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BYD

BYD

Beijing's clean-energy incentives give price edge to Chinese carmakers

PUBLISHED : Monday, 28 July, 2014, 4:26am
UPDATED : Monday, 28 July, 2014, 6:46am

The latest government incentives have armed mainland car brands with competitive price advantages as they seek to win market share in the burgeoning "new-energy" car market from foreign brands.

Harry Chen, an automotive analyst with Guotai Junan Securities, said the latest round of supportive measures would give homegrown brands a significant price advantage, with more models enjoying local government subsidies.

In addition to central government subsidies designed to encourage the purchase of electric cars, plug-in hybrids and fuel cell vehicles, some local governments have also launched their own subsidy programmes. Local governments used to compile their own directory of models eligible for local subsidies, in order to keep out cars made elsewhere on the mainland, but the State Council announced on Monday that a unified directory would be compiled to ensure that local subsidies covered more new-energy car models.

Chen said joint-venture models not developed on the mainland would find it difficult to win recognition from local governments and enjoy local subsidies.

The State Council said the next five-year fiscal support programme, after the expiry of the current one at the end of next year, would exclude imported new-energy cars, with the aim of nurturing domestic carmakers.

John Zeng, a director of consultancy LMC Automotive, said homegrown brands would be able to set competitive prices with government support.

"Local carmakers such as BYD price their electric car models mostly between 120,000 yuan (HK$150,000) and 140,000 yuan after deducting subsidies, which is competitive," he said.

The prices of homegrown new-energy cars will also comply with budget requirements for government procurement, which is set to boost new-energy car sales following the introduction of a rule mandating that at least 30 per cent of new government vehicles be powered by alternative energy by 2016.

As the budget for each vehicle is capped at 180,000 yuan after deducting subsidies, Orient Securities' analyst Jiang Xueqing said more expensive foreign brands such as Tesla could not be included in government procurement programmes, while most cars produced by local brands would be within the budget.

Jiang forecast that government purchases of new-energy cars could reach 100,000 units in 2016. The number could reach 30,000 to 40,000 units this year as heavily polluted areas such as Beijing and the Pearl River Delta were now required to have 15 per cent of new government vehicles powered by clean energy.

The brokerage is upbeat on the outlook for local carmakers including Shenzhen-based electric carmaker BYD, Anhui Jianghuai Automobile and bus manufacturer Zhengzhou Yutong.

Zeng said a series of measures was likely to help homegrown brands, but local carmakers should also step up efforts to launch more competitive green car models in order to boost their market share.

Mainland marques sold 3.63 million cars in the first half of the year, with their market share dropping by 3.48 percentage points year on year to a five-year low of 37.7 per cent, according to the China Association of Automobile Manufacturers.

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