What's going on?

China is fast becoming the global focus for electric cars: on Thursday, Volkswagen (VW) announced that it and its Chinese partners would invest �10 billion (~$12 billion) in developing electric vehicles for the Chinese market.

What does this mean?

China�s government has set stringent new rules: automotive companies� production must include a set amount of electric-powered vehicles (the quota, after a few years, calls for 8% of all vehicle sales in China to be electric). The new rules begin to come into force in 2019, causing a swathe of international automakers, including VW, Ford and Renault-Nissan, to ramp up production of electric cars in China (international automakers are typically obliged to partner with Chinese companies to develop and sell cars there). Given the size of the Chinese car market � the world�s biggest � meeting Beijing�s demands is a priority.

Why should I care?

The bigger picture: The war for the future of the automobile will largely be waged in China.

China wants to ban all production of petrol and diesel cars by 2040. The research and development efforts along the way will almost certainly create electric cars that will be sold globally. One upshot will likely be the dilution of Tesla�s �first mover� advantage in electric vehicles. More broadly, it means that Detroit and Stuttgart � traditional bastions of automaking � will increasingly be taking their cues from China.


For you personally: VW�s big spend highlights why China is so important for your investments.

VW�s exposure to the Chinese consumer is significant and growing � and it�s not alone. Whether it�s Ford, Apple, Starbucks or other western brands seeking to penetrate the Chinese market � and its growing middle class � these companies are deploying shareholders� funds to make big investments in China. That�s one big reason it�s worth paying attention to Chinese economic data � its portents have a direct impact on the fortunes of companies like VW (which your pension fund has probably invested in).