Three factors hamper China's new-energy vehicle market

Shanghai, June 24 (Gasgoo.com) China's auto market is calm when the global market of new-energy vehicles is heating up. The Toyota hybrid car Prius, which has been popular worldwide, has sold less than 3,000 units since it was introduced to the Chinese market two years ago. Why hasn't the new-energy vehicle market in China gone onto the fast track now?

Chinese carmakers are not to blame for the sluggish sales of new-energy vehicles in the country. Its auto-manufacturing companies have all seen the huge market potentials of the new-energy vehicles and have invested considerable in their development and production. The Shanghai-brand hydrogen fuel cell cars and hybrid vehicles made by SAIC achieved excellent 7A scores in a competition with the new-energy vehicles of global carmakers at the Michelin Challenge Bibendum 2007 in Shanghai.

Industry experts said that there are three decisive factors that have hampered the new-energy vehicle market growth in China:

1. The related rules and regulations of the government have restricted the production of new-energy vehicles, and few or none of these vehicles have any price competitiveness. Currently China's automaker must get the permit from the government's regulatory body for production and sales of their vehicles. In late April this year, seven new-energy vehicle models were okayed by the National Development and Reform Commission for mass production. The seven models include Shanghai Volkswagen's fuel cell Passat, Shanghai General Motors' SGM7240, FAW's CA7130, and other four hybrid buses produced by Dongfeng Motor Corp, Beiqi Foton Motor, and Changan Auto. It will take a long period of time from a new-energy vehicle model's getting the approval to its starting mass production.

2. Under China's current fuel pricing system, new-energy vehicles show little or no advantage. With the fuel costs soaring, American consumers have shifted their attention to energy-economy and hybrid vehicles. The fuel subsidies from the Chinese government have made the gasoline price much lower than the global average price, and the fuel price rise is much slower than the global pace. As a result, Chinese consumers would not take their fuel consumption costs seriously, nor consider buying the comparatively expensive new-energy vehicles.

3. Government support for the new-energy vehicles is still insufficient. New-energy vehicles are not enough produced and therefore their prices are relatively higher than those of the conventional vehicles. That means the new-energy vehicles need the favorable tax policy support from the government, but such a policy has not come into being yet, even after rumors abounded in the last months about the purchase tax exemption for consumers buying new-energy vehicles.

The U.S. government has issued its preferential tax policy for hybrid vehicles. From now to December 31, 2009, American consumers who buy a 85,000-pound-plus heavy hybrid vehicle that satisfies other conditions are eligible for a maximum of $18,000 in tax credit; users (since December 31, 2005) of light hybrid vehicles and advanced rare fuel vehicles that meet related conditions can also get the tax credits.