China’s Trial Program to Subsidize Electric Cars Meets with Disappointment

The Chinese government launched a testing program that pays part of the production cost of plug-in hybrid and all-electric battery cars. At present, five cities participate in the project: Shanghai, Hefei, Changchun, Hangzhou, Shenzhen. The sum of subsidy an e-car can receive is determined by the capacity of its battery packs that provide propulsion: 3,000 yuan (440 US dollars) for every kWh. Under this standard, a plug-in hybrid can get up to 50,000 yuan, and a pure-electric up to 60,000 yuan, which compares to an maximum of 7,500 US dollars (51,220 yuan) in tax credit an e-car can get in the States. Subsidies will decrease for the e-cars from a certain automaker after its sales of qualified vehicles reaches 50,000 units (counted separately for plug-in hybrid and all-electric vehicles).

Automakers in China have been pushing hard for an EV subsidy policy in the past two years, and several of them have postponed the release their EV models waiting for it. The waiting is certainly not over with the current trial program, but at least they are happy to see signals of strong government support ahead.

The initial response of ordinary people concerned, measured by several online surveys, is mostly of disappointment, doubts, and even anger, for the biggest reason that all the subsidies go directly to the automakers instead of the buyers.

Automakers in China, both native and foreign, have a reputation for being especially creative in manipulating pricing information to their advantage. Foreign brands almost always sell for a much higher price in China than in developed markets–even if the cars are built in China using mostly local parts. Cars from home-grown makers are indeed cheap but often of questionable quality. The high profit margin of car-making in recent years have made many ordinary consumers feel cheated. In this context, to subsidize carmakers directly for producing high-priced EVs risks deepening this sense of being cheated, making the consumers less willing to buy.

On another level, injustice is felt by many who do not count themselves as potential auto consumers. Unlike in the US, a car is not a necessity in China. Even after years of crazy growth of the auto market, most Chinese still consider cars, and certainly e-cars, luxury goods. Subsidies will not make e-cars affordable to ordinary workers who make about 200 US dollars a month. If the rich and privileged can get 8,000 dollars for buying an e-car, how much should be paid to a Chinese choosing or having to go around on bikes or feet?

Some auto experts have also voiced reservations and skepticism. Some doubt that direct subsidization to automakers can lead to green tech innovation. Having developed more than a dozen e-cars in the past two short years, the Chinese EV makers are suspected of engaging in a low-tech, non-green activity for the real purpose of getting government and public support for their over-ambitious expansion projects. What’s more, it has been pointed out, feeding on the "dirty" electricity in today’s China, these e-cars would cause no less carbon emissions than many popular small cars of the conventional type.