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China, the beginning of the end of fossil fuels?

15-09-2017 | Redacción CEU

The Beijing government wants to ban the production and sale of gasoline and diesel cars, like France and the United Kingdom before announced. The second world economy decision could revolutionize the global automotive sector and be the decisive push towards the electric car transition. Are we witnessing the fossil fuel end? Will we definitely abandon diesel and gasoline to sign onto an electric future? China has gone for broke on the motor world.

 

Goodbye, oil! Some countries exclaimed timidly among the crowd, a few months ago. The China announcement is a proclamation at the top of its lungs. No one can ignore the news from the mouth of the largest car market in the world. The vehicles future is increasingly bound to the electric model and car manufacturers are now facing one of the biggest challenges of this century: the motor industry structural transformation.

The transition to a new model of this transcendence requires great changes: high investment disbursement, new legislation preparation to accompany the electric vehicle impulse, an infrastructure construction that supports its development, gradual transformation of the production model, change of mentality in the consumer, vehicle design adapted to the new reality,... The defiance for the Asian giant is enormous, also for the rest of the countries that follow their footsteps –which will not be few–.

For the Professor of Management and Organization of Companies at the University San Pablo CEU and Director of the Master in Automotive Companies Management of the Institute for Advanced Management, Jose Manuel Maraña, the diesel and pure gas fuel end is close. Like he recently recognized in an interview about the future and present of the sector: <<The consumption in cities and the vehicles use in large cities is an increasingly studied social and political issue and its rational use as mobility element, not as property, is unstoppable. Indeed, I reaffirm, we have a totally different perspective on the automobile coming ahead>>. Are these announcements the indicators of the beginning of  the change?

The shy pioneers

France will be free of fossil fuels in its vehicles in 2040. At least that is the pretension of the measures announced in July by its Minister of Ecology, Nicolas Hulot, in order to drive the Paris Agreement. This is an ambitious task, considering that cars using gasoline as fuel reached 95.2% of the vehicle production in France during the first half of 2017, while electric cars only meant 1.2 and hybrids 3.5%.

Two weeks after the French announcement, the United Kingdom joined the push of clean energy cars. The London Government revealed that by 2040 it would ban the sale of diesel and gasoline cars to palliate environmental pollution. Some experts point out that other States like Norway, India, the Netherlands and Germany would be considering the same possibility for even before 2030.

The symptoms of the fossil fuel renunciation are becoming increasingly evident. The big European cities are betting on plans that promote the liquid hydrocarbons gradual disappearance. In Paris, diesel cars will not be able to circulate from 2020 and, for many years, vehicles that use this fuel and are prior to 1997 are vetoed in the metropolis. In some Copenhagen areas, diesel trucks need a particle filter to move. In Lisbon, there are restrictions for old vehicles. In the Netherlands, low emission areas have been created and Utrecht and Rotterdam do not allow the circulation of diesel models previous to 2001.

China, the beginning of the end of fossil fuels?

An ecologic decision

The country with the largest population and the fastest car market of the world, China, recently unveiled its intention to forbid vehicles that use fossil fuels. The Vice Minister of Industry and Information Technology, Xin Gobin, revealed in a forum dedicated to the automobile sector in Tianjin the work that the Government was doing to establish a road map for the fossil fuels disappearance; although without a steady schedule on the table, with the firm spirit of ending the production and sale of these car types in the near future.

According to the United Nations, China and the United States occupy the podium of large emitters of polluting gases, the 40% of the world level. The Asian Government committed to reduce a 20% of greenhouse gas emissions by 2030 under the Paris Agreement, and they even committed to attempt reaching the goal earlier. The environmental covenant has influences in the decision-making, but are there other reasons that may have motivated China's determination to end with fossil fuels in the country?

The Chinese electric stimulus

The consulting firm AlixPartners says that the Asian giant has moved from the bottom of the list in 2013, to selling 22.5 million kilometers of electric range –number of sold electric vehicles  multiplied by the electric autonomy– in the second quarter of 2017. Only the United States could follow it significantly with 9.9 million kilometers. In addition, according to this ranking, five Chinese companies are among the top ten car manufacturers that have sold more kilometers in the second quarter of 2017, companies like Zhidou, BYD Auto, BAIC Motor Corp., Zhejiang Geely Holding Group and Jianghuai.

China is getting good marks in electric terms. It seems to be preparing well for the change. The advertisements of France and Britain, although daring,  were not strong enough. Their markets add up to two million vehicles per year. However, the Beijing Government announcement is an unprecedented stimulus. For eight years, China has established itself as the largest vehicle market with 26 million vehicles per year and the consultancy's forecast is that in 2024 China will sell 42 million cars per year, 36% of the world total.

The Asian giant bets on the electric automotive business. Not only that, it wants to lead both sales and the new model transition. Will the rest of the countries be prepared for the change? How will foreign manufacturers respond to the Chinese push? The motor world is at stake.