Policy shot in the arm for new-energy vehicles

Analysts predict better times ahead after mainland governments are told to lift purchases of electric and hybrid vehicles to 30pc of mix by 2016

PUBLISHED : Tuesday, 15 July, 2014, 1:31am
UPDATED : Tuesday, 15 July, 2014, 5:02am

Beijing's move to ensure that at least 30 per cent of new government vehicles on the mainland are powered by alternative energy by 2016 is expected to boost a new-energy car market that has been losing steam of late because of high prices and a lack of charging stations.

The new policy, issued by the National Government Offices Administration and four other government bodies, will be applied to all central-level departments and those in cities selected for a trial run to promote new-energy vehicles.

Under the policy, at least 15 per cent of new vehicles would have to run on clean energy by this year in heavily polluted areas such as Beijing, Tianjin, the Pearl River Delta and the Yangtze River Delta.

The directive also says that no more than 180,000 yuan (HK$224,750) can be spent on an alternative-energy vehicle by government departments, after deducting the subsidies provided by the Ministry of Finance.

The government started providing a 120,000 yuan subsidy for the purchase of electric or plug-in hybrid cars a few years ago.

"The new policy, along with other incentives launched earlier, will definitely help in a breakthrough for the new-energy vehicle market this year," said Zhang Zhiyong, an independent industry observer, referring to the waiver of the 10 per cent purchase tax for new-energy vehicles from September 1 until the end of 2017.

"This is not the first measure by the government to stimulate the industry and it won't be the last."

BYD, the electric carmaker partially owned by Warren Buffett's Berkshire Hathaway, rose 3.8 per cent to HK$49 yesterday on the news. The stock has risen 70 per cent over the past year, outpacing the 9.7 per cent gain for the Hang Seng Index.

The mainland, the world's largest car market, has been aggressively pursuing the goal of becoming a global leader in new-energy vehicle manufacturing but has been struggling to close the yawning gap between the offerings of domestic carmakers and top global marques.

About 17,600 new-energy cars were sold in China last year, far behind the 110,000 in the United States and the 50,000 in Japan.

Yale Zhang Yu, the managing director of Shanghai-based consulting firm Automotive Foresight, said the steep price tags of electric and plug-in hybrid vehicles were still a major issue for mainland consumers, as was the lack of sufficient charging stations.

To address these problems, the new policy stipulates that local governments must factor in charging facilities for new-energy cars when they draw up plans for public infrastructure.

"With all these measures, it's very likely we'll see a significant increase in sales of alternative-energy vehicles in China this year," Yale Zhang said.

Given the expenditure cap imposed by the government on vehicles for official use, he said only domestic brands would benefit from the new policy.

The vehicles would initially be used in areas like public transport, postal services and environmental sanitation services rather than for high-level officials, he said.

"You can hardly imagine a senior government official used to a Volkswagen Passat taking an electric car for a business trip to another city and searching for a charging station along the way," he said.