China fuel tax helps commercialize new energy cars

New energy cars are expected to enjoy a good opportunity of large-scale commercialization in China fueled by the domestic fuel tax reform effective from the beginning of 2009.

At least eight Chinese automakers including Shanghai Automotive Industry Corporation (SAIC), First Automobile Works (FAW), Dongfeng, ChangAn, Chery, Geely, BYD and Great Wall are now making great efforts on research and development of new energy systems.

In fact, a group of new energy cars have already rolled off lines at Chery, ChangAn, Geely and BYD. BYD launched its first mass-produced plug-in hybrid car F3DM in mid-December and aroused worldwide attention.

Wan Gang, minister of Science and Technology, said in public that he hoped energy-saving and new energy cars would take up 10 percent of China's new car output by 2012.

In view of current circumstances, there is still a long way to go for new energy cars to realize large-scale commercialization. To accomplish this, the automakers need to make more efforts on R&D and marketing of new energy cars, while the government should take supportive measures and provide subsidies to help promote consumption of such cars. Besides, the construction of supporting facilities is necessary for new energy cars to keep their feet in the market.

The Chinese government encourages the development of new energy cars. The National Development and Reform Commission (NDRC) is mulling over a plan to boost China's auto industry. Included in the plan are contents to support new energy cars, especially electric cars.

According to Zhang Jinhua, a leading expert joining in a state energy-saving and new energy car project, the Ministry of Science and Technology and the Ministry of Finance plan to provide price subsidies to large-scale demonstration projects for buying new energy cars, effective possibly before January 26, also Spring Festival, the country's most important traditional holiday.

At present, different automakers take different paths on the development of new energy cars. FAW and ChangAn focus on hybrid car development. Dongfeng gives weight to both hybrid cars and electric cars. SAIC is moving towards hybrid cars and electric cars from its initial research on fuel cell cars, while BYD is concentrated on electric cars based on its advantage in rechargeable batteries.

Li Mengtao, an auto researcher from Sinolink Securities, consider electric cars the final right direction of new energy car development, with hybrid power only a transitional technology.

Hydrogen fuel cell car is also not a good choice as it is hard to meet the technology requirements and realize lot production, according to Xu Jian, vice president of Volkswagen China.

McKinsey, a leading consulting firm, said in a research report that China should prioritize the development of electric cars, considering automakers' research and development (R&D) capability and resource reserves.

Cheng Qingtai, a researcher with the Development Research Center of the State Council, said the government encourages the research on different power sources and will make the decision in the future. China will stay in a stage of coexistence of different kinds of new energy vehicles with diversified power sources and fuels by the year 2020.