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China's vehicle electrification subsidies are a strategic choice by government

Date
18 September 2013
China's vehicle electrification subsidies are a strategic choice by government

Changhua Wu, Greater China Director, The Climate Group blogs about the announcement from China's government of new subsidies for new energy vehicles such as electric vehicles, to reduce pollution in the country's major cities.  

This week the Chinese Ministry of Finance, the Ministry of Science and Technology, the Ministry of Industry and Information Technologyand the National Development and Reform Commission announced a new program to support new energy vehicle adoption and introduce related subsidies, in a bid to reduce energy consumption and control excessive air pollution in major cities over the next three years.

The government's promotion of new energy vehicles, such as electric vehicles (EVs), in heavily polluted cities such as Beijing, Shanghai and Guangzhou, includes:

  • introducing 10,000 new energy vehicles in central city regions and 5,000 in other cities from 2013-15
  • ensuring that 30% of new or replaced public transport is made up of new energy vehicles
  • publishing detailed measurements on procured new energy vehicles, public transport and infrastructure improvements (such as EV charging)
  • evaluating participating cities every year and discarding those that do not qualify

Subsidies for new energy vehicles including batteries for electric vehicles, hybrid electric vehicles and fuel cell electric vehicles, will also be offered. Subsidies will decline each year corresponding to production scale and technology improvements; in 2014 and 2015, the allowance percentage of all three kinds of vehicles will decrease by 10% and 20% respectively on the basis of 2013. 

The incentives are clearly defined, with every hybrid electric vehicle getting a specific allowance based on its range, every hybrid electric bus getting allowances based on length, and special incentives for used-battery electric vehicles such as in postal, logistical and sanitary services, as well as for fuel cell electric vehicles.

Electrification of transportation to improve efficiency and energy security and reduce emissions is a strategic choice by Chinese government. In the current context, when many Chinese cities are covered in smog and the number of vehicles continues to shoot up, these new policy incentives are expected to speed up the scale up of electric vehicles (EVs) in large urban areas, as well as some priority regions where addressing air pollution is more imperative than ever. This is also an important part of China’s clean revolution and third industrial revolution.

Such incentive policy will a new boost to market demand for EVs, which will drive continued technology innovation and collaboration. With such a large market in place, one could expect that investment and finance innovation will follow. Financing manufacturing, consumption, and more importantly the infrastructure will definitely generate growth and jobs. The benefits go beyond economic, but environmental and social.

But while as exciting as it is, gaps do still exist that must be bridged for the successful implementation of this policy. The EV industrial sector in China continues to face some technological barriers to overcome before scale up. For example, building up the new infrastructure to accommodate EV charging remains at the piloting stages. To address those barriers, sharing and learning from other countries’ experiences becomes critical. China must more actively reach out to other countries for collaboration - the opportunity can not be missed.

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