New-energy Vehicle Policy Shifts Gears

Government procurement of new-energy vehicles is also encouraged, the document said, suggesting that 30 percent or more of new cars for public transportation, public affairs, logistics and environmental sanitation purposes should be fuel-saving ones.

The new guidelines still define new-energy cars as pure electric battery cars, plug-in hybrids and fuel-cell vehicles, leaving out the more conventional gasoline-electric hybrids from the subsidy scope.

In the previous program, which ended on Dec 31, the government offered a 3,000 yuan (US$490) rebate to a buyer of new gas-electric hybrid cars, way below the 60,000 yuan handouts for all-electric battery cars.

The current policy suggests that various government departments hold contending views on the priority of electric vehicles, with some favoring all-electric cars and others opting for hybrid vehicles, said Wang Tianwei, policy director of the policy coordination department of Jiading Auto City in Shanghai, an international model zone for the development of electric vehicles.

Jochem Heizmann, chief executive officer of Volkswagen Group, told Reuters in April that plug-in hybrids will have much better prospects to achieve a certain volume than purely electric cars over the next decade.

In terms of subsidy depth, the extended policy provides equal treatment to buyers of battery-driven vehicles in 2013, who are entitled to a rebate of up to 60,000 yuan. Buyers of plug-in hybrids will receive up to 35,000 yuan.

The more costly fuel-cell vehicles for passenger and commercial uses will enjoy 200,000 yuan and 500,000 yuan subsidies, respectively, this year.

The incentives will be reduced by 10 percent in 2014, and an additional 10 percent the year after. Only electric and plug-in hybrid buses are exempt from the reduction.

The policy sends out a clear signal that Beijing is poised to de-emphasize policies to simply give subsidies for vehicle purchases and wants to encourage the research and development capabilities of the country's main automakers, according to industry observers.

Wan Gang, minister of science and technology, told an international forum on electric vehicles in Shanghai in May that direct government incentives for consumers may be phased out by 2020, if operational expenses can be contained and the market expanded.

He added that the industry can only be sustained by raising technology levels and lowering costs.

"These are of course fine-tuning measures in the long run. But more aggressive policies at the current stage are needed to genuinely help people embrace a new-energy car craze," said Wen.

The country started offering handouts to buyers of electric cars three years ago, aiming to put 500,000 new-energy vehicles on the roads by 2015 and 5 million by 2020.

But just 12,791 such vehicles were sold last year, according to the China Association of Automobile Manufacturers. By the end of March, China had around 39,800 electric vehicles, about 80 percent of which were used for public transportation.