Manufacturing News

China pushes ahead with EVs amid VW diesel probe

China will forge ahead with its plan to promote electric vehicles to reduce dependence on fossil fuels, as regulators increase scrutiny of diesels following Volkswagen AG's admission that it rigged U.S. emissions tests.

"The Chinese government has been paying attention to air pollution prevention given that it affects China's development and economic structural adjustments," Zheng Shanjie, vice administrator of China's National Energy Administration, told reporters Friday in Beijing, in response to a question about Volkswagen and diesels.

"China is now vigorously promoting development of electric vehicles, which is part of our measures on comprehensively addressing the issue."

Unlike Europe, most cars in China run on gasoline. In recent years, China has spent billions promoting the adoption of electric vehicles, doling out research grants and subsidies to automakers and battery suppliers.

China has said it aims to raise the proportion of non-fossil fuel energy usage to 15 percent of total energy consumption by 2020, increasing to 20 percent by 2030.

China's major cities began restricting diesel-powered passenger vehicles in the 1990s due to concerns that poor diesel quality would worsen pollution. As a result, sales of diesel-powered passenger vehicles were only 0.4 percent of total deliveries in China in the past 12 months through August, according to data compiled by Bloomberg Intelligence.

China's shunning of diesel cars may turn out to have been a blessing for Volkswagen, as it's shielded the company from direct backlash in its largest market. The Wolfsburg, Germany-based automaker has counted on the country for 35 percent of vehicle sales this year.

Volkswagen plans to raise local production capacity to 5 million light vehicles by 2019, up from 3.5 million last year.

"The Chinese government has been supporting development of electric vehicles instead of diesel-powered cars," said Steve Man, a Hong Kong-based analyst with Bloomberg Intelligence. "China is critical for Volkswagen and the ban on diesel cars may make China a savior for the company and help preserve the brand's good reputation in the market."

VW's two joint ventures in China said last week that they produced none of the vehicles involved in the widening scandal that cost former CEO Martin Winterkorn his job.

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