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With huge financial support, China aims to top in new energy vehicle industrializatio

China eyes the No. 1 throne of new energy vehicle market volume by 2020 with plans to invest over ¥100 billion ($14.5 billion) into the industry in the next 10 years, according to a report on auto.sohu.com, citing the draft of the Energy-Saving and New Energy Vehicle Industry Development Plan for 2011-2020 (the Plan).

The Plan, drafted under the guidance of the Ministry of Industry and Information Technology (MIIT), has been finished recently, and will be submitted to the State Council after collection of suggestions from different ministries.

The Plan says that China will set pure electric vehicles as strategic direction of new energy vehicle industrialization, and closely keep an eye on fuel cell vehicle technology. The government will push commercialization of pure electric vehicles and hybrid vehicles based on pilot programs, in order to leap in the auto industry development.

Development target: No. 1 in the world in terms of sales

According to the Plan, new energy vehicle (including EV, PHEV and hybrid) population should reach 5 million nationwide, and sales of energy-saving vehicles, represented mainly by hybrid vehicles, should achieve 15 million to take No. 1 in the world by 2020.

The above goals will be realized by two steps, says the Plan.

Targets in the first step, to be completed by 2015, include:

1. Vehicle fuel economy should be improved evidently, and the average fuel consumption of new passenger cars should be cut by 35 percent from the 2008 level to reach 5.9L per 100 kilometers.

2. Mass industrialization of regular hybrid vehicles should be achieved. A weak hybrid with stop-start system should be the standard feature of passenger vehicles; and medium and fullhybrid passenger vehicle parc should total over 1 million units.

3. Primary industrialization of pure electric vehicles and plug-in hybrid vehicles should be realized, with a population of more than 500,000 or 1 million units. Necessary infrastructure system should also be available at that time.

4. The key parts and components industry supporting the EV commercialization should be formed. The localization of key materials and production equipment of power batteries should be realized. Power battery’s energy density should reach over 120 WH/kg, cost be lowered to ¥2 per WH, and battery life surpass 2,000 charge cycles or over 10 years. Three to five large supplier groups of key parts and components should be established, with an industry concentration degree of over 60 percent.

Targets in the second step, to be completed by 2020, include:

1. The overall vehicle fuel economy should be close to the advanced international level, and the average fuel consumption of new passenger vehicles should be lowered to 4.5L per 100 kilometers.

2. Hybrid vehicles should get popularized, and production and sales of medium andfull hybrid passenger vehicles should reach over 3 million units annually.

3. Pure electric and plug-in hybrid vehicles should be commercialized, with a population of over 5 million or 10 million units. Enough charging station networks should be in place to support operations of pure electric vehicles between different cities and regions. Power battery’s energy density should reach over 200 WH/kg, while cost be lowered to less than ¥1.5 per WH.

4. In terms of industry restructuring, 3-5 leading new energy vehicle manufacturers should be organized, and 2-3 major self-innovative and globally competitive power battery and electric motor makers should be formed, with an industry concentration ratio of over 80 percent.

Huge amount of financial support

According to the Plan, in the next 10 years, the central government will invest over ¥100 billion into the R&D and promotion of new energy vehicle technologies. (Insiders said ¥100 billion is the number expected by the plan makers, which may be a little smaller in the final version.)

The investment will be divided into the following parts:

1. From 2011-2020, the central government will allocate ¥50 billion as a special fund to support new energy vehicle R&D and industrialization. The government will build a national new energy vehicle industry innovation alliance to form a joint development system.

2. During 2011-2015, the central government will issue ¥30 billion to support new energy vehicle pilot programs. Moreover, another ¥20 billion fund will be set to help promote energy-saving vehicles with focus on hybrid vehicles.

3. In the next five years from 2011 to 2015, the central government will invest ¥5 billion into infrastructure construction of the new energy vehicle pilot cities. Local governments of the pilot cities should give more financial support to the infrastructure construction, and release preferential measures for electricity price and land use to encourage power grid and petrochemical companies as well as other industries to actively involve in the infrastructure construction.

4. The central government will allocate ¥10 billion in 2011-2015 to support and guide production of parts and components of energy-saving and new energy vehicles, in order to attract more social capital for this sector and cultivate several supplier giants.

Besides subsidies from the central government, local governments will also pour money into the R&D and promotion of new energy vehicles. The automakers themselves will undoubtedly invest greatly into the R&D, and those companies which take major technology R&D projects should set aside certain amount of fund for technology development of supporting facilities. Moreover, under the guidance of related preferential policies, more social capitals are expected to run into the new energy vehicle industry, and more new energy technology investment agencies will be built.

In addition, independent brand products should account for no less than 50 percent of the government procurement of new energy and energy-saving vehicles.

Tax breaks

As revealed by the Plan, energy-saving and new energy vehicles will enjoy great benefits in terms of taxes. For instance, in the next 10 years, purchase tax of pure electric vehicles and plug-in electric vehicles will be cancelled, while that of hybrid vehicles be halved. Before 2015, the vehicle and vessel tax will be exempt in registration of pure electric vehicles and plug-ins and halved in registration of regular hybrid vehicles.

In addition, R&D and production of energy-saving and new energy vehicles as well as core parts and components will be included into the State high-tech fields and enjoy preferential tax benefits granted specifically to high-tech enterprises. Enterprises which are engaged in R&D and production of energy-saving and new energy vehicles as well as core parts and components will be exempt of business tax for their income earned from technology transfer, technology R&D and related technology consulting and services.

The Plan also encourages banks to provide loan support to such companies and the government will support the listing of eligible energy-saving and new energy vehicle OEMs and suppliers at stock exchanges at home and abroad.

Stricter entrance management

For approval of new energy vehicle companies and products, the Plan has made new, stricter requirements. New Sino-foreign JVs of key parts and components for new energy vehicles, such as vehicle-use batteries, electric motors and whole vehicle control systems, should boast self-development ability and independent intellectual property. Shares of the Chinese side in the JVs should not be lower than 51 percent.

 

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