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China’s latest new energy vehicle policy may result in fresh EV tech for the world

September 20, 2013

The Chinese government just issued its latest New Energy Vehicle subsidy policy. Seems like the government has pretty much given up on trying to create a consumer market for new energy vehicles, which include battery electric, plug-in hybrid electric, and hydrogen fuel cell vehicles.  That isn’t so bad, actually. Because the government’s focus has turned to the area where NEVs have real potential — public transportation and fleet vehicles.

One technology has been completely left out of the current policy – regular hybrid vehicles.  My friend Yang Jian mourns this omission in a column for Automotive News China. But I don’t think it is so bad.  The price of hybrids will soon come close to that of regular gasoline-powered cars. And if the hybrids can offer significant fuel economy then Chinese will buy them, just as Americans have.

Some details of the new NEV policy:

The policy covers 2013-2015.

The subsidies for NEV passenger vehicles are no larger, and decline over the next two years.  Battery electric passenger cars are eligible for incentives of up to 60,000 RMB, plug-in hybrid electric passenger vehicles up to 35,000 RMB in 2013.  Those amounts will decrease by 10% in 2014 and by 20% in 2015.

Hydrogen fuel cell passenger cars are eligible for incentives of 200,000 RMB. That amount will also decrease in 2014 and 2015.

Battery electric public transportation buses are eligible for up to 500,000 RMB in incentives.  Plug-in hybrid electric vehicle bus incentives top off at 250,000 RMB.

The ebus is already rolling around various cities and campuses worldwide.

BYD’s ebuses should do well under the new policy.

Commercial vehicles in public fleets are another important inclusion.  Mail, sanitation, garbage, and general goods battery electric vehicles receive a 150,000 RMB incentive.

There are target purchase volumes and guidelines for municipal governments:

In large cities and areas – mainly Shanghai, Beijing, and Guangzhou it seems – the number of NEVs should reach no fewer than 10,000 by 2015.  All other cities and/or areas should have no fewer than 5,000.

When buying new vehicles for municipal fleets, at least 30% of the purchases should be NEVs.

In an important nod to the huge problem protectionism presents in growing the public transportation and fleet market for NEVs, the policy also says at least 30% of the purchases should be from companies outside of the region.

Those are the main points.  While it remains to be seen how rigorously the policy will be enforced, the subsidies may kick-start production of NEVs by the regional and national vehicle manufacturers.  Of course, they don’t have all the necessary technology to product BEVs and PHEVs. That could present a business opportunity for foreign firms with battery management system technology, for example. And for companies that can integrate the electric drivetrains into the rest of the systems, which has been a problem for Chinese companies.

Sure, it also shows that China’s central government hasn’t given up on becoming a leader in some kind of electrification technology.  Otherwise, why totally exclude regular hybrids from the policy? As Yang Jian points out, China still hasn’t given up on trying to be a leader in some electrification area and hybrids are already mature technology.

But Chinese automakers will need plenty of help from outside China to produce quality BEVs and PHEVs, so they are unlikely to become leaders in those areas anytime soon.  The volumes envisioned for local fleets could, however, result in new technologies being developed for China, technologies that the rest of the world could benefit from.  At the very least, volume production of some components should help bring the price down.

So, the new policy should benefit both China and the rest of the world.  Now to wait for the level of enforcement….

17 Comments leave one →
  1. DJ Christian permalink
    September 20, 2013 4:09 pm

    Excellent article, thanks Alysha!

  2. September 20, 2013 8:38 pm

    Hi Alysha, Steve here from Quartz. Do you mind talking a bit for a post I am doing this weekend? Thanks and best, Steve LeVine

    On Thu, Sep 19, 2013 at 11:28 PM, Alysha Webb’s ChinaEV Blog wrote:

    > ** > Alysha Webb posted: “The Chinese government just issued its latest New > Energy Vehicle subsidy policy. > Seems > like the government has pretty much given up on trying to create a consumer > market for n”

  3. September 20, 2013 11:13 pm

    Please note I corrected the blog. Subsidies for hydrogen fuel cell vehicles will also decrease in 2014 and 2015.

  4. John Kua permalink
    September 21, 2013 5:06 am

    Hi Alysha,

    John Kua here. Thanks for the timely update.
    A few comments/observations here:

    1. My belief is that China has omitted real hybrids because they do not wish to champion technologies pioneered by other countries (i.e. firstly Japan, then the U.S.) and especially where their market acceptance is approaching maturity – not exactly “New” energy vehicle that China would like to promote.

    2. Initial focus on Fleet vehicles – this is sound and sensible policy, as pubic fleets can do better at lowering initial barriers to market adoption than individually-owned private NEVs. The reasons are firstly, they are (publicly) more visible, secondly they are revenue-earning (helping them immediately to defray operating expenses), and they usually have fixed routes and centralised workshop maintenance, which makes operating NEVs much easier. Finally, they are an ideal testbed to iron out teething problems in operating these vehicles before mass adoption.

    3. The subsidies given to fleet operators seems like the problematic California ZEV mandate – where state government dictated and artificially fixed percentage adoption demands. The difference, here is that with the focus on public/municipal fleet adoption, the Chinese government may have better control over initial market introduction than the California Mandate, which depended too much on California’s skeptical motoring public and EV/HEV manufacturers. After all, if the Chinese government wants to promote NEVs, it helps by leading and setting an example through mandating public fleet adoption.

    John Kua

    • September 23, 2013 9:26 pm

      Hi John,
      Yes, your remarks pretty much echo my blog, only wordier. 🙂 The requirement to have a certain percentage of NEVs as new purchases is very important as it will create a market for the technology and spur development of new technologies. Government regulation has done that here. The key will be, as always in China, how strictly it is enforced. Local governments will surely try to guanxi their way out of it, as they will the local protectionism requirement. Still, I think it is the only way to start. Now if only the central government will set the way by example!

  5. BRIAN RAFFERTY permalink
    September 23, 2013 6:09 pm

    Question : does the new EV vehicle policy include free license plates or some type of reduced fee?

  6. brian permalink
    September 23, 2013 6:25 pm

    Does the new policy allow any allowance for free license plates?

    • September 23, 2013 9:22 pm

      Brian, that is a local government issue. The policy does not address it.

  7. September 25, 2013 6:12 am

    Thanks, A very useful information.

  8. brian permalink
    September 25, 2013 7:41 pm

    Why doesn’t the Chinese government subsidize charging stations at holmes of individuals purchasing EV’S This would show a real commitment?

    • September 26, 2013 2:34 am

      Most Chinese live in high-rise multi-family dwellings. They do not even have parking garages since most were built before private car ownership started expanding. Newer complexes do have garages, but even then putting in chargers would be challenging, though not impossible.

  9. February 27, 2014 7:04 pm

    Yes, 100 % agree. You may have slammed the nail on the head completely

  10. June 18, 2014 6:30 pm

    Yeah, 100 % agree. You could have struck the nail on the head.

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