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Foreign automakers shouldn't fear Beijing's 2025 edicts
Yang Jian | 2017/5/19

SHANGHAI -- Beijing has been busy issuing edicts to automakers ever since it opened China to foreign investment. 

The latest is a blueprint -- published just last month -- which is supposed to guide automakers through 2025. 

It sets goals for EV sales, fuel economy and r&d expenditures, among other things. It even indicates which Chinese automakers should rank among the top 10 of global powerhouses.

Should foreign automakers take this stuff seriously? If history is any guide, they should keep an eye on the policies, but not worry themselves sick about them. 

These are not policies in the strict sense of the word. They are little more than a wish list. But over the past decade or so, Beijing's priorities have shifted.

The government at first wanted to nurture state-owned automakers.

In 2009, for example, Beijing announced plans to consolidate China's highly fragmented auto industry around eight state-owned companies led by FAW Group, Dongfeng Motor, Changan Auto and SAIC Motors.

And in 2011, foreign automakers were told to create new car brands for their joint ventures. The new brands were supposed to help their state-owned partners learn about vehicle development.

How seriously should we take these policies? Well, the government has ditched a plan to consolidate China's auto industry. And it has ignored foreign automakers that failed to launch new brands for their joint ventures.
 
Now Beijing is promoting EV production. The government last year called for California-style carbon credits to goad automakers -- especially foreign companies -- to ramp up EV output.

Yet Beijing will phase out EV subsidies by 2020, even though these subsidies fueled China's EV sales boom.
 
So, what will become of China's carbon credit plan? Well, government officials have begun easing their EV production quotas after Volkswagen, BMW and Mercedes kicked up a fuss.

But why does Beijing fail to implement these policies? Bureaucrats that regulate the auto industry suffer from two misconceptions.

First, they seem to believe they are still living in the old days, when China was a state-controlled economy insulated from the outside world. 

China's economy is so different from what it used to be. Most industries -- including auto manufacturing -- no longer are controlled by state-owned monopolies. 

China's auto market today is mainly in the hands of global brands and private Chinese carmakers such as Geely and Great Wall. These companies care more about what consumers need than what government wants. 

The second problem with China's policymakers is that they don't consult automakers before drafting policies. 

So what is the likely fate of the government's new industry blueprint?

Automakers are likely to reduce their average fuel consumption per fleet to 5 liters per 100 kilometers (47 mpg) by 2020, as the government has requested.

But annual EV sales aren't likely to reach 2 million vehicles by 2020, as Beijing requires. And it's even less plausible to mandate annual sales of 7 million EVs by 2025. 

Moreover, the government cannot order the size of domestic automakers' r&d budgets. And it certainly can't expect to dictate how many companies will join the global top 10.

Like so many policies that it has previously introduced, Beijing's blueprint is mainly a bag of wishes, not enforceable targets.

Pictured: Yang Jian is managing editor of Automotive News China.


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