China's new policies set stage for NEV growth

The Chinese central government’s regulatory bodies are drafting new policies regarding the new energy vehicle (NEV) segment.
China’s vision for 2020 is that the country will be a global example of a better, cleaner country with 5 million NEVs, mainly electric and plug-in hybrid vehicles, in use.
As part of this plan, four of China’s regulatory bodies, including the Ministry of Industry and Information Technology (MIIT), the National Development and Reform Commission (NDRC), and others, have created a Ladder Policy.
The Ladder Policy has 16 levels of subsidies based on the amount of savings the car yields, instead of subsidies based on the technology used. The program is still in draft form, but if approved, it will run for three years. The minimum subsidy is over CNY3,000 (US$484). This is the first central government draft policy to encourage the purchase of regular hybrid vehicles.
NEVs – such as battery electric, plug-in hybrids, and fuel cell vehicles – are weighted by a factor of five, while regular hybrids and other vehicles that save energy and have fuel consumption of less than 2.8 liters per 100 kilometers will carry a factor of three.
China is aiming to reduce its overall dependence on fossil fuels through NEVs, including fuel cell vehicles, plug-in hybrids (PHEVs), and battery electric vehicles (EVs). By 2015, the Chinese government is aiming for over half-a-million NEVs to be in use in the country.
China has had green plans for many years. One such plan was initially created in March 1986. The China 863 Policy is the backbone of all automotive-related policies in the country, and is also called the State High Level Development Plan. It set the stage for the new energy revolution in China, as well as created a major drive for the country to expand its research and development and technology levels.
The plan was expanded over time to include the 10 City, 1,000 Vehicle project. Government agencies such as the Ministry of Science and Technology (MOST), the Ministry of Finance (MOF), the NDRC, and the MIIT formed this plan in 2008, which was launched in September 2009.
Initially set to include 10 pilot cities, additional cities were added over time, bringing the total up to 25 by 2010. The goal was to put at least 1,000 NEVs on the road in each pilot city. Ultimately the plan was to have NEVs be 10% of the market by 2012. By the end of the pilot program, however, the plan had achieved a mere 38% success rate, and 80% of the vehicles were buses.
Another government plan involves subsidies for private purchases of NEVs. This program was launched in 2010 and expired in December 31, 2012, though some regional governments still utilize subsidies. A CNY60,000 (US$9,682) subsidy was given for the private purchase of battery electric vehicles and a CNY50,000 (US$ 8,069) subsidy was given for the private purchase of plug-in hybrid vehicles in five pilot cities only. These pilot cities were Shanghai, Changchun, Shenzhen, Hefei and Hangzhou.
There are still bonuses from state-owned sectors, such as the electricity sector, which offers special rates for EVs. Cities such as Shanghai also offer free license plates to EV buyers.
One last project the Chinese government is trying is the 863 Fuel Cell Vehicles Project. In 2001, the government invested CNY800 million (US$129 million) in this project to encourage the development of fuel-cell vehicles, called Ran Liao Dian Che in Mandarin.
The second component of China’s 2020 vision is to reduce fuel consumption. Beginning May 1, 2013, this policy is aimed at reducing average passenger fuel consumption in China to 14.49 Km/L (34.1 mpg) by 2015. In June of each year, the MIIT will publish a list of the most fuel-efficient vehicle fleets in China. Penalties will be imposed for the worst performers, though details of these have not yet been disclosed.
The new fuel-consumption reduction goals are part of the broader directive by the Chinese government to reduce dependence on diesel fuel and gasoline. The government released this policy in March 2013. The MIIT has stated that automobiles account for 55% of diesel fuel and gasoline consumed per year in China.
Automakers have been calling for a gradual policy system to push sales of hybrid vehicles in China. The Toyota Prius, for example, was originally produced in China at the FAW-Toyota joint-venture in 2005, but ceased due to almost no sales in the country. However, in December 2011 Toyota restarted Prius production in China in a bid to increase its commitment to bringing greener vehicles to China.
Earlier in 2013, the province of Guangdong issued its own policies and local subsidies for vehicles. Guangdong aims to introduce hybrid vehicles as well as other alternative fuel vehicles under its 2013–20 NEV development plan. The new draft policy includes EVs, PHEVs, and extended range EVs, fuel-cell vehicles (FCVs), as well as conventional hybrid vehicles and liquefied natural gas (LNG) vehicles.
IHS Automotive’s principal China powertrain analyst, Tony Wang, says that the new Guangdong policies extend the scope of the overall NEV policy structure in China. “In 2012 the Chinese central government issued the 12th five-year plan for the auto industry where it defined NEVs as only EVs and plug-in hybrids, and fuel-cell vehicles. [T]his new local policy extends the scope of it to common hybrids,” says Wang.
Sales of NEVs in the first quarter of 2013 have risen by 30.5% year-on-year to 2,128 units. However, this is still very low and it is likely that potential NEV buyers are awaiting the release of the central government’s subsidy policy before purchasing NEVs.
All of China’s policies set the stage for China’s vision of 2020 when it aims to be an example of a cleaner, greener world, and where China has a high level of new innovative technology. The MOST states that under the 863 Plan, CNY11 billion (US$ 1.78 billion) was invested and the plan created 2,000 global technology patents.
(May 17, 2013)