The Obstacles: Time and Money

Well and good, says the conscientious consumer, but what do I do if my battery runs out on the way somewhere? This probably is the first question out of an ordinary consumer’s mouth when considering new energy vehicles. After all, we can imagine that a huge investment of money and time will be needed to build enough charging stations along roadsides and recharge facilities near community parking lots. Of the 1,017 new energy vehicles operating at the Expo site, there are 196 FCEVs, 321 BEVs and 500 HEVs. In order to “feed” all those buses, a charging station has been especially constructed and sufficient batteries have been stored.

In practical terms, an inconveniently located charging station means lost time. This is one reason, in spite of years of development, that new energy vehicles haven’t achieved a satisfactory market performance. The Toyota Prius has seen sales of only 3,500 units in three years, a figure outperformed by its traditional counterpart in one month. “For now, the price, the unfamiliar technology and the lack of a supporting infrastructure are what concerns consumers,” concludes an auto dealer.

The other barrier to market acceptance is cost. Without achieving mass production, the price of an HEV may go as high as RMB 1 million, while a traditional family car of the same brand sells for only about RMB 160,000. In China, few people can afford RMB 1 million just to get around. “So cost is largely to blame for this bottleneck in new energy autos, but also impinging on a healthy market share is the lack of advanced technology,” says Gao Wei, sales manager of Changchun Auto Sales Center. Compared with tried-and-true conventional vehicles, new energy vehicles are not mature enough in terms of reliability and durability.

The Root of All Encouragement

In order to promote new energy vehicles, the Chinese government has not only given great technical support to domestic carmakers, but also initiated a consumer subsidy for purchases of new energy vehicles.

There is confidence that the massive use of new energy vehicles will grow on the impulse for moderation that drives the times. “First of all, new energy vehicles represent new technologies containing incalculable commercial value. Second, there’s an environmental imperative. Nowadays every country is vigorously seeking technologies that reduce greenhouse gas emissions, including China of course. China committed itself to a target date of 2020 for reducing by 40 percent its carbon dioxide emissions per unit of GDP. Clamping down on vehicle emissions in urban areas makes a lot of sense. Last but not least, a revolution in automotive technology is being triggered by dependency on non-renewable resources like petroleum. The price of petrol can only continue to climb, while new energy vehicles can only become more cost-efficient,” says Mao Wei, Vice Minister of Industry and Information Technology, who has often expressed his support to the development of new energy vehicles.

In February 2009, the Ministry of Finance, the Ministry of Science and Technology, the National Development and Reform Commission and the Ministry of Industry and Information Technology held a meeting to work out a pilot demonstration program for promoting energy-saving and new energy vehicles. But at that time government subsidies mainly focused on urban buses over 10 meters in length. This time, government subsidies for personal purchases of new energy vehicles is expected to directly expand the market and encourage the production, research and development of energy-saving and new energy vehicles. Detailed subsidy standards are also public knowledge for the first time, with BEVs enjoying the highest subsidy. Some industry insiders bet that hand-outs focused on electric vehicles reflect the government’s intention to foster domestic brands, the major products being BEVs. Instead of handing out subsidies to consumers directly, the program stipulates that the money be set aside for the carmakers, who then lower the sticker price accordingly.

Let Me Think

Consumers may need more time to handle the doubts and questions the program has stirred up: Will the policy stimulate domestic carmakers to continue their effort in new energy vehicle development? Does it amount to a duplication of investment in this regard? Is new energy’s performance/price ratio acceptable to consumers? Mr. Wang, a Beijinger who has followed these developments with interest, expresses the opinion: “Market expansion still rests on a lower price and mature infrastructure. Currently, maintaining and repairing an HEV is pricey, and few ordinary people can afford it.” Even with technical standards and subsidies rules in place, cautions Shen Li, Nissan (China) Brand Director, “It is still unlikely we will achieve mass use of new energy vehicles in China any time soon. Adapting to local standards won’t be a difficult job, it’s the buyer who needs to come around.”

LI RUIJIE is a journalist for China Ethnic News.