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China’s NEV development gets bogged down in speculatio

by Fu Hui

Fu Hui is director of auto industry research department of 21st Century Business Herald. This article is translated based on his commentary at the publication. – Editor

China’s complete auto manufacturers will keep on speculating in the new energy vehicle industry in 2012 as what they have been doing last year. It is an inevitable situation that is caused by the nature of this market.

China’s policy makers do not have a clear roadmap in developing new energy vehicles. In the beginning, electric vehicles were made the only direction of the electrification blue print. The direction however turned out to be of little practicality. On the macro level, auto manufacturers by no means would oppose the country’s e-mobility strategy. In reality, hybrids are the most feasible option.

Automakers are out of step with policy makers. It is the most important thing that how much the latter knows about the former. Besides, policy makers themselves are not so confident about whether electric vehicles are the final destination.

The long-awaited industry gospel Energy-Saving and New Energy Vehicle Industry Development Plan (2011-2020) (NEV Plan) is still being trimmed due to interest conflicts among various administrative departments. Even if the NEV Plan comes out, it will not achieve what it is meant to because policy makers always tend to control the industry via administrative ways and meanwhile make the best interests out of it. There could be no breakthroughs in the NEV industry unless the administrative pattern is changed.

In face of the vague attitude of the administrators, auto manufacturers naturally will resort to all kinds of speculation strategies. Some Chinese carmakers hurry to build EVs with the help of their foreign joint venture partners. Some make their EVs based on technologies that they have bought from foreign peers. Others just simply write EV manufacturing into their corporate development plans and showcase one or two electric models at some auto shows. In a word, to make EVs becomes their means of subsistence instead of real strategies.

Hybrid vehicles, which do not require as much technology as needed to develop electric ones, are a more practical option for the present. It seems that China’s policy makers have come to this realization and they have resorted to acquiescent attitude. Therefore global auto makers like Toyota and Honda have increased their hybrids delivery into the Chinese market.

But one fact that Chinese policy makers cannot ignore is that 80 percent of the world’s hybrid technologies are held by Japanese carmakers. This is not helping China take a short cut to outrun foreign competitors in the new energy vehicle arena. Thus China has to play with Japanese automakers in the game for interests, hoping to obtain some technologies from these fore-runners. The result does not turn out to be what as expected, judging from the stingy purchase subsidies that Chinese government set for hybrids.

Chinese EV makers do not want to start new energy vehicles from basic research and development. It will take too long time before their investment pays back. Their emphasis has been placed in application researches instead of basic science study. This will not add up much competitiveness to Chinese automakers in the world competition. They lack the technology persistence of Japanese, the rigidness of Europeans and the innovative commercial thinking of American.

If such a situation cannot be changed, China’s new energy vehicles will remain a bubble.

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