China has halved the previous tax on the purchase of combustion engines – this reduces the attractiveness of purchasing electric drives. The primary goal of the People’s Republic: to become a car export nation.

The recent discussions in Europe about not developing any more new internal combustion engines in the near future and phasing out this type of drive has led to a policy change in China. The Communist Party has halved the previous tax on the purchase of these vehicles from ten to five percent.

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This reduces the advantage of electric drives, on which no taxes are currently levied in the People’s Republic. Beijing expects this course modification to give it a strong competitive advantage.

On the one hand, it will not be possible to satisfy the ever-increasing demand for cars in the huge country in the short and medium term with electric motors alone. On the other hand, China’s auto industry is hoping for growth on the European market if the states there don’t keep up with their own production.

Alexander Görlach is a Senior Fellow at the Carnegie Council for Ethics in International Affairs in New York. The PhD linguist and theologian teaches democratic theory in Germany, Austria and Spain as an honorary professor at Leuphana University. In the 2017-18 academic year, he was at National Taiwan University and City University Hong Kong to conduct research on China’s rise. He is currently researching new technologies at the University of Oxford’s Internet Institute and how they are used in democracies and abused in dictatorships.

This “both-and-course” is very much in line with the trend in Chinese economic and environmental policy. The People’s Republic has agreed to be climate neutral by 2060. At the same time, more coal-fired power plants are being built in China than ever before.

This can be explained by the fact that the People’s Republic as the “workbench of the world” has an increasing hunger for energy that cannot be satisfied with new, green energies alone. As China’s ruler Xi Jinping sees a growing economy and rising prosperity as the basis of legitimacy for his and the Communist Party’s all-encompassing rule, the economy still takes precedence over the environment.

China was already at the fore when hydrogen drives came into focus about a decade ago. Since this form of propulsion is demanding for passenger cars (for example, a hydrogen-powered vehicle cannot be parked in a garage), China has focused on hydrogen-powered trucks and buses. China is now the largest hydrogen producer in the world. However, 95 percent of its production is based on coal and not on wind and solar systems.

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The fact that the Chinese Ministry of Commerce announced at the beginning of July that it would extend the tax exemption on the purchase of electric vehicles may be interpreted as meaning that the People’s Republic will not revoke its long-term goals in terms of mobility change.

It came with a promise to provide more charging stations across the country. The much more important announcement, however, was that of tax cuts. Because the CP hopes that the Chinese economy, which has been badly hit by the pandemic and the government’s ineffective “zero Covid” policy, will be boosted again. Compared to the previous year, sales from January to May fell by 12 percent.

Above all these measures there is one major goal: sooner or later, China wants to become a car export nation, with both conventional and new drives. This would completely change the role of the country, in which German premium manufacturers in particular generate a large part of their sales.

Current figures show that this is not just a dream of the future: in the first half of 2022, just over a million cars were exported, which corresponds to an increase of 43 percent compared to the previous year. Last year, with around one million cars sold, China was the third largest export nation after Japan (with 3.8 million vehicles) and Germany (with 2.3 million cars). With a million vehicles already sold in six months, China could overtake Germany as an exporter this year.

Responding quickly to movements outside of the People’s Republic, especially in the car-producing country of Germany, may pay off for the Chinese automotive industry. Should the European Union withdraw from the development and production of internal combustion engines, China would be ready to replace them with the latest internal combustion engines “Made in China”.

The Covid pandemic remains the great unknown for now, as China too is dependent on chips made in Korea and Taiwan, which do not get to where they are needed in time due to disruptions in global supply chains.

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