China’s auto industry wants to be among the world leaders in electric cars. But the government is also promoting combustion models for economic and strategic reasons. If the European electric strategy fails, cheap Chinese gasoline engines are ready.

The Chinese government has lowered the tax rate for vehicles with internal combustion engines with a displacement of up to two liters from ten to five percent. No tax is levied on the so-called New Energy Vehicles (purely electric cars and plug-in hybrids). The current tax cut is therefore reducing the advantage for electromobility.

The measure is intended to counteract the declining sales of combustion engines. However, observers also see it as a correction of the attitude towards conventional engines. With the rejection of combustion engines in Europe, the Chinese industry has the opportunity to take over Europe’s leading role as a developer of modern combustion engines. The well-known development efforts for the combustion engine in research and industry speak for this.

China had always rejected a ban on combustion engines, as in the EU; the huge growth potential of the Chinese auto industry is unlikely to be met with e-vehicles alone. China’s government has reduced the subsidy premiums for electric cars and wants to stop them altogether, but is still spending a lot of money on technology – for example for battery replacement projects to supplement charging stations or to promote electric fuel cell mobility. With powerful players such as Nio, XPeng or Geely, China is already one of the world leaders in electrical engineering.

With the exception of BMW, German car manufacturers will be discontinuing their petrol and diesel vehicles in this decade or at least will no longer be developing new engines. Alternatives to battery cars, such as climate-neutral e-fuels, have just been clearly rejected by Germany’s most important car boss and Volkswagen boss Herbert Diess.

Industry insiders speculate that China is not only exporting its own electric models from Nio, Polestar, Aiways or Lynk

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In any case, Germany’s auto industry is on the decline. “The trend towards electromobility has already triggered a noticeable structural change in Germany as an automotive location. The net balance of this structural change for value creation and employment in Germany will be negative,” is the conclusion of a recently published study by Deutsche Bank. The Chinese, who are already on a shopping spree for suppliers in Germany, are now in the starting blocks.

Despite political differences, China remains attractive as a production location. In contrast to the EU, a cheap energy supply with coal and nuclear power as the base load is attractive. Especially with the particularly energy-intensive battery production for electric cars, this proves to be a locational advantage that Germany in particular no longer has with its fragile energy system and skyrocketing prices.

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