01 Mar China shifts gears to drive electric car development
Premier Li Keqiang vowed to “step up support” for the electric vehicle industry at a meeting of the State Council on Wednesday by shifting funds from supporting EV production to rewarding companies that produce new technologies and hit sales targets, according to the government website.
Principal targets include achieving a “revolutionary breakthrough” in battery technologies and using EVs for taxi and bus fleets in major cities.
China considers the development of its EV market a key strategic goal, and policy has encouraged auto producers to focus on fuel replacement in the hope that such technologies will allow them to be competitive abroad while reducing air pollution at home.
Subsidies for producers and buyers alike helped sales rocket to more than 330,000 vehicles in 2015, up fourfold from 2014 but still shy of Beijing’s goal of half a million.
Growth-by-subsidies cuts both ways, however, and reports in Chinese media of widespread “fraudulent” claims by companies that take government money without redirecting their efforts towards the expensive process of EV technology development prompted the Finance Ministry to announce in January that it would phase out subsidies by 2021.
“The age of subsidising manufacturers is whittling away,” said Bill Russo, managing director at Gao Feng, a Shanghai-based advisory. The government has “decided to focus the development down to areas where China can develop some degree of competitive leadership,” he said.
Sourcing and manufacturing battery-related technology, a key component of electric vehicles, is one area in which China has a natural advantage due to its large — and carefully guarded — store of rare earth metals such as lanthanum, which is used to make hybrid batteries.
The success of companies such as US-based Tesla Motors has been as much due to battery technologies as to motors and recharging components, and China is keen to create homegrown champions that can compete in this crucial area. Currently most major EV producers in China are joint ventures with foreign carmakers.
Mr Li’s statements also included a push to use public transport and institutions as a conduit for boosting EV sales, with the mandated percentage of new energy vehicles purchased by public institutions rising to 50 per cent from a previous 30 per cent.
The prospect of updated public transport fleets being encouraged to use only electric vehicles also raises the possibility of an uneven playing field developing, with local manufacturers given priority in bidding for deals.