Original Spanish Version Posted: Oct 15, 2017

The Chinese Government has announced that starting 2019 it will gradually set a minimum of mandatory quotas for the production and import of hybrid and electric cars (10% in 2019 and 12% in 2020). The policy seems to have been triggered by growing concern about the high levels of pollution and the bad air quality in Chinese cities, as well as the desire to have more solid alternatives to gasoline that will allow decreasing its fossil fuel dependency.

Moreover, this change of strategy is also a consequence of a State Plan, launched in 2015 by the Chinese Government, which aims at transforming the country into the world leader of different industries of the future, including the electric-automotive industry. Although this is a domestic policy, it will probably have significant consequences in the automotive and the energy industries due to the fact that China is the world’s largest car market.

In fact, according to data from the Wall Street Journal (WSJ), the Asian giant went from having a million vehicles in the year 2000 to twenty-four millions in 2016; and nowadays, current sales in the Chinese Market represent two thirds of global car sales and half of all electric-car sales.

Taking into consideration the size of the Chinese market and the desire to guarantee a share in it, main vehicle companies have announced different strategies to comply with the new state policy, even though this might require to speed-up or transform their production models.

On the other hand, even if the implementation and the promotion of the use of hybrid vehicles have been gaining momentum in Nordic countries such as Finland and Norway; China’s announcement (the most populated country and the 2^nd largest economy in the world) seems to give an strategic impulse to other countries such as the United Kingdom, France and India, to strengthen and fast-track similar policies that could eventually lead to a market reconfiguration.

In fact, a paper from the Monetary International Fund (IMF) called “Riding the Energy Transition: Oil Beyond 2040” points out that transitions in a specific sector might be considerably accelerated in a country if it is backed by the State.

In China´s specific scenario, besides the gradual system of mandatory market quotas, the Government has carried out actions such as: granting subsides to national electric-automotive companies; building thousands of charging stations and fast-tacking the issue of transit plates for electric vehicles as well as setting considerable restrictions to the expedition of plates for engine-driven vehicles. (Wall Street Journal)

In this sense, a State policy issued by the Government of the world’s largest vehicle market could lead to a new revolution in transportation and to a future reconfiguration of the energy market; especially if we take into consideration that, as the IMF’s paper indicates, the transportation industry is the most critical component of oil demand. In fact, 57% of oil´s world demand comes from this industry.

So, in the future, an increased in the use of vehicles that substitutes or might require lower gasoline consumption could trigger a decreased in the global demand of fossil fuels and an increase in the use of other energy sources such as gas, electricity and bio-diesel.

Lastly, it should be noted how the Chinese Government was able to timely identify the automotive sector not only as a national growing sector but also as a key area for the international market and  as a factor of considerable importance for the well-being of its population and the environment. With these elements in mind, as well as with a geopolitical desire to expand its footprint in the world, China has decided to bet for the development of electric vehicles in order to gain a comparative advantage against other superpowers, while it also sets the baseline of what might be the future of transportation, the car market and in consequence the future of gasoline and the energy sector.