China offers incentives for green cars
June 2, 2010

In order to reduce their carbon footprint and go green in the largest automobile market in the world, China launched a pilot programme to wean consumers away from fossil-fuelled vehicles by offering substantial purchase subsidies for green cars and financing for the construction of electric power charging infrastructure in five cities, the ministry of finance (MOFCOM) said. Beijing has realised that without subsidies to purchasing green cars and easily available locations to recharge cars, consumers would be unwilling to budge.

China plans to invest 10 billion yuan (US$1.46 billion) to speed up commercialization of new energy vehicles and it also aims to have 500,000 green cars rolling on the roads by 2012. The decision comes just a few days after Indian automaker Mahindra and Mahindra acquired Reva Electric Car Co.  The Indian market, is slated to touch 80,000 units by 2020, from almost nothing at the moment.

As a result, the MOFCOM, said it would offer as much as Rmb50,000 (US$7,300) subsidies for the purchase of plug-in hybrid electric vehicles and Rmb60,000 (US$8,784) for pure electric vehicles, in five major Chinese cities – Shanghai, Changchun, Shenzhen, Hangzhou and Hefei. The incentive would primarily depend on the capacity of the battery packages, a 3,000 yuan subsidy is offered for each kilowatt for green cars. The subsidies would be gradually phased out once the carmakers sold 50,000 green cars.

Also, the central government will offer 3,000 yuan (US$439) subsidies for gasoline and diesel cars with 1.6-liter-or-less engines that consume 20 percent less fuel than current models, the ministry added.

On the 1st of June, China’s first super electric vehicles recharging station started operations in Wuhu City in East China’s Anhui Province. The recharging station covers an area of 4,800 square meters capable of recharging 10 electric-powered buses and 10 cars, simultaneously (see picture).

General Motors, which already makes hybrid cars in Shanghai, will import its Volt plug-in hybrid into China next year. SAIC Motor Corp will also market its first electric car as early as 2012. The country’s most famous electric carmaker, BYD Automobile Co Ltd– backed by US investor Warren Buffett, is already selling plug-in hybrid F3DM electric vehicles in China since March this year.

Nonetheless, analysts expect China’s green car market to take a while to pick up. While these incentives offered by the government will provide a boost to the industry, the growth of the market will depend on reliable quality of products, mature infrastructure as well as better understanding among consumers, which will take time.


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