Long journey for China’s green cars?

Strong government support has allowed electric vehicles to win a limited share of the Chinese auto market, but its too early to tell if favourable policy can build a thriving industry. Han Ziyu reports.

In early March, the Chinese government unveiled a summary of its programme to promote electric cars during the 12th Five-Year Plan period.

Targets set by the Ministry of Science and Technology include breakthroughs in 29 key technologies – from car components to charging platforms – by 2015. They also expect applications to be filed for over 3,000 electric-vehicle patents; large-scale demonstration projects in 30 or more cities; and trials of new marketing models in at least five cities.

All of this is intended to provide the technical basis for a commercially viable electric vehicle industry. Specifically, reaching electric-only car sales equal to 1% of traditional vehicle sales has been pinpointed as an important threshold. In short, support given to the auto industry during the 10th and 11th Five-Year Plans looks set to continue with a new burst of backing for electric vehicles in the coming years.

But can the favourable policies generate growth in consumer interest that has so far remained stubbornly low? It may be too early to celebrate China’s great shift to green driving.

China’s “big four” car-makers are already responding to these signals from the top. The Faw Group’s alternative-fuel strategy will concentrate on strong hybrids (vehicles that can run on just one engine), small plug-in hybrids and electric-only economy car models, as well as strong hybrid buses. A new alternative-fuel subsidiary will produce over 10 different models on six different technical platforms.

Dongfeng Motor
, meanwhile, says it will have 100,000 mild or strong hybrid vehicles on the roads by 2015 (and 800,000 by 2020). By that year, it also hopes to have sold 50,000 electric-only cars and for fuel-efficient and alternative-fuel vehicles to account for 20% of all passenger vehicle sales.

SAIC Motor
has agreed further strategic cooperation with US auto giant General Motors on alternative-fuel technology and the development of a new generation of vehicles. And Chang’an Automobile Group has said that, by 2015, it will have a commercially viable platform; be manufacturing its own key components; and that alternative-fuel vehicles will comprise 20% of sales. By 2020, it aims to have an innovative industrial chain, with its own intellectual property registered for all key technologies.

It all sounds very industrious. But a major challenge for the sector still looms: how to create a larger consumer market for electric vehicles. So far, the answer has stayed elusive.

Look at the Toyota Prius, the first hybrid to come to market. Two and a half million units have been sold worldwide, but in China, consumers have bought just 4,000 of the second-generation model. And with its newest, third-generation Prius – launched in February – Toyota is hardly aiming for the sky: it hopes to hit annual sales of 3,000 in China.

Cost is the primary factor holding the Prius back. In the United States, the car carries a US$27,000 price tag (180,000 yuan). In China, even though the latest Prius is cheaper than its predecessor, it still sells for between 229,800 and 279,800 yuan. These high prices are the biggest barrier to expanding the Prius’ share of the Chinese market.

The Prius is a mature product and best-known symbol of the hybrid world. But car-buyers still find the price hard to swallow. If that’s the case for a well-known brand, what chances do other alternative-fuel cars have?

Price isn’t the only stumbling block for electric vehicles. There are also technical barriers to consumer acceptance.

I spoke to one driver of the BYD e6, an all-electric model from Shenzhen-based manufacturer Build Your Dreams. He said that, in real driving conditions and with the air-conditioning switched on, his car can run for 70 kilometres on a full charge. That might be enough in most cities, but range needs to be increased for the sprawling metropolises of Beijing and Shanghai. And the question of how the electric-vehicle batteries – developed, after all, due to environmental and resource pressures – will be recycled and disposed of also remains unanswered.

Yu Fuwu, executive vice president and secretary general of the Society of Automotive Engineers of China, said that the sector needs to see major breakthroughs in next-generation battery technology in the coming decade. If that doesn’t happen, Yu said, doubt about commercial viability of electric cars will continue to plague the industry, both in China and around the world.

The China Passenger Car Association has previously proposed that subsidies be made available to expand the number of private automobile purchases in cities where electric cars are being trialled; and that the state should provide support for alternative-fuel vehicle development and commercialisation to only three or four companies. It argues that alternative-fuel vehicles need long-term planning and that making cars low-carbon will be a gradual process.

The Ministry of Science and Technology sums up the last decade of electric-vehicle development in China like this: thanks to technology surges over the span of two Five-Year Plan periods and demonstration projects associated with the Olympics and World Expo, China has acquired an electric car sector. It has made major progress in key components and car assembly technology, as well as technological standards, testing technologies and operation of demonstration projects, taking the first steps in establishing the technical conditions necessary for a flourishing sector.

Applications have been filed for more than 3,000 patents, while 56 state and industry standards for electric cars have been published and over 30 platforms set up for research into alternative-fuel vehicles. 

In 2001, electric-vehicle research was included in the ministry’s “863” high-technology programme. At that point, the strategy was to start with petrol vehicles and work towards using hydrogen as fuel. During the 11th Five-Year Plan period (2006 to 2010), the government started trial use of electric vehicles, mostly urban buses and works vehicles.

Policy support included: the “Ten Cities, One Thousand Vehicles” programme – a project to demonstrate the operation of 1,000 new electric vehicles in 10 cities each year; the foundation of an alliance of state-owned enterprises working on electric cars; and subsidies for purchases of alternative-fuel vehicles. But this favourable environment did little to stoke the interest of individual buyers. The technology was immature, prices high and the necessary infrastructure lacking.

In 2008, the market started to stir. Industry data show that during that year, 899 passenger EVs were sold, an increase of 117% on the previous year. But the figures, then and now, remain strikingly low.

The 12th Five-Year Plan provides a technological roadmap for the next decade and beyond. From 2010 to 2015, hybrid technology will be rapidly rolled out and small electric-only and plug-in hybrid cars developed. From 2015 to 2020, efforts to popularise those newly-developed vehicles will be bolstered, on the basis of the widespread use of hybrid technology. And, from 2020, electric-only technology will take the lead, and electric and fuel-cell vehicles used to drive a large cut in emissions.

On paper, it’s simple. Will it work in real life?

Han Ziyu (a pseudonym) is a reporter based in Beijing.

This article is published as part of our Green Growth project, a collaboration between
 chinadialogue and The Energy Foundation. 

Homepage image by Michaelarent shows a display at the Shanghai World Expo.