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China finds some new stones in its electric vehicle policy; still crossing the river

July 1, 2013

Is China backing off its push to have millions of electric vehicles on China’s roads in the next ten years?  Not exactly. But recent statements by government officials do signal a change in strategy.

China is moving towards a plan which doesn’t see purchase incentives as the best way to encourage the EV market in China. Instead, it will aim for more support for research and development of fuel saving technologies.  There are caveats, however.

That may come as a surprise to some readers who don’t obsessively follow China’s EV adventures. After all, wasn’t China going to have 5 million EVs on the road by 2020?

Well, just because the China’s central government declares something will happen doesn’t mean it will.  There are barriers such as oh, science and technology, to overcome.  And since this isn’t 1958 and this isn’t the Great Leap Forward, China’s leaders sensibly altered their plan.  Crossing the river by feeling for the stones and all.

More recent policies have more strongly supported (in words, anyway) plug-in hybrids and even regular hybrids. No leapfrogging there, but the technology is mature and consumers will more readily accept it. And it will result in more fuel economy more quickly.  Meanwhile, China can work on pure electric vehicle technology.

If you are a Chinese automaker, or a foreign automaker producing cars in China for that matter, this method of policy making can be annoying to say the least.  Product cycles are not a stone in the river.  So China’s automakers have paid lip service to producing electric vehicles while doing little. That is still pretty much the case, according to my sources in China. They aren’t rushing to produce EVs.

Great Wall was showing a PHEV at the Shanghai show this year but isn't producing them.

Great Wall was showing a PHEV drivetrain at the Shanghai show this year but isn’t producing them.

China’s domestic automakers ought to stop waiting around for the government to make a decision and start developing their own regular hybrid technology,  scolded Dong Yang, secretary general of the China Association of Automobile Manufacturers, in mid-May. (Which calls to mind, my mind anyway, a saying: “Either s*** or get off the pot.)  They are getting left behind, he said.

“As far as energy savings are concerned, for the next ten years hybrid technology is the most important area in new energy vehicles.  The domestic brands shouldn’t just keep staring at the direction of government support policies, they ought to grasp research and development of hybrid technologies,” Dong was quoted as saying.

OMG! Wasn’t the government negative on regular hybrids just a few years back since that technology has already been developed by foreign companies?!? Well, yes. But the goal is not just to make China a technical leader in the EV world; it is also to reduce its dependence on foreign oil.  China’s government now realizes that those two goals will not be achieved simultaneously.  China’s leaders – including former premier Wen Jiabao – even said that China should get the alternative fuel vehicle from foreign companies if necessary.

In late May, Wan Gang, head of China’s Ministry of Science and Technology, said almost exactly the same thing as CAAM’s Dong, that R&D was more important than subsidies.  The China Daily quoted Wang as saying: “The government is unwavering in its commitment to the industry, but EV makers should never count on subsidies to survive.” Wan, who was speaking at an international forum on electric vehicle pilot cities in Shanghai, said it is “imperative” for companies to boost their research and innovation capabilities.

And, in a statement equivalent to the U.S. Federal Reserve saying it would stop pumping money into the economy (well, not quite the equivalent, but in the China EV world still pretty significant), Wan said purchase subsidies would likely be phased out by 2020. Like the Fed — which later clarified its policy by adding that stimulus would end only if the economy continued to strengthen – Wan said EV incentives would be phased out if operating expenses could be lowered and the market could be expanded. Still, his words were a clear indication of where the government wants the EV market to go.

Meanwhile, word is out that the central government will soon announce a new electric vehicle subsidy policy.  (Wan declined to comment on this.)  The old policy, which offered subsidies of 60,000 RMB for pure electric vehicles and 50,000 RMB for certain hybrid vehicles, is expected to be expanded to include more substantial subsidies for plug-in hybrid electric vehicles and even regular old hybrids.  The new policy will incentivize vehicles based on how much energy usage is reduced rather than the technology used, Miao Wei, head of the Ministry of Industry and Information Technology (MIIT) was quoted as saying. Of course, he also said the policy would be out in June.  I write this on July 1 and no policy yet….

Still, it is step in the right direction.  Choosing technology winners hasn’t worked for the Federal government here in the U.S.; nor has it worked for the central government in China.

Local efforts

Here in the U.S., some local governments have been trying to expand EV ownership by installing charging stations and the like.  China’s local governments have also been trying to encourage EV ownership, but with more heavy-handed policies.  The jury is still out on how effective those policies will be.

Shenzhen comes to mind first.  As it is home to BYD, the government has a vested interest in growing EV sales.  BYD pays taxes in Shenzhen and employs people, after all.  So the Shenzhen government has been buying (I guess) BYD EVs.   The Shenzhen police are driving about in 500 BYD battery-electric vehicles. They join 300 BYD e-taxis; Shenzhen aims to increase that number to 3,000.  E-buses are planned to hit 7,000.  Those are big plans; right now there are only 3,850 new energy vehicles in the city’s fleets, or 12.6% of the total.

Among the other measures Shenzhen has taken:  Banning high-polluting vehicles from the road between 7:30am and 7:30pm on designated days; additional subsidies on top of the central government subsidies; and preferential access to special lanes.

Shanghai, where the government-owned SAIC produces electric vehicles, will waive license plate fees owners of a pure electric vehicle. Coincidentally, Shanghai Auto began selling the Roewe E50 EV around the time the policy was announced.  Waiving the license fee is a significant perk. Shanghai has long limited the number of license plates available; a limited number are auctioned off monthly in Shanghai and can cost more than a small car.   The municipal government also offers electric vehicle purchase subsidies of up to 40,000 RMB.

Shanghai Auto had many EVs on display at this year's Shanghai Auto Show, but few actually in production.

Dongfeng had many EVs on display at this year’s Shanghai Auto Show, but few actually in production.

Other local governments are also implementing regulations aimed at reducing congestion – and sometimes encouraging EV purchases by exempting EVs from those regulations.  In Guangzhou, the right to register a car is now handed out by lottery; only 10,000 a month are allowed to register.  Beijing and Guiyang have similar restrictions.  And electric vehicle owners can bypass the lottery system in some cities.  Beijing has said electric vehicles will soon be able to get license plates without a lottery and be eligible for a 60,000 RMB rebate, for example.

I doubt these policies will make much difference, however.   A story in China’s Sohu Auto (which I found reproduced on the site summed up the problem well.  It focused on Beijing’s plans to implement various policies to boost EV uptake.

The three big failings of efforts to “marketize” EVs are:  EVs aren’t dependable; EVs have limited range; EVs price is high, it said.    “The chance that electric vehicles will be able to replace traditional vehicles in the short term is remote,” the story concludes.

If they replace a few of the traditional vehicles, however, China may claim victory. And why not?

4 Comments leave one →
  1. Sing-ren permalink
    July 2, 2013 9:35 am

    Hi Alysha, Trying to put up some comments to stir up a discussion on your site.
    1. I hit that link about Shanghai EV. 3.5 Bln RMB for a market hoping to sell 350 EV makes it 1 Mln RMB per EV, per Mayor of Jiading.
    2. I am assuming the rental car company is paid by the govt (SAIC) to take those 500 Roewe E50’s.
    3. Great Wall Mtrs, I recall they were using CODA EV technology but not sure if they got the EV display then cancelled the “cooperation”.
    4. Shanghai plate going for 76,000 rmb in March, 2013.
    5. Problem with “developing technology” in China, like the Qoros, most of the technical parts are contracted to Western consulting firms and then system integrated by another consulting firm. The China-side does the EFT.

    Did you notice any factions like with the last annual 5 Yr Plan, where the NDRC said a more cautious development by 2020 and MIIT said 5 Mln by 2020, all BEV? Your article quoted MIIT and MST, just wondering what the NDRC stance is with the new govt.


  2. Lawrence permalink
    July 3, 2013 3:56 pm

    When Beijing first promoted the great leap toward EV supremacy, I think it failed to consider the high level of technology the task demands.

    The article you mention Alysha, cites the main failings in the way of the hitting the target,

    “…EVs aren’t dependable; EVs have limited range; EVs price is high,…”

    But I think the one that dwarfs all others is the second one, the all-elusive “range solution”.
    Simply put, people don’t want to get stuck when they depart point A on the way to point B.

    Last century when China embarked on the building of vehicles, did the government expect the automakers to provide the roads as well? I don’t think so.

    One of the achievements of the great Qin dynasty was to standardize the niuche 牛车 , or oxcart axle width. It revolutionized transport. Now this government needs to step up and provide a standardized EV recharging infrastructure.

    Otherwise abandon the current BEV objectives and chase the alternatives.

  3. July 3, 2013 4:12 pm

    @Sing-ren The fagaiwei wil be the final decider of EV policy! You are correct that factions have different ideas about how China’s EV policy should proceed. I have heard that Miao Wei and Wan Gang are not in agreement, for example. But, I think it is clear that China will continue to pursue EV targets. Just in a more realistic manner. As you note, Chinese companies lack some of the important technology to produce EVs and that must be provided by foreign firms. The central government has encouraged Chinese companies to use foreign technology as necessary, however. The main problems are stil the same as in the U.S., however – price and range. Of course those are the same problem. A big battery costs alot. @Laurence. I disagree that lack of a recharing infrastructure is the main problem. It is one problem. Workplace charging should be encouraged in China. And provided for. But, if the municipal governments would just switch to using EVs, that would account for a lot of vehicles, eh? So the problem is also putting the money where the mouth is, as we say.

  4. brian permalink
    August 14, 2013 6:51 pm

    China ought to implement a exchange policy gas cars for EV’s at a reduced rate.China then could ship those gas guzzlers to the USA for re-sale

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