China’s EV Revolution: Environmental Impact in a Booming Market

CONTENTS: China’s EV Revolution: Environmental Impact

• China EVs popular, not environment
• China leads EV market, environment lags
• China pushes EVs with subsidies and policy
• China EVs: Cost focus, mixed environment impact
• China EVs: Geopolitical play, air quality bonus

China EVs popular, not environment

China’s EV Revolution: Environmental Impact

In November, Kenzi, an advertising professional in Shanghai, decided to buy an electric vehicle, not for its environmental benefits, but because she had read Elon Musk’s biography and liked the look of the Tesla Model 3. Additionally, purchasing an EV allowed her to avoid the lengthy and costly process of obtaining a license plate in Shanghai, where they are government-rationed.

“It’s challenging to get a license plate in Shanghai, but buying an EV grants you one for free,” Kenzi explained.

“The country has an annual sales target for electric vehicles, but for consumers, environmental protection isn’t the main concern. The trend and popularity of EVs are the bigger reasons for their purchase.”

Kenzi joined the expanding group of EV owners in China, which is not only the world’s second-largest economy and the largest carbon emitter but also the leading EV market. According to a 2023 report by the International Energy Agency, over half of the world’s EVs are now on the roads in China.

China’s EV Revolution: Environmental Impact: China’s EV production and adoption represent one of the most significant success stories in global markets. EV sales in China surged from 1.3 million in 2021 to 6.8 million in 2022, making up over a third of the world’s EV sales that year.

China, the largest single carbon emitter, contributed 33% of the global total in 2021, with transport responsible for about 10% of its emissions. The Chinese Communist Party (CCP) government aims to peak its emissions by 2030, potentially achieving this goal earlier than planned. Part of this strategy includes having new electric vehicles comprise 40% of all cars on the road by that time. As of June 2022, out of 312 million civilian vehicles, battery electric cars made up approximately 3.2%. While Tesla is the most popular EV, the domestic brand BYD is nearing the top spot.

China’s EV Revolution: Environmental Impact: China’s EV sector has seen explosive growth due to years of government subsidies, tax incentives, significant technological and infrastructure investments, and policies aimed at boosting consumer adoption, such as free license plates.

The CCP has leveraged its authoritative power to implement impactful policies and market interventions to cut emissions and achieve its renewable energy targets. In 2001, the CCP included EV technology research in its five-year plan and set a target for EVs to represent 45% of new car sales by 2027. From 2009 to 2022, billions of yuan in subsidies and tax breaks were funneled into the market, and comprehensive roadside infrastructure has been developed in Chinese cities.

A prime example of this shift is the expansive global R&D center of Changan, a major carmaker located on the outskirts of Chongqing. Founded in 1862 and now partnered with Mazda and Ford in joint ventures, Changan has become the eighth-largest EV producer in China. Its showrooms offer a range of vehicles, from compact city cars to luxury sports models and large hybrid SUVs, all featuring CATL batteries and Huawei technology. Changan plans to cease production of internal combustion engine vehicles by 2025 to focus exclusively on electric and hybrid models.

China’s EV Revolution: Environmental Impact: In China, the marketing of electric vehicles (EVs) rarely emphasizes their environmental benefits. Instead, the primary motivator for buyers is cost. Rui Rui, a 32-year-old finance worker in Shanghai, noted that he saved around 100,000 RMB (about £10,650) on license plate fees alone by opting for an EV. He also pointed out that while fuel costs are higher, electricity is cheaper in China.

The environmental impact of EVs remains a topic of debate. Studies have shown that the manufacturing of EVs can be more damaging to the environment compared to conventional cars, though over time, the emissions savings can outweigh this initial disadvantage.

A recent study published in *Nature* analyzed the effects of EVs on air quality in Beijing, Shanghai, and Shenzhen. It found that regions with higher rates of private EV usage experienced improvements in air quality, as indicated by decreased pollutant levels. However, in cities like Beijing and Shanghai, where electricity is largely coal-based, the study observed an increase in nitrogen dioxide levels, potentially linked to the electricity consumption of EVs.

Researchers from the Massachusetts Institute of Technology and Beijing Institute of Technology concluded that while battery electric vehicles offer notable carbon reduction when replacing fuel vehicles, substantial emissions reductions are expected over the next decade as China moves towards its emissions targets.

China’s EV Revolution: Environmental Impact: Dr. Tinglon Dai, a business professor at Johns Hopkins University, believes that the 45% target for electric vehicles (EVs) is achievable if Xi Jinping remains committed to supporting the industry. He points out that China is leading globally in EVs, offering high quality, low prices, and a wide range of options. This positions China to dominate a prestigious market while aligning with broader environmental goals in the West.

However, Dai suggests that Xi’s push for EVs is not solely about climate or economic benefits but is more of a geopolitical strategy to establish dominance in a high-status industry. He argues that even if China were to lose money on EVs, the significant economies of scale are currently preventing such losses.

While the environmental benefits of EVs may not have been the primary motivation, they are a welcomed bonus for both buyers and the government. Kenzi, who drives her Tesla mainly on weekends, has noticed improvements in air quality. She observes that the rise in EVs has contributed to reduced car emissions and better pollution levels.