China Throws More Money at Sputtering EVs 对购买新能源汽车进行补贴是徒劳的

By newsdoug on June 20, 2012

Beijing's latest EV backfire Despite the growing sounds of failure for its ambitious drive to develop alternate energy vehicles, Beijing is preparing to throw still more money at this foundering sector, resorting to its same tired old approach for that never seems to work for developing new industries. More than a year after announcing an initial package of wide-ranging incentives to boost electric and hybrid vehicle sales, Beijing is preparing to launch yet another round of new incentives aimed at getting more consumers to buy these cars, according to Chinese media reports. (English article)

The latest reports say this newest promotion plan being considered by Beijing would see buyers of electric and hybrid vehicles exempted from a vehicle purchasing tax. Here’s a news flash for Beijing: Alternate energy car makers like BYD (HKEx: 1211; Shenzhen: 002594), the biggest EV promoter, could probably give away their vehicles for free and still no Chinese consumers would want them.

The reasons are several. At the most basic level, EVs lack the proven track record that most consumers want before they invest so much money in a new technology. China also currently lacks the necessary infrastructure for such new energy vehicles, with charging and maintenance stations still relatively rare for these cars, meaning headaches for their drivers.

As if those issues weren’t bad enough, safety has also suddenly leaped into the headlines, following a horrific crash of a BYD electric taxi in Shenzhen last month that caused the car to catch fire, burning its passengers and driver alive. The graphic nature of the accident, which was caused by the driver of another speeding vehicle, made headlines throughout the country due to its graphic nature and the fact that it involved an electric vehicle. (previous post) As a result of the negative publicity, other electric cab drivers have been quoted saying consumers are avoiding their vehicles, and their business has dropped considerably.

All of these factors should be sending a loud message to Beijing, namely that electric vehicle technology is still not ready for the mass consumer market yet and, equally important, the mass consumer market is not ready to accept electric vehicles. And yet Beijing continues to throw the sector more money, which will probably either be wasted in the end or, worse yet, exploited by people who find a way to use this new incentive program for fraud.

Rather than throw money at these alternate energy vehicles, Beijing should focus more on pilot programs designed to improve the technology and work with big partners to build out infrastructure and improve consumer awareness. In all fairness, it has done some of this, though many of the initiatives appear to be coming at the local level from governments and companies with their own agendas rather than as part of a coordinated national effort.

BYD’s hometown of Shenzhen has been the most supportive of the effort, buying large fleets of electric buses and taxis for local use, including the taxi involved in the fiery accident. Reports last month about new national steps to boost the sector also included a plan to get more cities to buy electric buses, which looks like a better way to promote the technology since local governments have more money and patience to develop this kind of new product.

From the private sector, US firms General Motors (NYSE: GM), General Electric (NYSE: GE) and auto rental specialist Hertz have all announced various initiatives over the last year designed to boost the sector. (previous post) Beijing needs to turn its attention to these kinds of government and corporate investments and forget about consumer incentives for now if it really wants to promote this difficult sector. If it can show ordinary people through these kinds of pilot programs and other tie-ups that alternate energy vehicles really are safe and reliable, then the consumer sales will come naturally with or without big economic incentives.

Bottom line: Beijing needs to turn its focus for alternate energy vehicles away from the consumer market and work more with governments and big corporations to promote the technology.

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