China Slows On Electric Cars To Focus On Fuel Efficiency

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Several years ago, the U.S. auto industry worried that Chinese carmakers would use inexpensive cars to gain a foothold here, just as Japanese and Korean makers had done.

That hasn't happened, for many reasons--one being that making cars good enough to sell here is remarkably hard.

More recently, the Detroit Three worried that Chinese makers would leapfrog the industry to dominate electric-car production, backed by Chinese government policy encouraging so-called "new energy" vehicles.

That hasn't happened either.

Last summer, China began to reassess its plans to put 1 million electric cars on the roads by 2015 (the same goal, coincidentally, pursued by President Obama).

The country is adjusting its definition of "new energy vehicles" to include not only plug-in vehicles but conventional hybrids and more fuel-efficient conventional cars.

While some estimates still expect the country to put as many as 350 million vehicles on its roads by 2050, the near-term fuel for those cars is likely to be the same thing it is everywhere else: gasoline.

But the rising gas prices that are making U.S. drivers cranky are affecting Chinese car owners too.

In recent months, gas prices and other factors have caused car sales in China to plateau--leading to worries that its market may not grow as fast as expected.

In response, the Chinese government has ended incentives for overseas carmakers to set up new factories, to prevent potential overcapacity in car production.

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Beijing smog

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The news was delivered by premier Wen Jiabao at a party congress last week, according to Bloomberg. It had been previewed last December in statements by government agencies.

While it will keep incentives for consumers to buy electric cars, it will also move more aggressively toward higher gas-mileage requirements.

And it will also institute a program to scrap older, less efficient cars, something like the 2009 "Cash for Clunkers" program in the U.S.

Auto-industry analysts still expect that plug-in vehicles will slowly start to enter both nations' vehicle pools.

But it may take a decade or more for plug-ins to reach even the penetration level that hybrids enjoy today of 2 to 3 percent of the U.S. market.

Meanwhile, the U.S. and China are pursuing increasingly similar paths: Continue incentives for buying plug-in vehicles, while requiring all new cars to achieve better fuel economy.

Do you think Chinese cars will become a factor in the U.S. market? Will that country take a commanding position in electric cars?

Leave us your thoughts in the Comments below.


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