Keeping It Green

China gives more generous incentives to energy-saving and new-energy vehicles By Lan Xinzhen

Keeping It Green

China gives more generous incentives to energy-saving and new-energy vehicles By Lan Xinzhen

The Chinese Government has set a target of having 500,000 all-electric and plug-in vehicles on the road by 2015. However, technological stumbling blocks such as insufficient infrastructure must be tackled to clear the way for the sector’s development. A more successful business model is also badly needed for the fledgling sector.

The State Council, or China’s cabinet, adopted a development plan for energy-saving and new-energy vehicles (2012-20) on April 18 at its executive meeting, promising that pure electric vehicles will be the main strategic orientation for transforming China’s auto industry.

“Prioritizing purely electricity-driven vehicles will be the major strategic route for China to transform the auto industry. And the current focus is to promote the industrialization of pure electric cars and plug-in hybrid electric vehicles,” said Premier Wen Jiabao at the meeting.

Plug-in hybrid electric vehicles utilize rechargeable batteries that can be restored to full charge by connecting a plug to an external electric power source.

According to the plan, China’s accumulative output of pure electric and plug-in hybrid electric vehicles will rise to 500,000 units by 2015 and 5 million units by 2020. The country will try to lower average fuel consumption of automobiles produced in 2015 to 0.069 liters per km and those produced in 2020 will see their average consumption drop to 0.05 liters per km. The plan also underscored the necessity of requiring domestic manufacturers to become capable of independently producing state-of-the-art components for new-energy cars.

In a bid to accomplish the above-mentioned goals, the Chinese Government has geared up a series of incentives, including implementing innovation projects, expanding the pilot program for subsidizing private ownership of new-energy cars, building more charging stations, creating more facilities for recycling batteries, improving the unified standard system, enhancing fiscal support and actively introducing international cooperation in the field.

A market formed

In the first quarter of this year, China sold more than 10,000 energy-saving and new-energy vehicles, among which 1,830 were pureelectric vehicles, 1,499 were hybrid vehicles and 6,873 were alternative fuel vehicles, according to data from the China Association of Automobile Manufacturers (CAAM).

It is the first time that the CAAM has taken the production and sales of new-energy vehicles into its statistics as more consumers consider purchasing them.

China kicked off the promotion for energysaving and new-energy vehicles five years ago.

And in 2009 China started a demo project in 10 cities, requiring each to incorporate 1,000 new-energy vehicles into its municipal fleets.

In late 2010, the list was expanded to cover a total of 25 cities, including Beijing and Shanghai. Right now, most sales of energy-saving and new-energy vehicles have occurred in these cities.

Since June 2010, China has launched trial subsidy programs in five cities—Shanghai, Changchun, Shenzhen, Hangzhou and Hefei—with the amount of subsidies to a purely electric vehicle and a hybrid vehicle hitting 60,000 yuan ($9,516) and 50,000 yuan ($7,930), respectively.

The released plan reassured the Chinese Government’s resolution to spur the purchase of energy-saving vehicles by expanding the pilot program for subsidizing the private ownership of new-energy cars. This means more generous incentive policies may come out in the future and private purchase will be the main part for government subsidy.

Beijing is spearheading the movement toward electric cars from gasoline-driven cars. The city will create more charging stations and more facilities for recycling batteries for privately owned electric vehicles. It now has completed four major charging stations, one of which, named Gaoantun, is the largest of its kind in the world. By the end of this year, Beijing will have over 5,000 new-energy vehicles in the public service sector, according to the Beijing Municipal Commission of Development and Reform.

As the next step, Beijing will establish an intelligent service network for charging and recycling batteries by the end of 2015, with a service station built within a radius of less than every 5 km within the Fifth Ring Road. Fast-charging posts will be set up near some transfer bus or subway stations to ensure it only takes half an hour to charge over 80 percent of the battery.

Proactive automakers

JIANG LIN

Eighty-eight new-energy vehicles are on show at the 2012 Beijing International Automotive Exhibition (April 23-May 2). Although they represent a smaller number compared with those in 2011, they are more practical and in line with consumers’ actual needs, said Wang Xia, President of the Automotive Industry Committee under the China Council for the Promotion of International Trade.

“The new promotion plan for new-energy vehicles charts the course for the future development of automakers, thereby helping spur the leaping development of the sector,” said Wang.

China’s automaker BYD revealed its second-generation plug-in hybrid, the Qin concept (named after China’s first empire), at the 2012 Beijing International Automotive Exhibition. BYD’s first plug-in hybrid, the F3DM, was introduced in 2008 but didn’t have strong sales, like most green vehicles in China. Like the F3DM, Qin will feature two modes of operation: hybrid mode (HEV) and pure electrical (EV). The speed up time from 0 to 100 km/h for the model is only 6.9 seconds and the overall cost for every 100 km is 16 yuan ($2.54), an equal to 2 liters of gasoline. With its better performance over the last generation, Qin has been widely applauded by netizens.

Toyota Motor, a multinational with renowned performance in energy-saving and new-energy vehicles in the Chinese market, sold 267 Prius cars in March, a hybrid vehicle that Toyota put a lot of emphasis on, while the sales of another hybrid vehicle Lexus CT200h has amounted to 1,456 units. Sales of hybrid cars took up 25 percent of Lexus’ overall sales volume in March.

Toyota’s new-energy vehicles have become a focal point at the 2012 Beijing International Automotive Exhibition. Sixteen types of newenergy vehicles, including hybrid electric vehicle (HEV), plug-in hybrid electric vehicle (PHEV) and electric vehicle (EV), are on show at the exhibition, accounting for over 30 percent of the total number of displayers.

Other automakers also have made lots of efforts in manufacturing green vehicles. By the end of 2011, 361 kinds of new-energy vehicles had been posted on product announcement of 75 automakers, according to the Ministry of Industry and Information Technology.

Future development

Although government planners have come to the consensus that electrification is the ultimate route for automobiles, it doesn’t mean pure-electric vehicles have become a popular choice among consumers.

Hybrid vehicles have become a mature industry and pure-electric vehicles are still being developed. Due to technological obstacles, pure-electric vehicles are at a starting point. After five years, it may have relatively fast development, said Wang Binggang, leader of the consulting experts of the energy-saving and new-energy vehicle project attached to the 863 Plan, a national plan for hi-tech development.

Participants at the annual meeting of China (Shanghai) International Electric Vehicle Pilot City Partnership Organization held on April 14 emphasized the importance of innovation of business mode in green vehicle development.

“Incentive policies for the pilot city program of new-energy vehicles will be adjusted at the end of 2012. The next step is to expand the pilot program to more cities in China and to emphasize more on the innovation of the business mode,” said Zhang Jinhua, Deputy Secretary General of the Society of Automotive Engineers of China.

For now, there are three types of business models in China’s pilot cities for new-energy vehicles, including the auto sales mode, represented by Hefei; the leasing mode, including battery lease and vehicle lease, represented by Hangzhou; and the finance lease mode practiced in Hefei and Hangzhou where finance companies purchase the batteries and then lease them to bus companies.

The electric vehicle industry in China has yet to be fully commercialized, and commercialization of products needs to be backed by a successful business model, said Zhang.“And the model is based on convenient purchase and use of electric vehicles by common people,” Zhang said.