New en­ergy ve­hi­cles await fuel in­jec­tion

Mar­ket fails to gain trac­tion as govern­ment sub­sidy pol­icy on hold, re­ports Jiang Xue­qing in Shen­zhen.

China Daily (Hong Kong) - - FRONT PAGE -

Like many auto in­dus­try ex­ec­u­tives, Xu Wei­han, chief fi­nan­cial of­fi­cer of Shang­hai Gaozhan New En­ergy Ve­hi­cle Sales Ser­vices, is anx­iously await­ing a new govern­ment pol­icy on sub­si­dies for pri­vate pur­chases of plug- in hy­brids and elec­tric ve­hi­cles.

The pre­vi­ous pol­icy, which ex­pired at the end of last year, pro­vided a max­i­mum sub­sidy of 50,000 yuan ($8,160) for plug- in hy­brids and 60,000 yuan for elec­tric cars. When in force, it helped Shang­hai Gaozhan sell nearly 400 elec­tric ve­hi­cles and take or­ders for a fur­ther 400 since open­ing a deal­er­ship in Shang­hai in Novem­ber 2011.

Be­cause the new pol­icy is up in the air, the com­pany’s busi­ness in the first half of the year has been greatly af­fected.

“Many cus­tomers who had signed or­ders have can­celed their pur­chases,” said Xu. “The tough sit­u­a­tion forced some ma­jor auto man­u­fac­tur­ers, such as SAIC Mo­tor, to pay the sub­si­dies first. They started do­ing that in July. They will ap­ply to the govern­ment for re­im­burse­ment of the sub­si­dies when the new pol­icy is un­veiled.”

Weak mar­ket

Crav­ing for lux­ury

The Chi­nese govern­ment pro­vides stronger sup­port to new en­ergy ve­hi­cles in terms of sub­si­dies than any other in the world, said Pang Yicheng, CEO of Bei­jing EV Fu­ture In­for­ma­tion Tech­nol­ogy Co, an in­for­ma­tion provider for the elec­tric ve­hi­cle in­dus­try.

In ad­di­tion to the cen­tral govern­ment, a num­ber of lo­cal gov­ern­ments have also for­mu­lated their own poli­cies to en­cour­age pur­chases of new en­ergy ve­hi­cles. In De­cem­ber, the Shang­hai mu­nic­i­pal govern­ment, for ex­am­ple, set up a year­long pro­gram to pay sub­si­dies of 30,000 yuan for plug-in hy­brids and 40,000 yuan for elec­tric ve­hi­cles. To sweeten the deal even fur­ther, it also of­fers pur­chasers free li­cense plates.

“Three years ago, we re­al­ized that China has no choice but to de­velop new en­ergy ve­hi­cles be­cause of con­cerns about the coun­try’s en­ergy se­cu­rity,” said Pang. “China is the fastest-grow­ing auto mar­ket in the world. Car sales rose 12.3 per­cent year-on-year dur­ing the first half of this year. So the coun­try has a sense of ur­gency about re­duc­ing oil con­sump­tion by ve­hi­cles.”

How­ever, the mar­ket for new en­ergy ve­hi­cles re­mains weak, de­spite the govern­ment sub­si­dies.

Just 5,889 new en­ergy ve­hi­cles — 5,114 elec­tric ve­hi­cles and 775 plugin hy­brids — were sold in China be­tween Jan­uary and June, but 10.78 mil­lion ve­hi­cles of all types were sold in the same pe­riod, ac­cord­ing to statis­tics from the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers.

By the end of March, the num­ber of elec­tric ve­hi­cles on the road had risen to more than 39,800 from 27,800 at the end of 2012, said Wan Gang, min­is­ter of science and tech­nol­ogy, at an in­ter­na­tional fo­rum in Shang­hai ear­lier this year.

The fig­ures are far be­low the cen­tral govern­ment’s pro­duc­tion and sales tar­get to get 500,000 elec­tric ve­hi­cles and plug-in hy­brids on the road by 2015 and 5 mil­lion by 2020.

But why is it so hard to pro­mote new en­ergy ve­hi­cles to pri­vate buy­ers? The big­gest prob­lem lies in sup­ply and de­mand, ac­cord­ing to Zhang Junyi, prin­ci­pal at Roland Berger Strat­egy Con­sul­tants, who spe­cial­izes in the au­to­mo­tive in­dus­try.

“Con­sumers are highly price-sen­si­tive. Even if we take sub­si­dies into ac­count, the prices of new en­ergy ve­hi­cles are still higher than those of con­ven­tional ve­hi­cles be­cause of un­der­de­vel­oped bat­tery tech­nol­ogy,” he said.

For ex­am­ple, the price of the e6 model, an all-elec­tric cross­over car — half sedan, half SUV — man­u­fac­tured by BYD Auto Co, is 369,800 yuan be­fore sub­si­dies. Al­though cus­tomers will re­ceive a sub­sidy of 60,000 yuan from the cen­tral govern­ment and a fur­ther 60,000 yuan from Shen­zhen’s lo­cal govern­ment (al­though the lo­cal sub­sidy varies from place to place), the car is still more ex­pen­sive than con­ven­tional gas-pow­ered ve­hi­cles in the same cat­e­gory, which usu­ally cost 100,000 to 150,000 yuan.

So far, around 3,000 to 4,000 e6s have been sold to pri­vate buy­ers, mostly in BYD’s home­town of Shen­zhen in Guang­dong prov­ince.

“At present, we are mainly fo­cus­ing on the pub­lic trans­port mar­ket. Once de­mand for the BYD e6 rises sig­nif­i­cantly in that mar­ket, we will move into mass pro­duc­tion, which will ben­e­fit con­sumers by bring­ing the price down,” said Wang Ai­hui, mar­ket­ing di­rec­tor of the Green Pub­lic Trans­port Di­vi­sion of BYD Auto Sales Co.

The com­pany has sold 820 e6 mod­els for use as taxis and 500 as po­lice cars, plus 935 of its K9 all-elec­tric buses, in sev­eral cities, in­clud­ing Shen­zhen, Chang­sha in Hu­nan prov­ince and Xi’an in Shaanxi prov­ince.

Some in­dus­try ex­perts said Chi­nese auto man­u­fac­tur­ers have failed to de­velop their prod­ucts in ac­cor­dance with de­mand trends as out­lined by mar­ket in­ves­ti­ga­tions.

For ex­am­ple, in large cities such as Bei­jing, Shang­hai and Guangzhou, con­sumers are start­ing to buy their sec­ond or even third car, and most of them are em­brac­ing lux­ury brands such as BMW.

“The Chi­nese ur­ban mid­dle class has not yet sat­is­fied its crav­ing for lux­ury brands. It’s hard for them to by­pass this stage and head to­ward a green life­style, un­less they drive elec­tric cars pro­duced by BMW,” said Pang of Bei­jing EV Fu­ture In­for­ma­tion Tech­nol­ogy. “Al­though some white-col­lar work­ers who al­ready have a car want to buy an elec­tric ve­hi­cle, de­mand is not high enough to sup­port mass pro­duc­tion.”

Pang ar­gued that cities at pre­fec­ture-level or lower, where ev­ery­day ac­tiv­i­ties take place within a ra­dius of 50 kilo­me­ters and there is more space for park­ing, could be prime mar­kets for elec­tric ve­hi­cles.

Al­though mo­torists in smaller cities are anx­ious to buy cars, their bud­gets are limited and they have to min­i­mize their run­ning costs. There­fore, elec­tric ve­hi­cles priced at less than 60,000 yuan would be an at­trac­tive op­tion.

High-end users are also a po­ten­tial mar­ket, sim­i­lar to US mo­torists who own elec­tric cars made by Tesla Mo­tors Inc.

“For rich peo­ple who have plenty of time to do what they want, buy­ing an elec­tric car is like putting on a tag that says, ‘I’m cool. I’m an en­vi­ron­men­tal­ist and a per­son with high so­cial sta­tus,’” said Pang.

So far, no Chi­nese man­u­fac­turer has de­vel­oped a new en­ergy ve­hi­cle that tar­gets high-end users. Only about a dozen elec­tric ve­hi­cle mod­els are avail­able in the Chi­nese mar­ket, and some of them have not been on the road long enough to pro­vide an ac­cu­rate as­sess­ment of their ca­pa­bil­i­ties.

Lack of charg­ing fa­cil­i­ties

An­other fac­tor re­strict­ing the growth of new en­ergy ve­hi­cles is the snail’s pace at which charg­ing fa­cil­i­ties are spread­ing.

The State Grid Corp of China built just 156 charg­ing sta­tions and bat­tery-switch­ing sta­tions na­tion­wide in 2011, plus 6,252 “charg­ing poles”, wall-mounted or free­stand­ing elec­tric­ity points, specif­i­cally de­signed for use by new en­ergy ve­hi­cles.

In re­cent years, Shang­hai Mu­nic­i­pal Elec­tric Power Co has built about 20 charg­ing sta­tions and erected 1,800 charg­ing poles in the city, but the fa­cil­i­ties are rarely used. Rec­og­niz­ing this fact, the com­pany de­cided to change its strat­egy and so, to avoid wast­ing re­sources, it only erects charg­ing poles in re­sponse to re­quests from driv­ers, ac­cord­ing to Xu.

It’s a chicken-and-egg sce­nario; if charg­ing fa­cil­i­ties are not read­ily avail­able na­tion­wide, the ex­ten­sive use of elec­tric ve­hi­cles will be im­pos­si­ble, said Roland Berger’s Zhang, who urged grid com­pa­nies and au­tomak­ers to im­prove co­op­er­a­tion in this field.

Auto in­dus­try pro­fes­sion­als also em­pha­sized that the dis­tri­bu­tion of pub­lic charg­ing fa­cil­i­ties has a huge in­flu­ence on the use of elec­tric ve­hi­cles.

“If you buy an elec­tric ve­hi­cle with a range of more than 100 km and live in a big city such as Bei­jing, you have to con­sider whether there is a charg­ing sta­tion near the place you in­tend to visit,” said Wang. “We hope that the up­com­ing cen­tral govern­ment pol­icy will make it com­pul­sory for newly built shop­ping malls and fives­tar ho­tels to have charg­ing poles in­stalled on their park­ing lots.”

To en­cour­age bet­ter in­fra­struc­ture de­vel­op­ment, Pang sug­gested the govern­ment break up the power sup­ply car­tel op­er­ated by State-owned com­pa­nies such as State Grid and China South­ern Power Grid Co. That would al­low a greater num­ber of pri­vate com­pa­nies to par­tic­i­pate in the con­struc­tion and op­er­a­tion of charg­ing fa­cil­i­ties.

The cen­tral govern­ment should also change the way it dis­trib­utes sub­si­dies. In­stead of giv­ing the money to auto man­u­fac­tur­ers through lo­cal gov­ern­ments, the cash should be paid di­rectly to the con­sumer, said Pang. This would pre­vent lo­cal au­thor­i­ties from only sup­port­ing lo­cal com­pa­nies and would open up the mar­ket to fair com­pe­ti­tion.

“If the lo­cal govern­ment wants to stand firm in the pro­mo­tion of new en­ergy ve­hi­cles, it should in­vite open ten­ders for the sup­ply of plugin hy­brids and elec­tric cars, or even have a trial pe­riod for dif­fer­ent mod­els to see which is the most suit­able for the city,” said BYD’s Wang. Con­tact the writer at jiangx­ue­qing@chi­ Chen Hong and Zhang Yuchen also con­trib­uted to this story.


A vis­i­tor in­spects a BYD new en­ergy ve­hi­cle on dis­play at the China (Shang­hai) In­ter­na­tional Tech­nol­ogy Fair.


A worker charges an elec­tric bus in Zibo, Shan­dong prov­ince. The city op­er­ates 20 of the ve­hi­cles.

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