(Chinese Version)

Ever since Tesla appeared in the market, electric cars have frequently become a focus point for the media. Traditional automobile makers, ambitious entrepreneurs, and even IT giants are all eyeing on the electric car sector, helping this very sector gain traction. The Development Guidance On Electric Cars recently released from National Development and Reform Commission is a great boost of confidence to this very sector in China. But if we take a step back and really think about these new expensive cars, we might realize that without subsidies we wouldn't really buy electric cars.

The subsidy policy of the government is the biggest contributor to the electric car industry

Statistics collected from MIIT (Ministry of Industry and Information Technology) show that in the first half of 2015 78,500 new energy automobiles have been manufactured in China, 36,3000 of which are purely electric cars, showing a year-on-year growth of 300%. Although electric cars have an extremely little market share in comparison with traditional automobiles , its amazingly high growth rate in the past consecutive years is hard to come by. In a way, it proves that the electric car sector is already on the right track. And behind the rise of this newly-emerged industry, the government’s power has been essential.

The truth is that almost every government in the world loves new energy automobiles, and Chinese government is no exception. Generally speaking, there are three main kinds of subsidies:

Direct subsidy: Even though the subsidy for new energy cars will decline over years, such subsidy is still pretty appealing. For instance, in 2015, pure electric cars that can run 80 kilometers to 150 kilometers after charged could get a subsidy of 31,500 RMB per years, while those that can run up to 150 kilometers to 250 kilometers after charged have a subsidy of 45,000 RMB  every year. As for electric cars that can run above 250 kilometers, they will get a subsidy of 54,000 RMB annually. In general the majority of cities adopt the 1:1 subsidy policy ratio, which means many electric cars’ subsidies are equally shared by the central governmentabove and local governments and that one third or above of the selling price of the cars will be subsidized.

Discount subsidy: In order to promote electric cars, many local governments give e-car buyers special treatment, or to put it another way, benefits. Take Beijing as an example, electric car owners can skip the license-plate lottery system directly, a headache-causing, time-consuming, and money-burning process that’s needed to get your car registered officially and get a license plate. If you only own an ordinary car like most people do, then you need to experience this exhausting procedure of which the odd of getting a license plate is 1:200. You see, having a new energy car will get you special treatment. We can’t deny the appealing side here. Apart from that, e-car buyers are also free from purchase tax, and they can use lanes for the buses as well.

Infrastructure subsidy: Almost every city that’s promoting e-cars is building charging stations for electric cars. So far, the Chinese government has built over 800 charging stations in 80 cities across China. In Beijing, for instance, all public charging stations had been free before May this year. Even though these stations are no longer free anymore, they are still insanely cheap compared to fuel. Currently public charging stations charge 1.7 per 1KWh. To put it in another perspective, if we use the 92 gasoline for example, the cost of driving an electric car will be 50% to 60% lower.

The government’s supporting policies are reasonable, but the thing is how many users will actually choose to buy an electric car for the car itself? One thing is for sure, unfortunately, that is the electric car sector is still far from mature, with little complementary services and accessories available for consumers at present. That being said, although the government has been pushing hard the adoption of electric cars, hidden troubles might still occur in the future. Japan is the only country that has a negative growth in the electric car sector, which is caused by the end of the incentive supporting policies.

When will the electric car sector in China grow to be more down-to-earth?

Speaking of electric cars, the first image that comes to most people’s mind is Tesla. But the inconvenient truth is that not everyone can afford a Tesla car, let alone when taking the maintenance fee and charging expense into consideration. As a matter of fact, Tesla by far has only sold less than three thousand cars in China, while the majority of the market share goes to electric car models from traditional automobile makers. Even so, the electric car sector in China is not down-to-earth enough, for the two following reasons:

a. The allocation of resources within the electric car industry in China is chaotic.

The drawback that’s holding the electric car sector back in China lies not in technological aspect since globally speaking the industry is pretty much on the same level, but the allocation of resources. Firstly, it’s true that we have a lot of entrepreneurs in this particular field, and that companies that offer services like the sales of cars, battery rental, and charging etc. are blossoming in the country. The number of companies that have claimed to be developing their own electric car models and those that have already had their products rolled out has reached over ten. Aside from that, China now has over 31,000 charging stations across the country. Quite an exciting development, right? But sadly, things are not as good as they seem to be.

Here’s one example: by the end of 2014, Norway’s adoption rate of electric cars hit 12.5%, with a total electric car of 40,877 and 6,208 charging infrastructures. Compared to China, Norway is far better off. By the end of 2014, there had been 83,198 registered electric cars in the country and 30,000 charging infrastructures. However, though the numbers look better than that of Norway, the truth is electric cars only account for 0.3% of the market share. To be more specific, if we really think about it, 800 charging stations are far from enough of covering over 80 cities in China, let alone the whole country. In this case, besides areas such as Beijing and Shanghai, electric car owners in different cities are actually having problem charging their cars. In other words, in many people’s eyes electric cars are just something great but they won’t actually purchase one and drive it on the road. Despite the benefits supporting policies can offer, electric cars are still distant from the general public.

b. The government needs to change its ways of supporting the electric car industry.

The recently released Development Guidance of Charging Infrastructures for Electric Cars (2015-2020) mentions one goal: to complete building 12,000 charging stations, and 4,800,000 charging posts before 2020 in order to satisfy the demands of 5,000,000 electric cars in China in the future. There is no denying that the central government has been putting a lot of efforts in promoting electric cars, from which people see opportunities. But before we jump into the opportunities presented by the electric car industry, we have to consider a few things first.

At present, all charging stations in China are built by the government, and therefore electric car owners will enjoy the benefits brought by all those supporting policies for a long time. Even early as in the Beijing Olympic Games and Shanghai World Expo, Beijing and Shanghai had already started building charging stations for promoting electric buses and taxis. Up till the charging stations in Beijing are still losing money and not frequently-used. In Shanghai, each electric bus shares the cost about 230,000 RMB per year and it’s hard for the city to earn back the investment. But still, the local government can use electric cars as an image project, making electric buses and taxis account for the majority proportion of the number of total electric cars (80,000) in the city.

On the other hand, the power source of traditional cars has always been controlled by state-owned enterprises. Perhaps this time private companies have the chance of making something big, but the reality is stated-owned companies are probably deploying its industry layout in the charging service sector already. Additionally, electric cars are scattered in different parts of China, and, China is a gigantic country, which increases greatly the difficulty to cover the country. It’s apparent that very soon the electric car service sector will undergo a major transformation, or, a total revolution.

Now let’s look back to the electric cars. If they lose all those subsidies and other supporting policies, will they still appealing to consumers?

Three knives are hanging

There is no doubt that electric cars will ultimately replace traditional automobiles in the future. But just I have mentioned before, a lot of people are eyeing this very lucrative sector. And in a situation where basic infrastructures are scarce and the situation won’t be improved in a short time, electric cars still have risks alongside.

The first question we have to consider first is how to break through the constraints. Tesla had announced that the company would build charging stations in the country even before its entry into China. Tesla, as a matter of fact, does keep its words. But still, most charging stations are built by the government. Another problem is about the battery and its capacity. When charging stations are scarce, the battery becomes more important. Tesla’s newest model can drive for up to 400 kilometers after charged. Chinese electric cars from brands such as BYD, BAIC, DURABLEV, DAOJUE, and VENUCIA etc. can mostly run for less than 300 kilometers while come can only run for 150 kilometers.

The fundamental obstacle lies in the battery technology. For instance, Tesla adopts Sony’s NCA battery while BYD uses its own battery. The biggest advantage of BYD’s battery is that the material is abundant in the country and therefore cost relatively lower to produce. The battery technology will without a doubt be the game-changer in the competition of electric cars.

Besides that, electric cars are not competitive enough. The lack of competitiveness can be seen in three aspects. Firstly, traditional automobile industry has a history of over a century and it has accumulated experiences and technologies on key components such as the engine and chassis, as well as seasoned design on structure. Electric cars have major disadvantages compared to them. Even though BMW and Benz have also launched their own electric cars, the core business of the automobile industry is still traditional cars. Hot as the industry could be, it’s still not a mainstream business and therefore, it lacks competitiveness.

Secondly, the pricing is a major problem. The electric car sector has advantages in subsidies, but its rival, the hybrid car sector, also enjoys pretty much all the benefits the electric car sector has. Although hybrid cars are transition products between traditional cars and electric cars, they still pose great threat to the position of electric car makers.

At last I want to say that at present electric cars are more of promotion stunts rather than real useful products. They seem to be futuristic and high-tech, and they definitely should be “smarter” than traditional cars. And industry players will surely make use of that. For instance, Tesla has recently developed its assistive driving technology while LeTV Auto also announced its idea of automobile ecosystem, which is platform+content+terminal+application. In the article How Much Would It Cost To Build An Electric Car Enterprise? Li Xiang mentioned that: “HMI (Human Machine Interface) is merely one tenth of a car,” which suggests that some electric car brands are just using some promotion stunts to hide the fact that their cars are not as good as consumers expected them to be.

Without subsidy, will consumers still buy electric cars? Now it’s high time for electric car crazed makers to really think about this question since electric cars need to be more down-to-earth as soon as possible to be more competitive. What electric car makers should do right now is try fix all those issues mentioned above, and not merely just dwell on this great concept of electric car and do nothing and feel good about themselves.

[The article is published and edited with authorization from the author @Alter, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at ECHO), working for TMTpost.