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Ky Krauthamer

Ky Krauthamer

Ky Krauthamer is an editor and news writer at Prague-based Transitions Online, a magazine of politics and current affairs in Eastern Europe and Eurasia.

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China to Car Buyers: Electric Or Bust

China to Car Buyers: Electric Or Bust

Five years ago, China raised the ante in the clean-car game when it announced production increases of hybrid and all-electric vehicles and a goal of becoming a leading global producer within three years and the undisputed champion going forward.

The worldwide financial crunch had yet to take a serious bite out of China’s economy and the stakes were high. The Chinese leadership was beginning to grasp that green technology could play a big part in cleaning up the atrocious urban air quality considered a major cause of the country’s high rates of lung disease and cancer.

Two years ago, the government set ambitious targets of 500,000 all-electric and plug-in hybrid vehicles sold by 2016, and 5 million by 2020. The goals were a major plank in Beijing’s 2011 Five-Year Plan, which places a high priority on clean technologies.

While electric vehicles (sometimes called EVs) emit little or none of the ozone and particulates that choke the air in Chinese cities, they have drawbacks. They are expensive -- a major issue in a country where most people make less than $5,000 a year. All-electric models need frequent visits to a charging station or battery exchange point and, like many countries, China still doesn’t have enough of those outside of a few urban areas.

Results have been disappointing, to say the least. There are now only about 39,000 electric cars on the Chinese roads, not much more than in the Netherlands. Undaunted, the government’s attitude seems to be,“If at first you don’t succeed, try, try again.” 

Related Article: 300mpg Diesel-Electric Hybrid Unveiled by Volkswagen

So Beijing has tried to lure buyers with incentives and subsidies and it has pressured carmakers to make more EVs. It has encourage drivers to scrap older, dirtier internal combustion vehicles -- known as “yellow label” cars -- by banning them from major cities and even paying people thousands of dollars to take them to the junkyard. It recently issued a decree that 11 million such vehicles be scrapped over the next two years.

Despite this -- and despite the fact that electric cars in China come with subsidies of up to $10,000, among other incentives -- just 17,500 all-electric and plug-in hybrid vehicles were sold in 2013. That’s less than one for every thousand new cars sold, according to an official of the China Association of Automobile Manufacturers. As a comparison, nearly 100,000 such cars sold in the United States (these figures exclude the bigger-selling “traditional” hybrids such as the Toyota Prius.)

Electric car manufacturers remain bullish on China, however. BMW’s China division head Karsten Engel last week tipped China to become the world’s largest market for EVs within five years, Bloomberg reported. BMW, Volkswagen and Daimler all hope to make serious inroads into the Chinese electric vehicle market, even though they will likely face steep price competition from domestic makers BYD, Chery, JAC, Zotye and others.

By some measures, China’s electric car campaign isn’t doing too badly. Those 39,000 vehicles on the road put the country in third place worldwide behind Japan and the United States, although market penetration is a puny 0.03 percent, compared to around 0.60 percent in Japan and the United States, and Norway’s impressive 4 percent, according to HybridCars.com.

What has emerged is far from a uniform national policy, although that may not be a bad thing. As Christopher Marquis of Harvard Business School and his co-authors write in Stanford Social Innovation Review (pdf), the early growth of the electric vehicle industry has not been guided from above by central planners. They call it a “step-by-step, highly pragmatic, fundamentally empirical” process. While overall, they argue, “The development of EVs in China demonstrates the limitations of government-driven implementation,” they also demonstrate that top-down decision making and innovation can coexist.

Related Article: Diamonds From Smog? China Plans To Try It

China broke trail for the EV industry by setting up pilot electric vehicle programs in certain cities, they write. Each of the cities -- originally 10, later expanded to 25 -- was given the freedom to experiment with different ways of promoting EV use. In Beijing, the emphasis is on preferential policies for EV owners, like lower vehicle taxes and exemptions from the license plate lottery, while Shanghai looked for ideas in its comparatively rich network of international contacts and is planning to roll out a vehicle rental system adapted from Bremen, Germany.

The results can look messy. Cities are inflating their EV take-up numbers to get more incentives and some are favoring local industries, thus stifling competition, Elizabeth C. Economy writes for the Council on Foreign Relations.

Another serious drawback is consumer reluctance to try out electrics. One auto executive told Caixin Online earlier this year that private buyers have purchased fewer than 2,000 new electric cars since 2009. The Marquis article quotes an industry expert, who like the executive asked to remain anonymous, as saying not one electric vehicle has been sold to a private customer in Beijing because “there is no place to buy one.”

Across the country, however, electric vehicle dealers are finding customers, even though most are public agencies. Sales of all-electric and plug-in hybrid vehicles rose 120 percent in the first quarter year-on-year, to 6,853 units. The fact that virtually all were Chinese made will spur on domestic makers and confirm foreign manufacturers’ belief that a huge niche is waiting to be filled.

By Ky Krauthamer of Oilprice.com

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Leave a comment
  • Randy on June 06 2014 said:
    "The Chinese leadership was beginning to grasp that green technology could play a big part in cleaning up the atrocious urban air quality..."

    Way to go Ky! You just wrote an entire article on Chinese electric cars without having mentioned once, not once!, where all of that new electric energy is gonna come from when all of those new Chinese car owners decide to plug their thingy-jingies into a wall outlet to recharge their batteries. Where? Do you suppose there might be some tiny power elfs that are kept hidden behind YOUR walls, and then zap new energy into an outlet each and every time YOU decide to plug-in to recharge the battery? Hmmm?
    Is it all magic, or might there be a giant, particulate-spewing coal power plant lurking behind all of this "plug-in stuff?" I dunno. But I would at least mention it in YOUR next article....
  • Roddy6667 on June 08 2014 said:
    Much of the PM2.5 particles that are the big problem in china's air come from heating plants and electrical generating plants. An electric vehicle only moves the air pollution source from the tailpipe to the smokestack, although it is marginally more efficient. I live in Qingdao, a city of 9 million. There is a big push toward cNG. All the taxis run on it, and most of the buses. The newest buses are 100% electric. A large subway system is starting to come on line this year.
    A wholesale switch to EV's will not make the air substantially cleaner, and might overload the grid. The grid here is great, the lights never even flicker. In the US, it runs on the edge of collapse at all times. In its present state, America's electrical grid cannot support EV's.

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