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New energy bus sales to surge in 2014

New energy bus sales are expected to surge this year thanks to favorable policies such as the recent announcement of the second batch of cities that will promote the use of new energy vehicles, according to several executives from bus makers in a recent interview with find800.cn.

“We had orders for more than 1,000 units of our new energy buses in the first quarter,” said Luo Gaohua, vice president of Sinotruk Jinan Howo Bus Co., Ltd. Luo expects his company to sell more than 3,000 new energy buses in 2014, according to a report in China Economic Herald.

The government subsidy policy has promoted sales of 6- to 7-meter intercity new energy buses but is far from enough to make up the price difference between the 12-meter electric buses and traditional diesel buses, said Luo. The construction of charging and battery swapping stations is also an important element affecting the promotion of new energy buses.

Quick development on plug-in hybrid technology

The maturity and performance improvement of new energy buses will promote sales in 2014, according to the above executives.

As introduced by Zhang Weilin, director of Higer Bus New Energy Research Institute, the self-developed ISG compound system of Higer hybrid bus needs no power transmission and torque switch and can reduce power loss caused by traditional transmission systems.

Yutong Bus has also adopted the ISG system. “Similar with the technical route of Honda, Yutong plug-in hybrid buses are not equipped with transmissions. The buses are well accepted by the market because of lower costs,” said Tang Yuxiang, president of Yutong Bus.

Technology adaption and good emissions reduction effect

Electric buses tend to be accepted by the market easier for its capability of carrying heavy load batteries compared with smaller cars. High-end buses can also dilute the cost of high power capacity batteries.

The emissions reduction effect of one new energy bus equals to that of 75 new energy cars, according to relevant statistics. China sold 28,072 new energy buses from 2010 to 2013, with total emissions reduction equaling to 2,102,031 new energy cars, according to statistics provided by Yutong Bus.

Policy support

Supporting policies issued by the government have greatly promoted the development of new energy buses.

For example, in the Energy-Saving and New Energy Vehicle Industry Development Plan (2012-2020) released on August 28, 2012, the government determined pure electric vehicles the main strategy of industry transformation.

The government announced in September 2013 to provide subsidies of ¥250,000 ($40,128) for plug-in hybrid buses, ¥300,000 for 6- to 8-meter pure electric buses, ¥400,000 to 8- to 10-meter pure electric buses, and ¥500,000 to electric buses over 10 meters from 2013 to 2015. 

An official with the Ministry of Finance also said at a conference on March 12 that the government would allocate subsidies to buses sold not only in pilot cities, but also in those cities that fulfill relevant prerequisites.

Rise in local government procurement

“New energy and natural gas buses are two hot spots of the China’s bus market in 2014,” said Sun Qingmin, president of Zhongtong Bus. “Government policies will stimulate the industrialization of new energy buses and their sales will surge this year.”

The government requires promotion of over 10,000 new energy vehicles in large and medium cities as well as key districts and over 5,000 units in other cities and districts from 2013 to 2015. Since the planning was just released last year, many public transportation companies have not started their purchase plans. The companies tend to purchase large number of new energy buses this year to fulfill government planning, said Li Dusheng, brand culture director of Zhongtong Bus.

Nevertheless, both Li and Zhang emphasized that since the subsidies are only allocated to the second batch of pilot cities, it is not easy to promote new energy buses to cities not on the list.

Local finance also gave large support to new energy buses. For example, according to an announcement of the finance department of Henan provincial government released in September 2013, the government will allocate ¥500,000 per unit to pure electric buses and ¥420,000 to plug-in hybrid buses larger than 10 meters.

According to the amendment of Interim Provisions of Shandong New Energy Bus Demonstration Capital Management released in July 2013, pure electric city bus (>10 meters) can enjoy a subsidy of ¥400,000 per unit, electric buses larger than 8 meters but smaller than 10 meters enjoy ¥350,000 in subsidy, while plug-in hybrids enjoy ¥250,000 in subsidy.

Industry analysts believe that China will have 600,000 public transport buses on the roads by 2015. Of those, 83,000 units, or 13.8 percent, will be new energy buses.

<Table: Provincial new energy bus promotion plan>

Falling costs

Another distinct feature of this year’s new energy bus market is the overall price decrease of buses caused by a sharp drop of auto parts costs.

With the development of new energy bus parts makers, prices of a number of parts have been reduced, and as a result, prices of new energy buses are gradually going down as well, said Higher Bus’ Zhang

The price decrease of hybrid bus parts can be attributed to technology improvement and sales increase, said Li. The price of Zhongtong’s plug-in hybrid bus is around ¥700,000 but can be purchased for ¥500,000 after subsidies, said Li.

“Fuel costs saved for years can make up for the excess upfront cost of new energy buses,” said Tang. Costs of pure electric and natural gas buses are only one-third and two-thirds of those of diesel buses, said Liu Xiaoyan, deputy director of Howo Bus Technology Research Institute.

Restraining factors

Government subsidies and construction of charging and battery swapping stations are two key elements that affect the promotion of new energy buses, said Luo of Howo Bus.

“Charging and battery swapping stations require large investment and land,” said Luo. “Pure electric buses usually charge for four to five hours at night, and it is a big problem to those companies that own large number of buses.” Besides construction costs, choice of location, land and government approval are all complicated.

Comparatively, battery swapping stations tend to take up less space. However, since swapping stations require large investment, the government does not advocate the construction of such stations.

Linyi, Zibo, Liaocheng and Weifang, four cities in Shandong Province and all in the second batch of cities for NEV promotion, are planning to promote 21,200 new energy vehicles and set up 31 charging and battery swapping stations, 6,520 charging poles and 11 new energy vehicle maintenance stations. The development of NEVs in other cities obviously hinges on infrastructure construction.  

Moreover, the ¥400,000 subsidy is fair enough for electric buses longer than 6 meters and shorter than 8 meters, but is still too small for electric buses over 12 meters which cost ¥1.4 million to ¥1.6 million in average, said Luo.

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