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 With a part-carrot, part-stick strategy of incentives and targets,
Beijing is pushing car makers to develop battery electric cars,
seeing this as its best shot at closing a competitive gap with
global rivals who have a 100-year headstart in traditional
combustion engines.
Electric powertrains are simpler to develop, and driving a push to
green cars fits President Xi Jinping's policy goal of reducing
pollution.
With an eye on both big subsidies and looming fuel economy targets,
automakers in China are earmarking at least 50 billion yuan ($7.86
billion) this year for developing and making 'new energy' vehicles,
a Chinese catch-all term for electric and highly electrified cars,
data compiled by Reuters shows.
"Some time ago, Xi Jinping explained it very well, saying that
developing new energy vehicles is the Chinese auto industry's only
road to grow from being big to being strong," Xu Heyi, chairman of
Beijing Automotive Group [BEJINS.UL] and a high-ranking Communist
Party official, told reporters recently.
Electric and plug-in hybrid car sales jumped 270 percent to 108,654
cars in January-August, the China Association of Automobile
Manufacturers (CAAM) said on Thursday, and China is on track to
overtake the United States as the world's leading producer, making
more than 130,000 such cars this year, according to consultancy LMC
Automotive.
The government has set a goal of annual production of 1 million new
energy cars by 2020, though industry researcher IHS Automotive
forecasts output then at nearer 791,000.
FUEL ECONOMY GOALS
As for the carrot, drivers in Shanghai, for example, can save up to
182,600 yuan ($28,600) over a traditional gasoline-powered car, by
taking advantage of free license plates for some green cars and
other subsidies, according to official data and analysts' estimates.
However, Beijing said in April it would roll back subsidies faster
than expected, and may now lean increasingly on fuel economy
requirements that grow progressively stricter to 2020.
Authorities haven't yet spelt out how these requirements will be
enforced, though a feasibility study released by Great Wall Motor Co
<601633.SS> <2333.HK> last month suggested automakers could face big
fines for failing to meet the requirements.
The central government plans to roll out a California-style system
that rewards manufacturers and drivers for going electric, while
punishing those who rely on traditional gasoline cars, Beijing
Auto's Xu said in July.
Chinese automakers are leading the charge to invest in green cars,
with domestic brands such as Geely Automobile Holdings <0175.HK> and
Great Wall raising money in private share placements or building
factories specifically earmarked for new energy vehicles.
Among foreign automakers, General Motors Co's joint venture with
SAIC Motor Corp said in April it would invest 26.5 billion yuan in
new energy technologies and increased electrification by 2020. A
spokeswoman said this was still on track.
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GM and SAIC's other joint venture, with Wuling Motors Holdings
<0305.HK>, said last month it would build a $470 million new energy
vehicle factory with 200,000-car capacity by 2017, though it did not
specify whether the cars would be traditional hybrid, plug-in hybrid
or full electric.
HOMEGROWN MODELS
While official data doesn't break down market share for green cars,
Chinese marques dominate the lists of top-selling electric and
hybrid models.
BYD leads the market with its Qin plug-in hybrid, while Beijing Auto
subsidiary BAIC Motor Corp <1958.HK> sells the leading full-electric
car, the E-series, according to the China Passenger Car Association
(CPCA).
"Foreign carmakers don't believe the technology is evolved," said
Yale Zhang, managing director at Shanghai-based industry researcher
Automotive Foresight. "They don't think there's enough demand for
pure-electric vehicles."
Some foreign car markers are showing faith, however, in the
long-term demand for electrified vehicles in China.
Toyota Motor Corp is gearing to launch by the end of this year a
lower-cost gasoline-electric hybrid, similar to its Prius, which has
been developed specifically for China.
Tesla Motors spokesman Gary Tao said that the company was optimistic
about the EV market in China after it recorded rapid sales growth
this year, contributing to a near doubling of sales in Asia-Pacific
in the second quarter compared with the first three months of the
year. He declined to give exact sales numbers.
"Gradually people can be more knowledgeable about these EV cars and
better accept EV cars, then the whole market could be ready for the
mass market (EVs)," Tao said.
"Quality and best-in-service will be a good base for the future of
long-term development ... more than volume at this stage."
(Reporting by Jake Spring; Additional reporting by Beijing newsroom;
Editing by Ian Geoghegan and Alex Richardson)
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