Illustration: Peter C. Espina/GT
The recent announcement that China will ban production of 553 vehicle models that exceed pollution limits as part of the country's efforts to combat air pollution will not have been a surprise to many Chinese manufacturers, coming only months after the closure of small, ineffective manufacturers of electric vehicles to push consolidation in the sector. However, the new ban restricts the sales of some cars made by Audi, Mercedes and Chevrolet. That will be a shock to the global automotive industry as they have relied on "fleet average" pollution limits, which included the percentages of non-polluting cars they may produce in the coming years. Now all manufacturers must comply with limits for each vehicle sold in China.
The fact that China is serious about reducing atmospheric pollution shouldn't be a surprise. By June 2014, as academics were fuming about pollution and the Intergovernmental Panel on Climate Change, a body under the auspices of the UN, was preparing for its momentous Paris meeting, China and the US agreed to deeply reduce their nations' pollution levels as neither country could deal with this problem alone. China promised to raise production of electrical energy from zero-emission sources to 20 percent by 2030 and the US pledged to cut its emissions to 26-28 percent below 2005 levels by 2025. The two nations' joint statement makes very interesting reading.
Given the backing of the leaders of the two major energy consumers - China and the US - the 2015 Paris meeting had almost a foregone conclusion. All nations agreed on the Paris Accord and within a few months it was ratified.
The leaders of China and the US met again when the G20 Summit was held in Hangzhou in September 2016 and they reaffirmed their climate change pledges. But by January 2017, China was saying that all signatories must stick to the 2015 Paris Accord to limit global temperature increases to well below 2C, and that walking away from the pact would endanger future generations. China knew that then president-elect Donald Trump had vowed to renege on the Accord (which he did officially in June 2017) and that the UK and Europe were mired in Brexit negotiations so might lose sight of the Paris Accord. Later, while pulling out of the Paris Accord, Trump said the US would stop contributing to the Green Climate Fund, a UN program that since 2013 has seen industrialized economies pledge $10.3 billion to address the effects of climate change. Meanwhile, China made 20 billion yuan ($3.1 billion) available for setting up the China South-South Climate Cooperation Fund to support developing countries in the fight against climate change.
Although China was a major polluter it has made great changes. To match its economic development plans it has had to produce more electricity - for its industry, its trains and for its growing middle class.
To the media's surprise it has built more coal-fired power stations but it has decommissioned many old and inefficient units and is producing power more efficiently with less pollution. It is building eight large-scale carbon capture and storage plants to attempt to reduce its carbon footprint via this new technology. Thus, by August 2017 it had reached its 2020 solar energy installation target, becoming the largest producer of solar power on earth; and in June, Northwest China's Qinghai Province ran on 100 percent renewables for seven continuous days.
To combat smog, many cities worldwide have decided to ban fossil-fuelled vehicle use by 2025-30. Research in China indicates its automotive market will be all-electric by 2030, following the government's edict to have local producers ramp up their electric vehicle percentages to greater than 12 percent by 2020. This is also occurring across the globe. Volvo, ostensibly a Swedish manufacturer of cars and trucks, has said it will cease making petrol and diesel cars by 2019. Yet this may not be a surprise as Volvo Cars is owned by Chinese auto giant Geely. Of the 90 percent of Geely's sales that it aims to electrify by 2020, the company expects that 65 percent will be hybrids and 35 percent pure EVs. All aim to reduce city smog and reduce overall global pollution.
But the future is not only about changing engines in vehicles, it is about absorbing disruptions. Tim Cook, chief executive of Apple, suggests that their EV-car project is the "mother of all AI projects." It is a combination of three different factors - self-driving cars, electric vehicles and ride-sharing. They would be digitally connected for safety, allowing EV-trucks to work as mini-trains over long distances.
Young people are forcing change, as many of them no longer own a car. In China, Didi Chuxing has become one of the world's top seven ride-hailing platforms. More people will soon accept autonomous, on-demand EV cars and ride sharing. All these changes will totally re-make the auto industry.