China will set a deadline for automakers to end sales of fossil-fuel powered vehicles, a move aimed at pushing companies to speed efforts to help reduce oil consumption and pollution while developing electric vehicles for the world's biggest auto market.
Xin Guobin, the vice minister of industry and information technology, did not say when the ban would be implemented but said the government is working with other regulators on a timetable to end production and sales.
The move will have a profound impact on the environment and growth of China's auto industry, Xin said at an auto forum in Tianjin on Saturday.
"Some countries have made a timeline for when to stop the production and sales of traditional fuel cars," Xin said. "The ministry has also started relevant research and will make such a timeline with relevant departments. Those measures will certainly bring profound changes for our car industry's development."
Citing "turbulent times" ahead, Xin called on the country's carmakers to adapt to the challenge and adjust strategies accordingly.
A ban on combustion-engine vehicles will help push both local and global automakers to shift toward EVs, a carrot-and-stick approach that could boost sales of energy-efficient cars and trucks and reduce air pollution while serving the strategic goal of cutting oil imports.
To combat air pollution and close a competitive gap between its newer domestic automakers and their global rivals, China has set goals for EV and plug-in hybrid cars to make up at least a fifth of the country's light-vehicle sales by 2025.
The government offers generous subsidies to makers of new-energy vehicles. It also plans to require automakers to earn enough credits or buy them from competitors with a surplus under a new cap-and-trade program to boost fuel economy and lower emissions.
New Honda EV
Honda Motor Co. will launch an electric car for the China market in 2018, China COO Yasuhide Mizuno said at the same forum. The Japanese carmaker is developing the vehicle with Chinese joint ventures Guangqi Honda Automobile Co. and Dongfeng Honda Automobile Co. and will create a new brand with them, he said.
Internet entrepreneur William Li's Nio will start selling ES8, a crossover powered only with batteries, in mid-December. The startup is working with state-owned Anhui Jianghuai Automobile Group, which also is in a venture with Volkswagen AG to introduce an electric SUV next year.
China, seeking to meet its promise to cap its carbon emissions by 2030, is the latest country to unveil plans to phase out vehicles running on fossil fuels. The U.K. said in July it will ban sales of diesel- and gasoline-fueled cars by 2040, two weeks after France announced a similar plan to reduce air pollution and meet targets to keep global warming below 3.6 degrees Fahrenheit.
Madrid, Mexico City and Athens have also introduced plans to phase out fossil fuel-powered vehicles.
Banning the sale of petrol- and diesel-powered vehicles would have a significant impact on oil demand in China, the world's second-largest oil consumer.
Last month, China National Petroleum Corp., a major state-owned oil company, said China's energy demand will peak by 2040, later than the previous forecast of 2035, as transportation fuel consumption rises through the middle of the century.
Song Qiuling, a senior finance ministry official, said during Saturday's event that government subsidies, intended for jump-starting the new energy auto industry, could easily be abused if held long-term and led to "mindless expansion" and excess capacity in the sector, Xinhua reported.
She said China would gradually withdraw such financial subsidies for the sector, and instead speed up the establishment of a credits accumulation policy to support the industry.
Reuters contributed to this report.