China's New EV Incentives Expected by End of June

New policies subsidizing purchases of electric vehicles in China are expected to come out in the first half of this year, encouraging many automakers to boost research and development.

Since previous policies expired at the end of last year, China’s ministries of Finance, Science and Technology, and Industry and Information Technology, as well as the National Development and Reform Commission, have reached an agreement to extend subsidies for electric vehicle purchases for another three years and revamping the subsidies.

According to the draft document, the new subsidies will go into effect retroactively from January 1 of this year until at least the end of 2015. However, the exact roll out date has not yet been fixed, and the policies are still subject to final authorization by the State Council or China's cabinet.

"The new subsidies will be divided into 16 levels according to the amount of energy the vehicles can save," Miao Wei, minister of Industry and Information Technology said recently. Previously, subsidies for new-energy vehicles were based on the type of technology they used. Plug-in hybrid vehicles could receive subsidies as high as 50,000 yuan (approx. US$8,000), while subsidies for pure electrics could reach 60,000 yuan (approx. US$9,800).

As China has shown a tendency to support hybrid vehicles with lower energy consumption, automakers have enhanced research, development and popularization of such vehicles, especially full hybrid and strong hybrid products. Detailed provisions regarding subsidies for electric cars will likely be implemented before the end of June 2013, but provisions for hybrid vehicles may come out later as standards for the evaluation of hybrid vehicle energy consumption have yet to be created. This has postponed the conversion of the subsidies for such vehicles to a standard based on fuel savings, according to industry analysts.

In addition, the highly-anticipated technological innovation projects for the EV industry are underway at 25 companies. These carmakers are expected to be the pioneers during the development process of China’s EV sector.

Ling Tianjun, chief engineer of green vehicles at the Shanghai Automotive Industry Corporation (SAIC), one of China's four largest auto groups, said SAIC has started selling hybrid cars at lower prices with the help of subsidies totaling over 100,000 yuan (approx. US$16,000). The company’s plug-in hybrid Roewe 550 PHEV is also expected to hit the market within this year.

BYD, one of the better known Chinese brands thanks to a stake held by billionaire U.S. investor Warren Buffett, has launched the BYD Qin hybrid vehicle and its “Green Hybrid” technology. The company plans to apply the Green Hybrid technology to its gasoline-powered automobiles as soon as possible

Chery, one of China's largest private automakers, has decided to spend more on electric vehicle research. But Duan Zhihui, Chery's chief hybrid vehicle engineer, said the three-year time limit for the new subsidies may cause auto companies to rush their research and development in order to avoid missing the opportunity to receive the subsidies.

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