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How Can China Boost Hybrid Sales? Guangzhou City Offers Cash

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Hybrid Badge

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Several years ago, you could get a Federal tax credit for buying a hybrid-electric vehicle.

That program has ended. Several manufacturers--Toyota, Honda, and Ford among them--reached their cap of 60,000 hybrids sold, and now hybrids represent 2 to 3 percent of the U.S. market without Federal incentives.

The goal of the program was to encourage sales of hybrid cars at a time when consumers were wary of the new technology.

The same logic now applies to the current Federal tax credit (and other state, local, and corporate incentives of various kinds) for purchase of a plug-in car.

Now, in the Chinese city of Guangzhou is offering a hybrid-purchase subsidy of 10,000 yuan, or about $1,730.

New-car buyers in China are some of the most price-sensitive in the world, and hybrids have stalled in the market because of their high purchase prices.

And the country's national government offers only a 3,000-yuan ($472) subsidy for buying a hybrid--versus 50,000 yuan ($8,650) for a plug-in hybrid and 60,000 yuan ($10,380) for a pure battery-electric vehicle.

The goal of the local incentive is to boost sales of hybrid vehicles--which are, as Automotive News China notes, the flagship products of two automakers whose Chinese headquarters happen to be located in ... Guangzhou Province.

Chinese cars

Chinese cars

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And adding to its push, the city will restrict the number of new-car registrations to 120,000 per year--but will reserve 10 percent of that number for "new energy vehicles," including hybrids, plug-ins, and electric cars.

In effect, then, hybrids are exempt from the restriction. That is likely to make them look a lot more attractive to Guangzhou buyers.

The subsidy doesn't totally make up for the price difference between a gasoline and hybrid model, which on the Toyota Camry is about 25,000 yuan.

But Honda and Toyota plan to start building hybrid components like battery packs and electric motors in China, and using them in locally assembled hybrid cars.

That could bring the cost differential down enough that with the local incentive, hybrid prices would be competitive.

Perhaps cars that can get around the registration limit in Guangzhou (and other Chinese cities, including Beijing) will become the equivalent of the much-desired plug-in cars now eligible for single-person travel in California's High Occupancy Vehicle lanes?

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Comments (7)
  1. "That could bring the cost differential down enough that with the local incentive, hybrid prices would be competitive."

    You could argue that the savings in gasoline make them competitive.

    The US hybrid incentive was a complex piece of legislation (a pretty good one at that). Each hybrid model got a different incentive based on how energy efficient it was. The tax credit ranged from about $450 for one Lexus model up to $3400 for the Ford Fusion. Being a hybrid was not enough, it had to be a good one.

    It also included a gradual phase out process over 15 months, so no rush at the end.
     
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  2. "You could argue that the savings in gasoline make them competitive."

    Not if you only drive 3,000 miles per year...
     
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  3. True, but how common is that?
     
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  4. It is China where people lives in a highly concentrated area and gridlock last weeks...
     
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  5. well, saving in gasoline doesn't work well if you don't drive too many miles per year.
     
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  6. Well, the situation is unique in China. Cars are still a "status" symbol even when the buyers are price senstive. Most Chinese drivers don't drive long miles per day and their gasoline usage is fairly minor. So, the payback is long. Many owners also don't keep cars past 100,000 KM or 10 years. So, if hybrid doesn't save them money in the first 2-3 years, then they won't buy it.
    One way to "encourage" buyers to buy "green" cars in China is to limited registration and/or license tags. Due to crowding, only odd/even tags are allowed on odd/even days. If hybrids/EVs get no restriction, then buyers will come. (No different from HOV lane access).
     
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  7. $1,730 is NOT much for a Chinese car buyers. That is about the price of two iPads in China or a nice set of dSLR camera with lens...
     
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