China is considering phasing out subsidies for plug-in electrified vehicles and switching over to automaker mandates similar to California’s system.

For China’s “new-energy vehicles” campaign, the government may eliminate its generous incentive program for electric vehicles and plug-in hybrids and transition over to a credit-based system for automakers to follow. Automakers would be required to build or import new-energy vehicles in proportion to the number of traditional internal combustion engine vehicles they sell.

Companies failing to manufacture these vehicles complying with emission reduction targets would have to buy credits or pay fines that could go up to five-times the average prices of the credits. The National Development and Reform Commission government agency is working out the details now of a draft proposal.

SEE ALSO: China Continues Strong Plug-in Electrified Vehicle Sales During First Half of 2016

China has been analyzing California’s zero-emission vehicle mandate, which requires that by the 2025 model year, automakers selling in California will have to make as many as 15.4 percent of them zero emission vehicles. China’s goal is to reduce air pollution and support companies in adding to the economy in what the government thinks will be the dominant automotive technology of the future.

“Without question, this will be good for the industry and will promote the development of all types of clean-energy vehicles,” said Ye Shengji, deputy secretary general of the China Association of Automobile Manufacturers, on Friday.

China became the largest global market for PEVs last year and wants to see new-energy vehicles sales surpassing the three million mark by 2025. Incentive programs have spurred sales, with the national and local governments in China spending 15 billion yuan ($2.3 billion) on these subsidies since 2009. The government has planned to phase out these subsidies after 2020.

Automotive News