German Minister Snubs Automakers to Back China EV Quota Plan

(Bloomberg) -- Germany’s environment minister is throwing her support behind an aggressive Chinese plan to boost sales of electric and hybrid vehicles, putting her at odds with her country’s automobile industry and some within the German government.

China is considering legislation that would require automakers to sell a specific quota of zero- and low-emission vehicles. The figure would start at 8 percent of overall deliveries in 2018 and rise from there in successive years.

“With this proposal, the Chinese are showing investors what they can expect,” German Environment Minister Barbara Hendricks said in an interview this week. “That’s exactly what economic actors need: A clear orientation of what’s expected of them.”

Her comments fly in the face of opposition to the plan from within the German auto industry, which says such short-term targets are unrealistic and give an unfair advantage to Chinese producers. German Economy Minister Sigmar Gabriel also voiced his concerns about the matter with Chinese Industry Minister Miao Wei during a trip to the country this week.

The draft from Miao’s ministry, released in September, requires carmakers that produce or import more than 50,000 vehicles a year to ensure that at least 8 percent of sales are new-energy vehicles by 2018. The proportion would rise to 10 percent in 2019 and 12 percent in 2020. Those that fail to meet the target would either need to buy credits from other automakers exceeding the goal, pay penalties or reduce their own output to meet the percentage total. German automakers say the proposal favors smaller, domestic producers.

“The central prerequisite for this is market neutrality,” Matthias Wissmann, head of the German automobile manufacturers association, said of efforts to lower vehicle emissions. “We insist that China creates reliable competition rules and fair market access also for non-Chinese companies -- as well as regulations that are not discriminatory.”

Along with the new proposed quotas, China has already taken measures -- including capping the number of new cars allowed in major cities, restricting the use of vehicles on selected days and relocating heavy industry to remote areas -- to reduce industrial emissions in smog-filled urban areas.

Hendricks, who caused waves earlier this year when she said Germany should work toward only selling zero-emission vehicles by 2030, sees the latest actions by China as helping to accelerate the move away from cars with traditional combustion engines. Automakers have no choice but to follow the country’s directives because China is the world’s largest auto market, with 21.1 million passenger cars sold in the country last year. That compares with 3.2 million vehicles in Germany.

Meeting the news targets would be very tough. BMW AG sold 1,796 plug-in hybrid and i3 electric city cars in China in the first nine months of the year -- a tiny fraction of 379,176 total it delivered in the country during that time. China is Volkswagen AG’s largest market. The automaker sold 2.85 million vehicles in China and Hong Kong through September -- with less than 1,000 of them being electrics.

“If the German auto industry doesn’t want to miss out on where the Chinese market is headed, it would serve the industry well to expand its model offerings as quickly as possible to align itself with such criteria,” Hendricks, a Social Democrat, said of the proposal.

VW Chief Executive Officer Matthias Mueller said Tuesday at an event in Shanghai that the automaker will introduce 15 locally produced new-energy vehicles in China in the coming three-to-four years. The automaker plans to bring to market 30 new electric vehicles globally by 2025.

Gabriel, who heads the Social Democrats, told German media after meeting Miao that he expressed the view to his counterpart that the 2018 targets were not attainable, and that Miao assured him that any proposal would be implemented fairly for all involved.

“I certainly have serious doubts that such draconian steps are correct,” Olaf Lies -- economy minister from VW’s home state of Lower Saxony and a member of the automaker’s supervisory board -- told Sueddeutsche Zeitung regarding the quotas.