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China's Electric-Car Future: Government Subsidies, Buyer Resistance

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courtesy Bentley

courtesy Bentley

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Over the last few years, China has experienced some of the highest city pollution concentrations anywhere on earth--with concentrations of pollutants climbing far past dangerous levels on official scales.

Roughly a quarter of that is due to heavy traffic, and it's prompted legislation to clean up the country's streets by any means possible.

BYD e6 electric taxi in service in Shenzhen, China

BYD e6 electric taxi in service in Shenzhen, China

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Electric cars are one suggestion, but so far sales have struggled--and that doesn't look likely to change any time soon, according to writer Alysha Webb, who follows electric-car activities in China.

Like many other countries around the world, one of China's electric car incentives include financial subsidies. For electric vehicles, the rebate totals 60,000 Yuan (about $9,600 at current exchange rates) and for plug-in hybrids, 35,000 yuan ($5,600).

Last September, China's government made the decision to cut those subsidies by 10 percent in 2014 and 20 percent in 2015. One electric-car friendly politician, Ma Kai, has now managed to get those subsidy reductions revised, to 5 percent this year and 10 percent the next.

China's support for electric cars should continue beyond 2015, but the country has other problems to deal with.

Even considering the hefty subsidies on offer, electric car sales have been low. Despite China's population of 1 billion-plus, just 17,600 plug-in vehicles found homes in the country in 2013--that's electric cars and plug-in hybrids combined.

Venucia E30 (Chinese version of Nissan Leaf electric car), Guangzhou Auto Show [photo: ChinaAutoWeb]

Venucia E30 (Chinese version of Nissan Leaf electric car), Guangzhou Auto Show [photo: ChinaAutoWeb]

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High prices are still an issue for China's extremely cost-sensitive car buyers. Ma Kai has suggested waiving the country's 10 percent purchase tax to further incentivize the cars.

Buyers are also still concerned about the technology's perceived complexity and the lack of charging infrastructure in a country where many middle-class families live in high-rise apartment buildings or other multiple dwellings.

China's automakers won't stop making plug-in cars any time soon though. As in some other countries, automakers too benefit from government subsidies to produce cleaner vehicles.

While few consumers are buying them, Webb says local automakers will keep the production lines going in case the government suddenly tightens fuel-efficiency requirements.

Some politicians also see local protectionism as an issue behind slow electric car sales--China's heavy import duties can often price genuinely competitive vehicles beyond the reach of many buyers. And electric cars aren't cheap at the best of times.

One ray of light seems to be car-sharing programs for electric vehicles.

Recently, local firm Kandi announced impressive growth and plans to expand its vending-machine style service into several cities across China--letting customers drive around for just $3.25 per hour.

Supplying cars for such services could be one way of boosting EV sales in the country--even if it means sales are mainly to fleets, rather than to individual customers.

Despite this though, China will miss its goal of half a million electric cars in 2015 by quite some margin--and that was confirmed by the country's Minister of Science and Technology, Wan Gang.

The government may be behind the electric car push, with buyer and manufacturer subsidies and support in high places.

But getting buyers into the cars is proving a lot tougher.

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