Electric Car Jolts Market

By+Lan+Xinzhen

On February 26， Beijing announced the first license-plate lottery results for 2014. On the same day， the municipal government also released the list of new-energy car models subject to consumer subsidy. BYDs allelectric E6 model and BAIC Motors E150EV have become the first two models on the list. That day， 1，428 applicants were picked as eligible to buy new energy cars.

Starting from 2011， the city introduced a license-plate lottery system designed to limit the number of privately owned cars hitting the road each year. According to an announcement by the Beijing Municipal Government， in the future， more new-energy car models will be added to the list of government-subsidized cars available to consumers.

Previously in Beijing， new-energy vehicles were mainly buses， taxis and sanitation trucks， and the number of new-energy cars was very small. A steep rise in users of new-energy cars in Beijing may indicate that Chinas new-energy vehicle market is embracing opportunities for development.

According to figures from the China Association of Automobile Manufacturers（CAAM）， at present in China， there are more than 30 manufacturers of new-energy vehicles， including both Chinese brands such as BYD， BAIC and JAC as well as joint stock companies of General Motors and Toyota.

The Planning for the Development of the Energy-Saving and New-Energy Automobile Industry （2012-20）， which was released by the Central Government， sets a target of producing and selling 500，000 pure electric and plug-in hybrid vehicles by 2015， and 5 million vehicles by 2020.

Its clear that China is unlikely to reach the goal of producing and selling 500，000 electric vehicles by 2015. However， it is estimated that more than 10，000 Beijing residents will buy new-energy private cars this year. If Beijing can reach this goal， the Chinese new-energy vehicle market will grow rapidly.

Ye Shengji， Deputy Secretary General of the CAAM， said Chinas low capacity in producing and selling new-energy vehicles can be mainly attributed to an inadequate number of buyers.

In order to encourage development of the new-energy vehicle market， the Chinese Government has slowed down the reduction of subsidies to new-energy vehicle buyers. According to a document jointly released by the Ministry of Finance， Ministry of Science and Technology， Ministry of Industry and Information Technology and National Development and Reform Commission at the beginning of 2014， the subsidies for newenergy vehicles in 2014 will be 5 percent lower than those in 2013， and the subsidies in 2015 will be 10 percent lower than those in 2013， which represents half of the previously planned reduction. The document also states that after the present subsidy policy ends at the end of 2015， the Central Government will continue offering subsidies.endprint

Ye said that the sales volume of new-energy vehicles in China is likely to grow explosively this year. While the government is promoting the saving of energy， the reduction of emissions and stricter controls on air pollution， Chinas new-energy vehicle industry will surely avail of the opportunities this situation presents.

More charging poles

Compared with gas stations for fuel-burning cars， which are available everywhere， an inadequate number of charging poles stand as the major factor restricting the development of the electric vehicle market. China has been promoting the development of electric cars and made it one of its measures to reduce pollution， but because of the difficulty facing building charging poles， the governments efforts have， unfortunately， had little effect.

To redress this situation， Beijing decided to engage in rapid full-scale construction of charging poles this year for the first time. It plans to finish construction of 1，000 public fast-charging poles within the year， and in the future there will be a charging pole every 5 square km， with a public charging facility network to be built. At present， there are only 20 charging stations in Beijing.

Xu Xinchao， chief of the New Energy and New Materials Division of the Beijing Municipal Science and Technology Commission， said in order to encourage use of new-energy vehicles， the government now only charges electricity expenses for the users of public fast-charging poles. To run for 100 km， new-energy cars need 15-18 kilowatt-hours （kWh） of electricity. With electricity price of 0.81 yuan （$0.13） per kWh， the cost will be 12-14 yuan （$1.96-2.29）， which is a tempting price for car users.

Shanghai is also accelerating construction of charging poles for electric vehicles. According to Shanghais planning for the development of energy-saving and new-energy automobile industry， the city is trying to build charging poles every 5 km in urban areas and every 10 km in city suburbs. By 2015， there will be 6，000 charging poles and over 10，000 new-energy cars in Shanghai. At present， the number of pure electric private cars in the city is fewer than 10.

Ye said the inadequate number of charging poles is one of the reasons for the slow development and unsatisfactory sales volume of the new-energy vehicle industry. The planning and construction of charging stations and poles have not yet been standardized， and there is no uniform planning and distribution among different regions.endprint

If there was to be a charging pole every 5 square km in Beijing and Shanghai， the difficulties of using electric cars would be rendered non-existent. In addition， if consumers were to be incentivized by favorable conditions such as easily obtained license plates and large subsidies， the sales volume of electric cars in Beijing and Shanghai may exceed 10，000 each year. Considering the trailblazing role to be played by Beijing and Shanghai as well as the promotion policies to be issued by cities such as Tianjin and Shenzhen of Guangdong Province， Chinas sales of new-energy vehicle may double in 2014.

Ye claimed the accelerated construction of charging stations will lay the foundations for a potentially huge market. According to his estimation， if each charging station costs 5 million yuan （$817，000）， the market size may reach 10 billion yuan （$1.63 billion）. Suppliers of related equipment will also benefit greatly from the construction project.

phasing out subsidies

According to figures from the Beijing Municipal Government， the quota for new-energy cars was 1，666 in February， but there were only 1，428 registrations. It seems that far more people would still rather wait to buy conventional cars by purchasing a ticket with a lottery win rate of lower than 1 percent.

Xu said most consumers still have doubts in their mind in choosing new-energy cars. For example， besides charging poles， they are also concerned about safety as well as the availability and price of aftersales service for such vehicles. These problems cannot be addressed by relying on government policies alone； the role newenergy vehicle makers play should be central to solving these problems.

Xu said that in Chinas new-energy vehicle market， depending on government policies is not a good thing. Particularly， the fact that consumers depend on government subsidies when buying new-energy cars could discourage automakers tendency to innovate. Therefore the government should phase out subsidies at the appropriate time.

According to present policies， government subsidies for purchasing electric cars range from 63，000 yuan （$10，250） to 108，000 yuan（$17，600）， and the subsidy for each fuel cell electric car amounts to 360，000 yuan （$58，600）.

Xu went on to elaborate that considering the present situation in Chinas new-energy vehicle market， new-energy vehicle makers must， when introducing new technologies to the market， innovate their sales pattern instead of waiting for government subsidies to take effect. For example， they can divide sale of cells and complete cars， lease out cells， or offer alternatives to charging cells built into automobiles， for example， by introducing detachable cells. This， he claimed， will remove most of the current obstacles in the new-energy vehicle market.

Ye said that compared with conventional vehicles， electric vehicles are more expensive， therefore government subsidies are necessary to encourage the purchasing of new-energy vehicles in the primary stage. However， Chinas new-energy vehicle industry should not rely on government subsidies ultimately， and it must be fully market-oriented. It is not certain whether or not government subsidies can successfully nurture a new-energy vehicle market， and how long it will take to nurture a real market.

With the growing production capacity and sales volume of Chinas new-energy vehicle industry， production costs will drop significantly， making new-energy cars increasingly cheaper. Therefore government subsidies should be reduced and eventually drawn back， Ye said.endprint