China Finds Some New Stones in its Electric Vehicle Policy

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.

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.

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?

Article by Alysha Webb, a freelance automotive journalist and founder of ChinaEV Blog.

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