China’s Favorable Policies and Subsidies Fueling Growth in EV Market

China’s Favorable Policies and Subsidies Fueling Growth in EV Market


Jan 27, 2016

Blog Fuel Cell and Battery Technologies China’s Favorable Policies and Subsidies Fueling Growth in EV Market

China, like many other countries around the globe, hopes to reduce air pollution through the increased use of electric cars. Last year, thanks to favorable government policies designed to increase both manufacturing and consumer sales, the country sold more electric cars than the U.S. for the first time, according to China Association of Automobile Manufacturers.

What’s fueling the mainland’s surge in electric car sales? A combination of local and national subsidies for one thing, reports Adam Minter. For example, he cites the D2 model manufactured by Xindayang, an electric-vehicle maker. Ordinarily, the vehicle designed for “urban dwellers who drive short distances and don't generally use the highway,” would cost buyers $20,000, but national subsidies have chopped that price by half.
Local incentives can apply, as well. Take the BYD Qin plug-in hybrid-electric vehicle, which is manufactured by Shenzhen-based BYD. Local buyers can receive a subsidy of $5,600 that combined with national subsidies, reduces the car’s $60,000 sticker shock by a third, Minter notes.
In addition to subsidies, the Chinese government also has extended other favorable policies to stimulate activity on new energy vehicles (NEV). Apparently, they’re working. According to data released by the Ministry of Industry and Information Technology, China quadrupled its output last year of new energy vehicles (NEVs) to almost 380,000.
On Jan. 1 this year, a national policy went into effect that allows a Beijing resident to buy a new energy car without first having to obtain a license plate through the capital city’s lottery system. The waiting period for plates can take up to five years. The first 60,000 license plates will be available on a first-come, first-served basis, according to Qian Ruisha.
The term “electric vehicles” includes commercial approaches such as pure battery-powered vehicles, plug-in hybrids, hybrid internal combustion/battery, range extending, and fuel cell vehicles, as well as vehicles powered by developmental sources such as supercapacitors and flywheel-powered. According to BCC Research analyst Donald Saxman, nearly all electric vehicle batteries are one of three systems: lead-acid, nickel metal hydride, or lithium-ion (including lithium polymer).
The nomenclature used in the electric vehicle industry has changed over the last 10 years, Saxman notes.  “’Electric vehicles’ now include the ‘hybrid’ electric vehicles (HEVs) as well as ‘plug-in hybrid vehicles’ (PHEVs), which can be recharged using utility electric power. Finally, there’s the ‘pure’ EVs without internal combustion engines at all,” he says. “Then there are fuel-cell-powered vehicles that also use electric motors, and are usually considered EVs. Even fuel-cell-powered vehicles will need high-capacity, rapid-charge batteries.”
Saxman explains that the Chinese government is aggressively promoting the use of EV and HEV to control air pollution and enhance technological and business advantages. So far, he says, the result “has been a series of somewhat fragmented but ultimately effective programs.”
“In 2009, the national government ‘mandated’ an unrealistic goal that 10% of domestic autos use some form of alternative fuel by 2012. Meanwhile, joint military-industrial ministries promoted ‘Plan 863’ (State High-Tech Development Plan), which specifically funds EV and HEV R&D under the 863 Electric Drive Fuel Cell Vehicle Project. Direct incentives to automakers (with the expectation that savings would be passed along to the consumer) have proved effective,” Saxman explains. “In 2012, a 100% tax exemption for pure battery- or fuel cell-powered vehicles was announced. HEVs received a 50% auto tax reduction.”
More recently, he continues, the Chinese began the “Energy Saving and New Energy Car Industry Development Plan” with a goal to increase annual production of pure EV and plug-in hybrid EVs to 500,000 by 2015 and over 5 million by 2020.  In mid-2013, China’s State Council announced that the energy saving sector will be a key pillar of the economy by 2015. The majority of environmental protection industries are expected to receive government funding in an effort to stimulate innovation in a wide range of technologies addressing air, water and soil pollution.
From a global market perspective, the electric vehicle market totaled over $58.6 billion in 2013 and should reach more than $73 billion, according to BCC Research’s Saxman. With an anticipated five-year compound annual growth rate of 8.5% between 2014 and 2019, the global market should total $109.8 billion in the end year.
Saxman says, “Much of this value and growth will result from passenger vehicle type of EVs. BCC Research anticipates a $73.5 billion annual passenger EV market by 2019 under a consensus scenario. An optimistic but still possible scenario could see a market worth more than $83.6 billion by 2019 (based on a 10.6% CAGR). The consensus scenario is based on the sale of over 2 million passenger EVs annually by 2019.”

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    Clayton Luz

    Written By Clayton Luz

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