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

The Chinese government just issued its latest New Energy Vehicle subsidy policy.  http://jjs.mof.gov.cn/zhengwuxinxi/tongzhigonggao/201309/t20130916_989833.html 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. http://www.bloomberg.com/news/2013-09-17/china-renews-electric-vehicle-subsidies-without-adding-hybrids.html

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.  http://www.autonewschina.com/en/article.asp?id=10788 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.

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….