I mentioned in a previous post that China has a target of 8% EVs and PHEVs (plug-in hybrid EVs) by 2018 and 12% by 2020. So how will this work? It's a kind of cap-and-trade system. Every manufacturer who achieves the targets gets points/credits, with 100% EVs getting the most points, PHEVs getting less, but more than hybrids without a plug, which in turn get more that petrol-engined cars which get zero points. If your EV/PHEV sales percentage is less than the target, you have to buy credits from manufacturers who have achieved the target. This will make your cars more expensive than the cars from producers who have achieved their target.
The Chinese scheme is modelled on California's ZEV (Zero Emissions Vehicle) scheme. The California scheme has been adopted by nine other states (Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Vermont).
The ZEV program assigns each automaker “ZEV credits,” which represent the company’s sales of electric cars and trucks. Automakers are then required to maintain ZEV credits equal to a set percentage of non-electric sales. The credit requirement is 4.5 percent of sales in 2018, rising to 22 percent in 2025.
For example, an automaker selling 100,000 cars in California in 2018 will need at least 4,500 ZEV credits, with at least 2,000 coming from battery-electric or fuel cell vehicle sales. However, this does not mean they’ll sell 4,500 electric cars and trucks, as most ZEVs generate more than one credit per vehicle (see below).
Automakers earn credits by selling zero emission cars and trucks. The credit per vehicle varies with drivetrain type and electric range. From 2018 onwards, plug-in hybrids—which only partially drive on electricity—receive between 0.4 and 1.3 credits per vehicle sold. Battery electric and fuel cell vehicles receive between 1 and 4 credits, based on range.
For example: the Tesla Model S, which boasts a range of more than 200 miles, is eligible for 3.3 credits, while the 84-mile range Nissan Leaf is credited at 1.8 ZEV credits per car sold.
Because not all vehicles receive a flat 1 credit per sale, the ZEV credit percentage does not directly reflect the EV sales percentage. CARB’s most recent assessment of the ZEV program estimates automakers will need to reach less than 8 percent ZEV sales by 2025 to meet the 22 percent ZEV credit requirement. [Read more here]
It seems odd to me that you would give an EV 1.8 or 3.3 ZEV credits but only require 1 credit to cover the EV requirement for producers who make or sell no EVS. As the article points out, this has led to a build-up of surplus ZEV credits. Which reduces the pressure on ICE manufacturers to increase their own EV/PHEV sales (because it reduces the price of the credits).
They're doing something similar in China.
Last week, Chinese Premier Li Keqiang met privately with German chancellor Angela Merkel to discuss China’s proposal to require all manufacturers to sell more so-called new energy vehicles. After the meeting, Merkel thought she had an agreement that would allow German companies that manufacture cars in China a little breathing room before complying with the new rules.
But a notification posted online this week by the Legislative Affairs Office, which reports to the Chinese cabinet, says otherwise. It indicates that all manufacturers will be required to generate EV credits that equal 8% of sales in 2018, 10% by 2019, and 12% by 2020. The rule applies to both foreign and domestic car makers.
The credits are computed based on the level of electrification of the cars produced. Fully electric cars earn more credits than plug-in hybrid cars, for example. Plug-in cars that go further on battery power alone are rewarded with more credits than cars that have more limited electric range. [Read more here]
So the question is; is China's 12% target also in effect lower because of over-issuance of credits or do they mean 12%? I looked for clarification but found none. For what it's worth I reckon China means a real 8% and a real 12%. But they might not actually achieve it because of supply constraints for components. All the same, the pressure is on, and those traditional car manufacturers will have to move rapidly if they want to preserve access to the world's largest car market, which makes up 35% of global car sales.