China now has as many automotive drivers as the entire population of the United States and it has rapidly become the largest car market in the world. This has been driven by the greater purchasing power of China’s growing middle class, which has been afforded the luxury of private travel for the first time. Less than thirty years ago, Chinese citizens were forbidden to buy cars but in the mid-1980s, and since then, demand for personal-use automobiles has exploded.
China represents the first model for rapid large-scale urbanization and it is predicted that by 2030 over 1 billion urban consumers will reside in its cities. When looking at the automotive industry within this context it is clear that the current status quo of personal ownership cannot continue within the current system and as a result, the future of mobility and car ownership will need to be reassessed. Although positive contributions to the economy have resulted, providing jobs and services throughout China’s major cities, even under the current scenario the countries systems are beginning to feel the strain of the growing automotive fleet.
The Growth of Negative Externalities
Congestion, Noise Pollution, And Deteriorating Air Quality
Hundreds of thousands of cars create congestion, noise pollution, and fumes for bikers and pedestrians to breathe in. Analysis from the Ministry of Environmental Protection in 2015 indicated that of the PM2.5 pollution generated within Beijing, 31% came from motor vehicles, 22% from coal burning, 18% from industrial production, and 14% from dust given off by construction and other sources. Cars are a major contributor to poor air quality in China’s cities and are not an efficient way for most of the population to get around.
Greenhouse Gas Emissions (GHG)
China’s aim to peak CO2 emissions by 2030 is threatened by the country’s inability to curb the number of new cars and trucks being put on the roads. While the government is making efforts to decrease coal consumption and dependency, there is less attention on oil consumption. In the absence of much tougher policies, it’s projected that total vehicle numbers rise to as much 400 million by the end of the next decade, more than triple the current amount. That increase in vehicles and oil consumption would almost double the volume of CO2 emissions from the transport sector, offsetting many of the cuts delivered by a reduction in coal use in power generation and industrial sectors. These consequences of car ownership make it questionable if the government should allow a continued increase in car sales.
Reduced Resource security
One of the implications of a developing automotive industry is a growing need for oil-based transport fuel. China’s domestic reserves of oil are unable to account for the levels required for the domestic market, and over the past 5-10 years, China has begun to look elsewhere for its reserves – in 2013 surpassing the US as world’s largest net importer of petroleum. This growth means that China now imports of 60% of its total oil consumption from a wide range of producing countries. With this, a supply risk is incurred from both the exporting territory, through political instability and extraction decisions but also in the transportation of products much of which goes through Malacca straight, infamous for piracy. Resource security is key to internal decisions and politics, and China are desperate to avoid issues on this front, it is therefore unsurprisingly to see China act quickly after the sanction lifted on Iran, which will no doubt bring more oil and greater security to domestic industries.
Are Electric Cars the Answer?
An Exploding Market and Incentives
At first glance, China’s electric car market is exploding. Although electric vehicles may cost more, the government hopes this will expand the number of clean-energy cars on the road to eventually hit a target of 200,000 new-energy buses, 100,000 new-energy taxis and delivery vehicles on the road by 2020.
To deliver on this promise, buyers receive a free license plate that they would otherwise have to acquire at auction, and the government recently announced they have set aside 100 billion RMB to construct of 4.8 million charging poles and 12,000 charging stations by 2020.
Not So Clean After All?
Although the thought of electric cars might have environmentalists nodding in approval, the unfortunate news is that they might not be reducing overall pollution if the cars are recharged using electricity generated by coal-burning power plants. A recent study by Carnegie Mellon University found that a shift to electric cars in China might actually cause more air pollution because of the nation’s emissions-intensive electricity grid, which is largely powered by coal in China.
So what else does China need to do?
Improved urban planning
While China is known for cities with high population levels, the density of cities is falling as sprawl takes hold. Sprawl which, like American cities, is beginning to catalyze car ownership. To combat this, urban planners need to increase their efforts to design and build cities that are not built on cars as a primary mode of mobility. The development of cycle lanes, a feature often so iconic to China’s historical cities should be further developed to incentivize the use of bicycles, that provide myriad benefits to society through the improvement of air quality, congestion reductions and the benefits to personal health.
Continue increasing the cost of ownership and driving
In order to successfully manage the volume of cars within its cities, deterrents will have to be placed on the purchasing of vehicles. One way to do this is to place the external costs of car ownership onto the consumers, through increases in license plate fees, raise tolls and implement higher fuel tax. By charging higher fees the opportunity cost of purchasing a private vehicle will increase and will impact on individuals purchasing decision. In Shanghai legislation is reflecting this with charges for license fees as high as US$20,000 per vehicle, along with a 10% sales tax, making car ownership unaffordable to the majority of its population.
Continue Investing in public transportation
If the government is going to increase the cost of private transport, more and more people will start using the public systems as their primary form of mobility. Given this eventuality investment in the streamlining and efficiency of these public services will be key to absorbing the greater travel volumes. Increasing the capacity, ease of use and affordability of the current system is a key factor in the development of a populous comfortable with the public service. Continuing to subsidize transport will encourage greater use and addition of bus and metro stations to increase proximity to home and work for as many as possible will be the key incentive.
Support the car sharing economy
The rise of affordable technology has increased the connectivity of cities worldwide. Technological companies are now leading the charge in the development of the sharing economy, a principle developed on the leveraging of excess capacity within systems. Perhaps the best example of this in practice is Uber Cabs car sharing function. This allocates ride sharing based on individuals pick and drop off point and is a perfect example of stakeholder wide benefit – the individual reduces cost, the driver increases revenue and fewer cars are required, reducing urban congestion.
Beyond considering whether having more cars, more noise, and more pollution is worthy of making cities less liveable in the name of private ownership and economic growth, as China moves towards 2025 the use of private cars for transport is expected to increase to up to 400 million. With the challenges associated with increased car ownership continuing to grow in size and scale, the likelihood that China major cities find themselves congested and polluted does also. If action to improve cars and investments in alternative modes of transportation are not met with action to change consumer perceptions and behaviors, then the transport systems will be tested beyond their limits.
These are challenges that will continue to create the conditions for alternative energy solutions and technological innovation, and we are already seeing China place a heavy emphasis on the development of the electric vehicle infrastructure, whilst private companies are looking to take advantage of consumer behavior. However there is still a need to do more in engaging stakeholders across the value chain, be it urban planners who advocate for public transportation or tech-enabled millennials continuing their adoption of the car/ ride sharing economy.
There is no doubt that the challenges faced are real and intricate but for us, this is the opportunity to see the problem as one not too big, but as one where the complexities of the system offer wide-ranging markets for the solution.
This article was written by Rachel Sorenson, Research Analyst at Collective Responsibility.