Tuesday, June 1, 2010

Consumer New Energy Vehicle Subsidy Pilot Announced

Finally, it's official. After months of speculation, China's Finance Ministry released a statement on its website confirming consumer subsidies for purchases of "new energy vehicles" (statement can be found here, in Chinese). The announcement was made jointly by the Finance Ministry, the Ministry of Science and Technology, the Ministry of Industry and Information Technology and the National Reform and Development Commission.

The subsidy will be implemented first as a pilot in only five cities: Shanghai, Changchun, Shenzhen, Hangzhou and Hefei. Consumers will be able to apply for subsidies of up to 50,000 RMB for a plug-in hybrid or up to 60,000 for a pure electric vehicle. But these amounts are only ceilings. The subsidy will be calculated based upon the kilowatt hour capacity of the battery in each vehicle, 3,000 RMB per kilowatt hour.

Based on this calculation, the BYD F3DM plug-in hybrid with its 13.2kwh battery would be eligible for a subsidy of up to 39,600 RMB. BYD's E6 pure electric with its 48kwh battery would be eligible for the maximum subsidy of 60,000 RMB. (The Finance Ministry was not specific about how the calculation would be made, so these are only my estimates.)

The announcement also says that, after each respective auto company sells 50,000 subsidy-eligible cars, the amount of the subsidy given for that company's cars will be lowered. That seems to make this a very open-ended program as practically every major auto company in China is working on new energy vehicles. The Financial Times reports that the subsidy would be limited to only 50,000 cars total -- which would make more sense, but that's not what the announcement says. I'll let readers of Chinese be the judge of my translation of the following:

Also of particular interest is the cities chosen by Beijing (and the fact that Beijing isn't one of them). Shanghai, Changchun and Hefei have the headquarters of Shanghai Auto, First Auto Works and Jianghuai (and Chery in nearby Wuhu), respectively -- each a state-owned enterprise. Shenzhen and Hangzhou have the headquarters of BYD and Geely -- both private enterprises.

This is interesting because locally-headquartered auto companies tend to dominate local auto markets. Local governments do their best to ensure this. There are other companies aside from those listed above who are working on new energy vehicles, and while they are probably disappointed that their respective cities were not chosen for the pilot, they are probably now considering how to sell more of their vehicles in the pilot cities.

The announcement also said that the central government would provide funds to the pilot cities for building out the necessary infrastructure to support these cars.

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