Electric Vehicles: China Leads as Trump Steps Back

  • Electric vehicle sales have soared in China over the last few years. The country is now planning gasoline-car-free zones.
  • Tesla is also building a Gigafactory in China.

Electric vehicles

According to Reuters, “China is considering testing a ban on gasoline-powered vehicles in some parts of the country and may set a timetable to eventually phase out such vehicles, according to the industry ministry.” China’s electric car sales have soared in recent years. Around 1.3 million NEVs (new energy vehicle) were sold in China last year. NEVs include both plug-in hybrid vehicles and battery electric vehicles. However, China’s electric car sales stalled last month, with NIO (NIO) reporting dismal car delivery numbers. Tesla (TSLA) is also building a Gigafactory in China.

Trump wants to take a step back

China is taking several steps to control pollution and increase electric vehicle adoption. It’s placed restrictions on new internal combustion engine cars in some cities to address the emission problem. The percentage of NEVs in China’s total car sales is higher than in the US.

While China has taken the lead in terms of electric vehicles and lowering emissions, President Trump wants the US to take a step back. The Trump administration has proposed lowering the stringent emission standards set under President Barack Obama. However, automakers are instead looking to the regulations set by California. These regulations are stringent compared to Trump’s proposal.

Trump lashes out at automakers

President Trump has a tumultuous relationship with automakers. He previously lashed out at General Motors (GM) and Ford Motor Company (F) for shifting production to Mexico. Yesterday, in a tweet, Trump called auto executives “foolish” for not heeding to his emission proposal. While Trump sees climate change as a hoax, automakers are increasing their efforts to produce electric vehicles.

Auto companies such as Ford and General Motors weren’t excited about the Section 232 automotive probe. The US Department of Commerce has submitted its Section 232 automotive probe findings to President Trump, but he’s delayed action on the report. Tariffs on automotive imports could particularly hit Japan and Germany. German GDP contracted in the second quarter.

Tesla and China

Last year, China increased the tariffs on US-made cars amid the escalation in the trade war. However, China later rolled the tariff hike back. Tesla had to increase car prices in China due to higher tariffs. It also rolled back the price hike after the additional tariffs were withdrawn.

As China rolls back subsidies for electric vehicles, Tesla might get a more level playing field in the country. NIO attributed fewer July deliveries to the rolling back of subsidies.

Electric vehicles and Made in China 2025

China sees electric vehicles as a key strategic industry. Under its Made in China 2025 program, the country is promoting new-age manufacturing, which includes electric vehicles and robotics. However, Made in China 2025 is a bone of contention between the US and China. The US has faulted China for massive state subsidies that interfere with the free market.

Electric vehicles: US versus China

China has taken a step forward by proposing gasoline-car-free areas. In contrast, we could view Trump’s proposal to ease emission standards as a step backward. Tesla’s CEO, Elon Musk, quit Trump’s economic advisory council after Trump pulled out of the Paris climate deal. Tesla and NIO are trading with double-digit YTD (year-to-date) losses. General Motors and Ford are up 13.3% and 23.9%, respectively, YTD.