China is a very brilliant country and extremely committed to execute its version of the world order. Few days ago, I noted that China was redesigning its future by planning to ban the production and use of fossil-fueled cars.
China is planning to fix a deadline to end the production and sales of fossil-fuel-powered vehicles. That is a big deal because over the last few years, China has been seen as a nexus of heavy global pollution. But now, it is working hard to clean the air and drive a post-petroleum era. …
Let us assume that China follows UK and France and puts the deadline in 2040, it means by 2050, more than 50% of global cars could be totally non fossil-fuel powered. (Both UK and France had already set a deadline of 2040 to phase out fossil-fuel-powered cars. I also expect other countries to follow through to make that 50%) Even without America acting, the trajectory is obvious that electric vehicles will be the driving element of automobile making of the future.
Most had commended China for this bold vision to help clean the air and work towards fixing the climate change issue. However, that may not be the whole story. According to Fortune Magazine, via newsletter, the real reason for the ban may not be a pure environmental concern. (Please be guided, U.S. press is not necessarily a friendly press to China’s mercantilist roadmap. It is part of the global competition.) Rather, China wants to play offense to help the local car companies in China. Here are the key drivers which I have expanded, drawing insights from the one-sentence Fortune comment:
- The patents for hybrid automobile sector are controlled by Japanese companies. Toyota and Honda are leaders there. China has minimal presence there
- The patents for fossil-fueled cars are controlled by U.S. and Germany, with China having minimal presence. Sure most of those patents have expired but China lags in broad innovation in fossil-fueled cars.
- But on electric, China is one of the world’s leading patent holders. Elon Musk’s Tesla even made the whole thing better, by making most of its patents royalty-free. That saves China from a lot of trouble. BYD China, which Warren Buffett has stakes, is a leading electric car company.
Of course, GM and most U.S. car companies are not happy with the decision by the Chinese government to plan to ban fossil-fueled cars in the future. They are arguing that China must allow customers to decide, and not dictate choices via mandates. GM sells more cars in China than in U.S. and China is the world’s largest car market. So, no car company can ignore China if it wants to be a global brand.
But irrespective of the feelings of the U.S. car markers, you can see the brilliance of the Chinese government. They are thinking decades ahead and how they can help their local companies. Here, they want to systematically move their customers to products made by Chinese companies. But they have done it in a way that even the citizens will not argue. They will give decades notice and then execute a strategy to ensure by the due date, their companies are ready.
Many Chinese analysts are expecting electric car companies to see a boom and investors will respond because they know that the future is now electric vehicles. By the decision of the government, electric vehicle sector will see massive capital inflow since any cloud has been cleared for the investors.
Contrast this strategy with former president Obasanjo’s model to ban use of foreign laptops in Nigeria, for public workers, during his presidency. The former president’s lack of plan to make sure Nigeria can make decent laptops was evident, and the very reason why nothing positive came out of it. China has put forward a roadmap to make sure its car companies can compete not just in China, but globally.
China knows trade and what drives great positioning. They are doing so in electric vehicles and Nigeria needs to learn from it.