As many Western governments roll back aggressive climate mandates, China is accelerating its green transition with a pilot fossil-fuel vehicle ban on the southern island province
By Da Cheung
A stark divergence in electric vehicle policy has emerged across the world this year. While the U.S. and Europe retreat from aggressive climate mandates to protect legacy industries, China is accelerating its transition.
On July 13, the tropical island of Hainan became the first provincial-level region in China to set a timeline for completely ending the sale of new gasoline-powered vehicles. The ban, which is set to take effect in 2030, applies only to new sales; existing gasoline-powered cars will remain legal to drive and register for annual inspections.
The move highlights a fracturing global auto market where consumer readiness and political will are dictating vastly different timelines for the end of the internal combustion engine (ICE).
A tropical testing ground for zero emissions
Hainan’s plan aims to ensure that new energy vehicles — a category that includes pure electric and plug-in hybrid cars — account for 45% of the total number of vehicles on the island by 2030, up from 23.75% in 2025.
The mandate is part of a broader, heavily state-funded strategy to transform Hainan into a zero-tariff Free Trade Port that will rival international hubs like Singapore and Dubai. A master plan was released in June 2020 and while some progress has been made in terms of trade growth, shipping, and business activity, some studies have noted that Hainan’s success has been way that of other Chinese economic zones, and foreign direct investment has been relatively low.
Despite a transition to a negative-list tariff system in late 2025 that flooded the island with capital and tourists, Hainan still struggles to attract the international expatriate base necessary to cement its status as an international hub. However, as a long-standing testing ground for a range of government policies and strategies, Hainan’s successful implementation of a ban on ICE vehicles could pave the way for similar mandates across China.
The island’s free-trade port strategy and its supportive policies of zero-tariffs and low tax rates have acted as powerful incentives for the island’s development as a hub for the commercial space sector, adding to its advantages of a low-altitude and coastal location. The Hainan Commercial Space Launch Site in Wenchang is China’s first launch site dedicated to commercial missions.
Western automakers and regulators hit the brakes
In sharp contrast to China’s acceleration, Western governments are rolling back their EV timelines to protect legacy automakers and respond to consumer reluctance to make the change.
In December 2025, the European Union watered down its flagship 2035 ICE ban. Instead of requiring a 100% reduction in emissions for new cars, the EU adjusted the target to 90%, effectively throwing a regulatory lifeline to hybrid vehicles and efficient ICEs. The reversal followed intense pressure from the European Automobile Manufacturers’ Association, which cited inadequate charging infrastructure, high costs, and the threat of over 10 billion euros ($10.8 billion) in fines hanging over automakers for missing 2025 emission targets.
Rather than fully embracing electric cars, European consumers are still hedging their bets with hybrid vehicles. This became the fastest-growing segment in Europe in 2025, as buyers favored the flexibility of cars that can run on both electricity and gasoline without requiring changes to their driving habits.
A similar retreat is underway in the United States. The Trump administration last year terminated a $7,500 federal tax credit for consumers who bought a new electric vehicle when it effectively dismantled key parts of the Inflation Reduction Act and replaced it with the One Big Beautiful Act, which eliminated the benefit.
The policy shift prompted Ford, General Motors, and Stellantis to slash their EV investments and expand production of hybrid and ICE vehicles. GM and Ford wrote down billions in EV assets late last year, while American EV startup Rivian saw its deliveries drop by 18%.
A shifting global hierarchy
The changing regulatory landscape has helped crown a new global leader. Following a historic 8.6% sales decline for Tesla in 2025, China’s BYD (1211.HK, 002594.SZ) officially overtook the American automaker as the world’s top seller of pure electric vehicles. It reported a 27.9% surge in sales to 2.25 million units compared with the U.S. automaker’s 1.64 million.
China’s home market remains the undisputed engine of global EV growth. In 2025, new energy vehicles captured over 50% of all new car sales in China, and the country doubled its EV exports to 2.6 million units.
The domestic EV market is forecast to see a healthy 15.2% increase in sales to 19 million units this year, although that’s down from a 28.2% pace in 2025, and if the ban being tested by Hainan is rolled out nationwide, that could provide a strong medium-term boost. But clouds are looming over the overseas market as Western governments raise trade barriers against Chinese EV makers to protect their domestic players. Whether the surge in exports can continue in 2026 and beyond remains to be seen.
Feature photo: The Shiji Bridge in Haikou, Hainan Province, China, by Letian Zhang.
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