Summary
While China is poised to become the world's largest car market and manufacturer, its strategy to promote electric vehicles as a means to minimize foreign oil dependence has been called into questions. Some analysts even observed that the Government's reluctance to provide subsidies to private purchase of electric vehicles may lead to a miss opportunity for China. What are the possible reasons behind the government's inaction?
Analysis
With limited oil resources and a growing demand in the auto market, China is actively pursuing alternate fuel vehicle development, including the pure electric battery vehicles. By the end of 2009, it is estimated that China's demand may exceed 12 million vehicles surpassing that of the US. The shift from oil to coal or hydro based electricity as a fuel will ease China's foreign oil dependence and create an opportunity for China to close its automobile technology gap.
While the central and local governments in China have provided incentives for electric vehicle development and promote domestic manufacturers such as BYD, the central government has not provided the needed incentives for electric vehicle purchase by the private sector. Manufacturers such as Nissan China which plans to debut its pure battery vehicle Leaf in China in 2011, and BYD have called for government subsidies in order for them to further invest in China's electric vehicle market. However, NDRC (National Development and Reform Commission) senior officials responded that such subsidy will only benefit the rich consumers and not fair to the public.
Behind such responses, there are speculations that China may take time to see whether current battery technologies, in particular the lithium ion battery, could lead to a cost effective and reliable vehicles. In deed there are other factors for China to take its time to promote pure electric vehicles at the consumer level. Among the key ones is the electric grid's ability to deal with a shift in consumption patterns. The recent announcement by China National Overseas Oil Company, one of China's big 3 oil companies, to provide battery exchange services in its retail petro stations, may require a change in the grid's infrastructure for a nation wide rollout. The added demand on power generation only shift the use of oil to coal which China's power generation still demands on. The shift would do little to reduce Green House gas emission. The longer term solution would be a systematic deployment of nuclear generating stations located near the load centers. As, well there are other alternate fuel options such as liquified coal for certain transportation needs. China may take its time to evaluate these options and may not be rushed and locked into certain technology for such a huge market.
