China Renews Electric Vehicle Subsidies Excluding Hybrids

China Renews Electric Vehicle Subsidies Excluding Hybrids

China, under pressure to reduce air pollution, renewed a subsidy program for alternative-energy vehicles such as electric cars. One notable exception: hybrids.

The central government will provide as much as 60,000 yuan ($9,800) toward the purchase of an all-electric passenger vehicle and as much as 500,000 yuan for an electric bus, according to a joint statement by the National Development and Reform Commission and finance, science and industry ministries. Fuel-cell vehicles, which are powered by hydrogen, were included for the first time in the plan and will qualify for as much as 500,000 yuan in rebates.
China has lagged behind its own target to have 5 million electric automobiles by 2020 because of high prices of battery-powered models, concerns over safety and a lack of charging stations. By the end of last year, when the previous round of subsidies lapsed, there were only 27,800 EVs in use, prompting Industry Minister Miao Wei to suggest in March the government should consider stepping up its promotion of hybrids and other fuel-efficient vehicles.
“The new policy is basically the same as the previous one and doesn’t really address the underlying problems,” Han Weiqi, an analyst with CSC International Holdings Ltd. in Shanghai, said yesterday in a phone interview. “Unless there are follow-up measures to step up support for hybrids, today’s policy is not expected to spur the EV market.”

Vehicle Subsidies
BYD Co. (1211), the maker of electric vehicles that counts Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) as a shareholder, fell as much as 3 percent as of 11:12 a.m. in Hong Kong trading. SAIC Motor Corp. (600104), which began offering its Roewe E50 electric car in November, slid as much as 1.4 percent in Shanghai.

Hybrid models, which run primarily on a gasoline engine with a backup battery, have lower incentives of 3,000 yuan under a different plan for fuel-efficient vehicles.

Under the new program, the central government will focus on promoting the use of new-energy vehicles in the three regions anchored by Beijing, Shanghai and Guangzhou using subsidies through 2015, according to the statement, which was posted on the finance ministry’s website.

The central government also set targets for local authorities to have at least 30 percent of new-energy vehicles made by automakers based outside of their jurisdictions. It also directed public agencies to take the lead in using alternative-energy autos.
The subsidies for electric passenger vehicles, including plug-in hybrids, will be lowered by 10 percent next year and by 20 percent from this year’s level in 2015, to encourage automakers to lower the costs of such cars, according to Han at CSC International.

“A new subsidy plan has been long awaited,” Ole Hui, Hong Kong-based analyst at Mizuho Financial Group Inc. (8411), wrote in a report today. “This new plans seems less aggressive than earlier targets.”