Chinese car makers turn to hybrids, entering a niche ‘green’ market

SHANGHAI: China is warming to gasoline-electric hybrid cars as it tackles an addiction to fossil fuels, and local car makers are finally heeding the call and entering a niche ‘green’ market dominated by Japanese rivals such as Toyota Motor Corp.

Some automakers like state-owned SAIC Motor Corp and Brilliance Auto are developing the fuel-saving technology pioneered by Toyota on its Prius model two decades ago, and BYD Co , a Chinese battery and automaker part-owned by a Warren Buffett company, will unveil a “self-developed” gasoline-electric car technology at the Shanghai auto show, the premier industry event in the world’s biggest market, later on Saturday.

Throwing more subsidies at conventional hybrids could help kick-start China’s so-called ‘new-energy’ car policy, which has failed to gain traction. The policy aims to put half a million new-energy vehicles – defined as all-electric battery vehicles and heavily electrified “near all-electric” plug-in hybrids – on the road by 2015 and 5 million by 2020.

Last year, just 12,791 such vehicles were sold, according to the China Association of Automobile Manufacturers data, and industry experts reckon China has little hope of hitting those objectives unless the government redefines new-energy cars and embraces conventional hybrids and other alternative energy technologies.

“After all these years, people now realise that all-electric battery cars are unlikely to become mainstream over the next 10 years,” said Peter Huang, associate director at IHS Automotive.

Expanding subsidies

Looking to wean China off fossil fuels and clean up its polluted air, Beijing has offered generous purchase incentives on new-energy cars in a 3-year programme that ended last year. As it comes to renew the programme, which industry insiders expect in the coming weeks, the government is thought likely to increase subsidies for hybrids.

Handouts for those buying hybrid cars “will likely be significantly higher” than they are now, a senior executive at a major state-owned automaker told Reuters. In the previous programme, Beijing offered a 3,000 yuan ($490) rebate to drivers buying a new gas-electric hybrid car, way below the 60,000 yuan handouts on all-electric battery cars.

“The government has to change the policy. What has happened is they can’t spend the money budgeted for all-electric cars because few people are buying them. People are not motivated to buy hybrids either as the subsidies are far from enough,” said the state-owned auto company executive, who didn’t want to be named because of the sensitive nature of the matter.

Jochem Heizmann, CEO of Volkswagen Group China, said “There’s a discrepancy between the (Chinese) government’s goals and actions. Over the next 10 years, plug-in hybrids have much better prospects to achieve a certain volume than (purely) electric cars.

“The problem is that special infrastructure has to be organised in some public areas. For private individuals it’s really difficult to use the electric car. It will take a long time to get to a certain volume (with battery-powered cars),” he told reporters in Shanghai on Friday.

“All very complicated”

Chinese media have reported that Miao Wei, head of the Ministry of Industry and Information Technology, told delegates at last month’s National People’s Congress that the new-energy car rebate programme would likely include 16 categories based on a vehicle’s fuel efficiency – raising industry hopes that the government is ready to boost subsidies for conventional hybrids.

“China’s hybrid vehicles have been gradually maturing and mainstream products have achieved 20 percent savings on fuel. Conventional hybrids are thus ready, and cleared the threshold for country-wide promotion,” state media reported Miao as saying at a Congress session.