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China’s subsidy for e-buses likely to be cut by 50 percent

China will adjust the subsidies for new energy vehicles and those for pure electric buses (6-10 meters) may be cut by 50 percent, according to evpartner.com, a Chinese website on new energy vehicles.

The government decision is revealed in its guidelines for new energy vehicle subsidies for the 13th Five-Year Plan (2016-2020) period. The following are highlights of evpartner.com’s analysis of the guidelines.

Subsidies for passenger vehicles will be subject to a price cap of ¥350,000 ($54,000), an energy consumption of no more than 13 kWh per 100 ton-kilometers and fuel consumption for plug-in hybrid no more than 80 percent of the corresponding target value in the current national standards for conventional fuel consumption. Meeting the above requirements will entitle the vehicles the same amount of subsidies.

The purpose of adding a price cap is to encourage OEMs to reduce NEV prices and in the meantime limit the number of imports. Currently pure electric vehicle models priced higher than ¥350,000 include the DENZA (¥369,000-¥399,000), the e6 (¥309,800-¥369,800), the BMW i3 (¥416,800-¥ 516,800) and Tesla’s vehicle models (¥608,000-¥1,000,000)

Among mainstream car models, only the Zhidou’s 100 ton-kilometers power consumption is more than 13 kWh, which means the model will not be qualified for subsidy.

The power consumptions of the three plug-in hybrid vehicles, the Roewe 550, Qin and Tang, are all below the required 80 percent (61, 69 and 77 percent, respectively).

Subsidies for new energy buses will also be subject to a price cap of ¥1,800/kWh for pure electric buses and ¥4,000/kWh for plug-ins. No cap is required for fast-charging pure electric buses.

As to plug-in hybrid commercial vehicles including buses and trucks, the fuel consumption (excluding the consumption of fuel converted from electrical energy) should be no more than 65 percent of the corresponding target value in the current national standards for conventional fuel consumption.

The suggested subsidies have changed significantly for new energy buses. According to the current subsidy scheme (Circular on Financial Support Policies on the Promotion and Application of New Energy Vehicles 2016-2020), subsidies for new energy buses depend on the unit load mass energy consumption (Ekg), the continuous driving range under electric mode only and the vehicle length. The maximum subsidy for a 6-8 meter pure electric bus is ‎¥250,000 (Ekg<0.25, R≥250) and the maximum subsidy for an 8-10 meter bus is ¥400,000 (Ekg<0.25, R≥250). The newly suggested subsidy for a pure electric bus would be ¥1,800/kWh and a plug-in bus ¥4,000 /kWh.

Analysts believe that if the suggested adjustment is adopted, the average subsidy for pure electric buses would be reduced by 31.8 percent and subsidies for 6-8 meter and 8-10 meter electric buses would be reduced by as much as 45.6 and 49.5 percent, respectively. The subsidy for plug-in hybrid buses would be reduced by 40 percent. Reduced subsidies would be a direct answer to excessive subsidy and subsidy fraud for the benefit of a healthy new energy vehicle development.

Subsidies for new energy truck and special-purpose vehicles will have a cap of ¥1,800 per kWh, with a maximum of ¥130,000.

These vehicles will have to meet special technological requirements. Power consumption for pure electric trucks should be no more than 0.5 Ekg per unit mass of transport. That for other pure electric special-purpose vehicles of 100 ton-kilometers should be no more than 13 kWh. The fuel consumption of plug-in hybrid vehicles should be no more than 80 percent of the corresponding target value in the current national standards for conventional fuel consumption.

The suggested adjustments to new energy trucks and special-purpose vehicles do not have much change, with a subsidy still at ¥1,800 kWh, but have added a maximum subsidy of ¥130,000 corresponding to a battery capacity of 72.2 kWh. Currently about 78 percent of special-purpose vehicles have battery capacity less than 72 kWh.

Based on the above adjustment policy, sales of new energy buses may in 2016 decline slightly. Sales of new energy passenger and special-purpose vehicles will continue to rise.

Generally, the suggested adjustments will cause a great impact on the new energy bus segment. First, the cost for purchasing batteries will be more than ¥1,800 per kWh, or at least ¥2,000 per kWh. It would be difficult to cover the battery cost. Some companies that took advantage of subsidies for 6-8 meter buses would no longer be able to do so. Before November 2015, 6-8 meter pure electric buses accounted for 78 percent of new energy buses. The increased cost of battery, electric motors, control systems and other electric accessories will lead to the loss of the competitive edge over traditional oil consumed buses. Also, new energy buses have more restrictions than traditional buses, which would lead to dramatically less demand.

In short, if sales of 6-8 meters pure electric buses are reduced by 50 percent in 2016, those of other new energy buses increase by 20 percent, sales of all new energy buses will be slightly reduced year-on-year.

The suggested adjustment has little effect on new energy passenger cars, trucks and special-purpose vehicles. It is estimated that sales of these three types of new energy vehicles would increase by 1.4 folds, with production volume reaching over 550,000 units. Therefore, despite estimated decline of new energy buses, production and sales of all new energy vehicles in China would still double in 2016.

Given the new guidelines, demand for lithium-iron phosphate batteries would be affected, but for LiNi0.3Co0.3Mn0.3O2 batteries demand would increase.

 

In short, due to the estimated decline of sales of new energy buses and increases in demand for new energy passenger and special-purpose vehicles, the use of LiNi0.3Co0.3Mn0.3O2 batteries is estimated to become more popular.

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