Autos Eye China's CO2-Free Drive To Push Electric Vehicles

In a bid to contain deadly air pollution, China, the second-largest economy in the world, has pledged to put a lid on its carbon emission by 2030. Reportedly, China in all likelihood will set a deadline for the automakers to end sale of vehicles, powered by fossil fuels. The likely restrictions on the sale of fossil-fuel-powered vehicles have prodded both global as well as the local automakers to emphasize more on the production of zero-emission electric vehicles in order to clean-up smog-filled cities.

Apart from these, the Chinese government is trying out various other things to boost sales of electric vehicles. Per the government mandate, automakers are required to devote certain part of their total production to electric vehicles. The Chinese government has been encouraging sales by providing subsidies to buyers. According to LMC Automotive, a global consulting firm, sales of battery-driven vehicles are likely to reach 400,000 by 2019.

Chinese Call

This has prompted a number of global automakers such as Tesla, Inc. (NASDAQ:TSLA) , General Motors Company (NYSE:GM) and Nissan Motor Co., Ltd. (OTC:NSANY) to turn its face toward China in order to grab a bigger share of the electric car market in China.

French automaker Renault (PA:RENA) SA (OTC:RNLSY) and Japanese automaker Nissan have inked a deal with Chinese automaker Dongfeng Motor Group Co to manufacture battery-powered automobiles in the Chinese market. Ford Motor Company (NYSE:F) has announced a joint venture deal to manufacture electric vehicles in China. Honda Motor Co., Ltd. (NYSE:HMC) is also set to launch electric vehicles in China in 2018. The Japanese carmaker has collaborated with local partners Guangqi Honda Automobile Co. and Dongfeng Honda Automobile Co. to develop electric vehicles.

Potential Risks

Huge investments made by China in electric vehicles have attracted global automakers to foray into the mainland. But, there also exist a few risks. Per New York Times, the allurement of entering the exciting and huge electric market in China might also result in sharing electric car knowledge with local companies. The risk of transfer of technology to the local companies may be detrimental to the global automakers in the long run.

Among the companies discussed above, Tesla, General Motors, Renault and Ford carry a Zacks Rank #3 (Hold), while Nissan and Honda have a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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