Index > Authors> NewsTurbo> Why is China investing heavily in NEV industry?

Why is China investing heavily in NEV industry?

Source: | Date: Dec. 9

  • The Chinese government has made it clear that developing new-energy vehicles (NEVs) is essential for China to become a formidable automotive power in the world. A number of Chinese cities, including Beijing, Shanghai, Guangzhou, and Tianjin, have listed NEVs as a top priority of their development targets.

  • Supported by a slew of government incentives and compulsory regulations, China's NEV production and sales volume have grown explosively in recent years. With sales expected to reach as many as 250,000 units this year, China is on course to surpass the United States as the world's largest NEV market, according to the China Association of Automobile Manufacturers (CAAM). It is clear that governments at all levels are determined to push ahead with the NEV industry over the next five years, regarding it as an important part of the country's economic growth and industrial restructuring.

  • So the question is why the government is investing heavily in an industry that many automakers from Europe, the US, and Japan do not seem to view as significant? According to one industry analyst, there are three main reasons or motivations behind the government's push for NEV development.

  • First, technically, the government is hoping to find a way to quickly catch up with global leaders in technology levels to upgrade its auto industry, since the pattern of "market for technology" is no longer as effective today as it was before.

  • Second, politically, China is seeking to reduce its heavy dependence on fossil energy by developing new energy technologies and related industries. This will help the country enhance its strategic advantage in issues concerning Northeast Asia, Southeast Asia, the Diaoyu island, and Taiwan.

  • Third, militarily, countries like the US, Japan, Germany, and Britain have been developing new energy technologies for military use. In this regard, developing new energy technologies not only helps China narrow the gap with automakers from the US, Europe, and Japan, but also enables domestic automakers to reduce their reliance on fossil energy, which in turn will help China increase the proportion of its fossil energy reserves for the PLA, thereby degrading the threat to its maritime transport routes posed by the US, Japan, and countries in the South China Sea.