The role of industrial policies in sustaining the electrification transition – comparing China with Europe

Type de publication:

Conference Paper

Source:

Gerpisa colloquium, Bordeaux (2024)

Mots-clés:

China, Electric Vehicle, electrification, Incentives, Industrial Policy, new energy vehicle, policy experimentation, Subsidies, upgrading

Résumé:

Over the past two decades, China’s automotive sector has achieved notable successes in the transition to the connected, autonomous, shared and electric (CASE) mobility. China has become the world’s leading country in electric vehicle production and consumption since 2015. For the year 2023, about 9.5 million units of new energy vehicles (NEVs) were sold in China, representing over 60% of the world total sales and growing at 38% on a year-to-year basis; among them 7.7 million units were passenger NEVs (CAAM). In comparison, the estimations for passenger EV (BEV+PHEV) sales in Europe and in the North America in 2023 were respectively 3.3 million and 1.6 million units (BNEF, 2023). Besides the quantitative achievements, China is the only country that has so far developed a full value chain of electric vehicle manufacturing, from raw material production, battery making, EV assembly to end-of-life recycling.

Faced with these sensational developments, Europe reacted with fear and distrust and in October 2023 the European Commission formally launched an investigation into state aid for Chinese electric cars. It is possible that the successes of Chinese electric car manufacturers can be attributed to some extent to state aid, but they are certainly also the result of far-sighted and effective economic policies implemented by the Chinese government. Our paper proposes a longitudinal critical analysis relating to Chinese public economic policies for the automotive sector, in comparison with the scenario European. As methodology, we make a systematic analysis of these policies based on official documents of the ministries and reference institutions and literature relating to public policies and innovation processes in the automotive sector.

According to our study, the successful deployment of the new EV industry in China is largely the merit of strong and comprehensive industrial policies, covering multiple aspects including raw material management, general emission standards, EV technical requirements, taxation exemptions, practical advantages, charging infrastructure, public fleet, demonstration zones, etc. There are active policy making both at the central and local governments levels. While the central government provides strategic guidance and funding for fundamental research projects, local governments have more direct roles in policy implementation and adaption, coordinating different actors and stakeholders. These policies have kept evolving with the changing market situations, following the Chinese way of ‘learning from experimentation’ (Roland, 2000; Qian, 2002; Wang and Yang, 2023). Our observations show that the Chinese EV industry policies have gone through several major phases, embodying important changes and evolutions, with the goal to not only reinforce China’s leadership in the emerging global EV industry but also accelerate the decarbonisation of its economy. With the Chinese EV industry becoming more competitive and the local EV demand more automatic, the policy focus is shifting on other aspects, such as next-generation connected and automated vehicles, new industrial norms and standards and carbon emission credit trading mechanism.

In Europe, the industrial policy making regarding EV sector is quite different from China. First, the public procurement has played a marginal role so far. Second, the regulations regarding emissions and energy transition have evolved in a way to leave room for European OEMs to progressively raise their technological levels; this, however, led to hesitation on an early adoption of the electrification strategy. Third, while in China the administrative restriction on the sales of ICEs is gradual and concentrated in large cities, on the contrary in Europe a sudden and total ban is expected for diesel and petrol cars, which will be applied simultaneously in all EU countries and in large cities as well as in small towns. Fourth, while in China the technological bar for access to incentives has been progressively raised to push technology upgrading, in Europe the notion of an electric vehicle deserving of incentives receives a static and more simplistic definition, without significant technological thresholds. Fifth, in relation to the size of the economy, China’s cumulative subsidies for EV purchase by 2022 were only around 0.16% of its GDP in 2022; in Germany the cumulative spending on incentives was actually around 0.5% of German GDP in 2022.

Our conclusions put accents on a systematic learning from the Chinese EV industry policies making, which is inherent in the energy transition by incorporating the evolution towards NEVs as central and foundational to the competitiveness of the Chinese economic system, encompassing areas of technology and expertise not yet specifically manned by other countries, with attention to the environmental sustainability of vehicles and new business models and production opportunities. Within this framework, the policies put in place by China involved an upgrading process by creating and innovating an entire value chain, complemented by the extended control of the supply of critical raw materials and the integration of digital solutions and applications.

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