Prius Does Not Qualify for China’s Green Car Subsidies

Among the many strange things about the auto industry in China, here is the latest: the third generation Toyota Prius non-plug-in hybrid, revered elsewhere in the world as a model green car, is barred from receiving government subsidies because the authority thinks its 1.8 liter gasoline engine is too big.

FAW Toyota, one of Toyota’s Chinese joint ventures, has been building Prius since late 2005. Later this year, it will release the third generation. Because no major discounts or rebates have ever been provided and the consumers have had to pay the full price which is outrageously high (38,000 US dollars for the standard version) for a compact car, Prius sales in China have been a disappointment—only about 3,700 units sold in over four years.

Early this month, the government announced two plans to subsidize green cars. One applies to electric models, and the payment is up to 50,000 yuan for a plug-in hybrid, and 60,000 yuan for an all-electric. Non-plug-in hybrids are excluded. The other rewards 3,000 yuan to each fuel efficient car that has an engine with a displacement of 1.6 liter or smaller. Because Prius has been a non-plug-in hybrid and will be equipped with a 1.8L engine, it will not benefit from the two plans, which are to be implemented in a few months.

The above is confirmed by an official from FAW-Toyota’s sales department earlier this week in a newspaper interview.

This means that other non-plug-in hybrids such as the current Camry hybrid and the upcoming Buick LaCrosse hybrid will also not get government assistance. By contrast, cars like the 1.6L version Corolla from FAW Toyota and Elantra from Being Hyundai will be benefited–although their fuel-saving records are not nearly as good as Prius’s.

The injustice here is obvious and seemingly hard to understand–especially in light of the fact that China has already in place an official system recording and monitoring fuel efficiencies of all on-road cars. What drives the authority to commit such a "folly"?

The reason seems none other than political. The exclusion of non-plug-in hybrids and all cars having big engines will make native automakers the main beneficiaries, as they rely on small cars to compete with foreign giants and bet on plug-in and all-electric ones for future growth (BYD is one example). Foreign models, mostly having engines above 1.6 liter, overwhelm higher segments of the market. In this context, the subsidy plans are designed to reduce the foreign players’s chance of getting government money. What’s better for the environment is never the only or most important standard.