Push to promote green cars likely to fail, analysts say

The mainland's latest efforts to ease pollution by subsidising the purchase of green cars is unlikely to tempt Chinese consumers owing to the higher running costs of these vehicles, analysts said.

"It is difficult to attract consumers to buy alternative-energy cars as the electricity costs for running them is higher than petrol, and it's a long-term burden for drivers," said John Zeng, director at consultancy LMC Automotive.

The National Development and Reform Commission, the Ministry of Industry and Information Technology as well and the finance and science ministries yesterday announced a renewed incentive programme to promote the use of alternative-energy vehicles in an effort to cope with rising pollution.

All-electric passenger car buyers can receive up to 60,000 yuan in subsidies while a rebate of 35,000 yuan will be offered to buyers of plug-in hybrid cars with an electric driving range of more than 50 kilometres. Fuel-cell electric vehicles, a type of hydrogen vehicle, are for the first time included in the plan with a subsidy of up to 50,000 yuan.

"Alternative-energy car sales saw a significant drop after a similar programme last year, so the subsidies will help boost sales although the effect will be limited due to cost concerns," Zeng said.

Higher fuel costs for petrol vehicles would likely force consumers to consider alternative-energy cars. However, crude oil prices were expected to remain at low levels of around US$75 per barrel and that would limit the popularity of alternative-energy vehicles in the mainland.

Olive Xia, an analyst with brokerage firm Core Pacific-Yamaichi International, said the new subsidies were more detailed and concrete than the last incentive programme, but the stimulus effect on green car sales would be limited.