Subsidies to New-Energy Auto Buyers

A subsidy scheme targeting buyers of new energy vehicles is expected to be released by the Chinese government within months, in order to boost purchases of new energy vehicles.

Miao Wei, China's vice minister of industry and information technology, said in a January 9 speech that the government would further emphasize the development of new energy vehicles and is considering subsidies for individual buyers. A sliding-scale of subsidy grants would be determined according to the technology standard involved in the vehicle. "The more advanced the technology, the greater the subsidy. This is aimed at encouraging technological innovation," said Miao.

In February 2009, four government agencies including the Ministry of Finance, the National Development and Reform Commission, the Ministry of Industry and Information Technology (MIIT) and the Ministry of Science and Technology issued a joint policy for public transportation departments to use subsidies for new energy vehicles, including electric cars, hybrid cars and hydro-power cars. The subsidy ranges from 4,000 yuan to 600,000 yuan. Since this announcement, key players in the auto industry believed that subsidies would eventually be offered to individual customers.

But Miao also stressed that the subsidy scheme would be temporary, designed to steer the new energy vehicle industry through a market-oriented development. "Companies should depend on lower costs to expand their market, rather than government subsides," said the minister.

Chinese automakers still face hurdles in the development of new energy technology, including the battery, engine and control system, according to Miao. Relying on imported technology escalates costs of building new energy vehicles. Miao said that a reasonable target would be if sales of the electric car, hybrid car and hydropower car could account for 10 percent to 15 percent of the country's total auto sales by 2020.

The State Council, China's cabinet, in early 2009 set a target for alternative-energy automobiles at 5 percent of total passenger vehicle sales by 2011, with each major domestic automaker offering at least one model.

In June 2009, the MIIT released new standards for the country's new energy vehicles which divide the alternative energy technologies into three categories according to different stages of development. Currently, 47 models from 24 manufacturers have met standards set by the government.

According to the China Association of Automobile Manufacturers on January 11, China's 2009 vehicle sales rose 46 percent to 13.6 million units, making it the world's largest auto market.

Translated by HW