despite the Taliban's announcement that they would soon lift the ban on girls' education in Afghanistan, she worries it "might last for years."

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

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