Electric Cars Losing their Appeal in China

A debate raging largely behind closed doors among members of China's ruling élite mirrors a wider debate that has been gathering steam this year: the viability of electric vehicles, at least over the next few years.

An FT article says that Beijing is rethinking its focus on electric cars as a means of reducing fuel consumption and improving air quality, as it looks increasingly likely the country will fall far short of ambitious goals to sell 1 million electric vehicles by 2015 and 5 million by 2020. As we have come to expect (and respect) with the Chinese, Beijing was hoping a combination of financial incentive for consumers, cheap loans to industry and party targets would combine to give China a world-leading position in the electric vehicle market.

It has worked spectacularly well in many other industries, but Chinese consumers, it seems, are influenced by the same concerns as those in other parts of the world when it comes to electric vehicles and that is lack of range and high cost (even after government subsidies of nearly $9,500 per vehicle). In fact, Chinese buyers have been even less willing to take the step than those in the West. Last year Toyota sold only one Prius in China - yes, you read right; one car!

Beijing may sensibly scale back its aspirations and hedge its bets by widening the 1 million vehicle target to include hybrids as well as all electric vehicles - although based on Toyota's experience, they clearly still have a major challenge ahead of them even then. Maybe they would be better advised to take the route being more vigorously pursued by BMW, Mercedes and VW, who (while still developing EV and hybrid models) are pouring millions into improving fuel efficiency and reducing Co2 emissions from turbo-charged conventional petrol and diesel engines. VW's new "Up" city car, for example, offers 67 mpg combined driving from a petrol engine while some Mini diesel owners report high 60s, even 70+ mpg; as good or better than many hybrid cars. Dollar for dollar, investment in diesel technology has proved an immensely more sensible and environmentally beneficial direction for power plant development.

Most analysts suggest Beijing's intent to leapfrog the halfway house of hybrid cars and expect large-scale uptake of electric vehicles was always unrealistic. The question is, are our own expectations of widespread uptake of hybrid and electric vehicles not overly optimistic? Sales so far have been lackluster.

The Nissan Leaf (most hyped EV of the year) has sold just 10,000 vehicles worldwide since its launch last December; half those are in Japan, home of the city dweller, and about 4,000 in the US (out of an approx 1,360,000+ year-to-date small car segment sales in the US). It's generated lots of interest with comparatively few sales, but then that is the story for just about all electric-only vehicles - lots of interest hasn't moved nearly enough product.

By. Stuart Burns

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