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  • China’s Incentives, which have at last Begun, for the Purchase by Private Individuals of Next Generation Automobiles

China’s Incentives, which have at last Begun, for the Purchase by Private Individuals of Next Generation Automobiles

|China

The system (the “Provisional Methodology for the Administration of the Pilot Financial Subsidy Funding for the Private Purchase of New-Energy Automobiles” of the Ministry of Finance, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, and the National Development and Reform Commission) of subsidies for individual purchasers of next-generation automobiles (plug-in hybrid electric vehicles: PHEVs; and electric vehicles: EVs, etc.) was begun on 1 June.

While the system (the “Provisional Methodology for the Administration of Financial Subsidy Funding for the Demonstration and Popularization of Energy-Saving and New-Energy Automobiles” of the Ministry of Finance and the Ministry of Science and Technology) for public transportation and organs was begun in February of last year, news had long been buzzing around of when the system and its operation for purchase by individuals would begin.

This is a system of subsidies for individual purchasers, which has finally begun, yet the point of view that its results are “limited” has been indicated from the heads of each of the manufacturers. For example Kevin Wale, the President and Managing Director of the GM China Group, has pointed out that the effect of promoting the popularization of next generation automobiles from the regulations for the “five cities” is extremely limited. In addition, Wang Jianjun, Deputy General Manager of BYD Auto, whose attention has been attracted by PHEVs and EVs, has pointed out that, besides the “price” of vehicles there are many issues in popularization, including infrastructure and consumer confidence.

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Looking at the detail of the system (see table) it can be confirmed that, even though prefaced as a “test case”, many issues remain to be overcome. First, as Kevin Wale pointed out, with the area being limited, the effect in promoting the popularization of next generation automobiles is limited, and whether subsequently cities for implementation will increase in secondary and tertiary phases is uncertain. If it is something which promotes the popularization of next generation automobiles via the expansion of individual users, securing a direct benefit for consumers, then a sense of unfairness for consumers outside the limited number of cities will probably appear. In addition, even in the case of having considered the benefit to consumers, as matters stand it is a case that the method for the provision of subsidies is indirectly available, via the manufacturers. Consequently, depending on how the premium prices of the dealerships which sell the highly popular next-generation automobiles are managed—by way of an example—it is possible that the benefit that the consumer obtains after deducting that amount will not reach the value intended by the government. Moreover, the target of the provision of subsidies is also limited to “passenger cars,” and in a China where urbanization is ongoing vehicles for transportation such as small trucks and buses are increasing, and in that sector also there will probably be a need to increase the number of environmentally-friendly vehicles via a similar endeavor (for commercial vehicles only the above model case—from February 2009 on—applies). What is more: the simple form of EV (low-end), taking Shandong Province as representative, is not eligible for the subsidy; the EVs of local manufacturers have a low selling price (25,000–35,000 yuan) to begin with; there is high potential for enlargement of the commuter market via increased income in the suburbs of urban areas and rural areas; and how to make the most of China’s “strongpoint” areas, such as the cheapness of components and materials, and mass-production knowhow, is not indicated. Taking a different angle, hybrid vehicles (HVs), which are Japan’s current “strongpoint”, are not eligible for the subsidy, but this—with subsidies for passenger cars of 1.6 liters and under that do not exclude HVs (“Detailed Rules and Regulations on the Implementation of the Popularizing of Energy-Saving Automobiles in the ‘Energy-Saving Products to Benefit the People Project’ ” of the Ministry of Finance, the Ministry of Industry and Information Technology, and the National Development and Reform Commission, 26 May 2010: see below)—has become a matter where modest subsidies result. Doubts remain, however, as to whether or not—because of the stipulation where fuel efficiency has become the standard—there is the aim of promoting competition in the development of technology among companies, through features where Chinese local manufacturers are also moving forward practical use, including stopping the idling of engines.

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Whichever ones they are, environmental measures in the Chinese automotive industry have only just begun, and a comprehensive roadmap indicated by the “New Energy Automotive Industry Development Plan” and the “Automotive Industry Twelfth Five-Year Plan” (and their attendant documents and detailed rules and regulations) and concrete support measures will be subsequently awaited. Nevertheless, examination thereof has already been started, and as in the HV example above, Japan, continuing to watch the direction that China, the top global market, is aiming toward, has to continue examining and executing prompt initiatives—giving them to the public and private sectors—as to how they can participate, amongst other things, on a business basis in the formulation of standardization and the creation of criteria.

[Translated by ERINA]