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China’s fossil fuel-free car future

China, the world’s largest car market with over 25.5 million cars and light vehicles sold in 2016, has signaled an end to production of fossil fuel-burning vehicles — someday.

There’s no timeline for the timeline for China to stop making internal-combustion vehicles. But China has set goals for electric and plug-in hybrid cars to make up at least one-fifth of Chinese auto sales by 2025. Shares of Tesla jumped 5.6% on the news, to $362.73, and stocks tied to lithium and other materials for electric vehicles surged.

China is poised to lead the EV transition. Its pollution problems are legion, with as many as one-third of deaths related to smog. Registered sales of EVs topped 352,000 in 2016 and are projected to double in 2018. (That’s more than double the 159,000 electric vehicles that have been sold in the U.S., more than half in California.) Add in Chinese sales of plug-in hybrids, and the total rises to more than 500,000 “new energy vehicles.”

The Chinese government in June introduced draft regulation for a credit system to compel manufacturers to produce more EVs by 2020; automakers that don’t meet the goals can buy credits from other manufacturers.

Foreign car manufacturers are taking heed by shifting EV design and production to China. GM is making China the hub of its EV research and development, while Renault-Nissan and Ford have set up electric-car joint ventures.

Volvo Cars, now owned by Chinese automaker Zhejiang Geely Holding, plans to build its first electric vehicle in China beginning in 2019.

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