The Chinese government revealed a new mandate requiring at least 30 percent of all automobiles purchased by the government to be electric or “new energy” vehicles by 2016, according to an official announcement made on Sunday.Unsurprisingly, the news gave electric car company stocks a boost.
The policy probably won’t do much to improve China’s abysmal air quality, however. In 2013, growing middle class demand for cars helped the country become the first to sell more than 20 million automobiles; government car purchases are estimated to account for less than 10 percent of sales.
Emissions from these vehicles and coal-fired Chinese power plants spew lung-choking particulate matter into the atmosphere at alarming levels. Last year, the average concentration of these particulates in China were more than 3.5 times the level recommended by the World Health Organization. On a particularly unbreathable, airpocalyptic Beijing day, the concentration amounted to 40 times the WHO’s recommendation. The conditions have gotten so bad, scientists earlier this year compared the effect to a “nuclear winter” that was seriously obstructing photosynthesis in plants and threatening China’s agriculture.
Highly polluted regions like the Beijing-Tianjin-Hebei region, the Yangtze River Delta, and the Pearl River Delta are a particular focus of the government’s initiative on state-owned vehicles, which are expect to include electric, hybrid, and fuel cell models. The government’s emphasis is on fully electric cars, although plug-in hybrids will be encouraged in places with cooler climates. (Incidentally, the reliance on coal for heating in these northern regions has resulted in a life expectancy 5.5 years shorter than in the south.)
The measure on state-owned vehicles is meant to bolster an ambitious plan introduced last year to get high-polluting vehicles that were registered before 2006 off of the roads by 2016. Just last week, the government announced that it would exempt electric cars from a 10 percent purchase tax through 2017 in order to boost demand. Electric car sales in the world’s largest car market have lagged well behind government goals, despite already existing subsidies — fewer than 70,000 of the cars on China’s streets are electric.
The government’s initiative and its tax break on electric vehicles do not exclude foreign automakers like Tesla, although the cost of vehicles purchased by the government has been capped at $29,000.
According to a 2012 McKinsey report, China is interested in electric vehicles not only in order to control pollution but also to “build a car industry that could leapfrog its global competitors in this emerging sector.” But it’s an open question whether government vehicle purchases will be enough to jumpstart China’s new-energy car market. Although the number of total auto sales in China continues to grow, the rate of vehicle purchases has cooled off since industry growth was at its height in 2009. Chinese auto manufacturers have this year seen their combined market share fall to its lowest level in five years.
Nevertheless, the performance of Monday’s stock market following the announcement on government vehicle purchases immediately reflected the potential benefits in store for domestic auto companies. Chinese electric carmaker BYD and Anhui Ankai Automobile, which has been developing electric and hybrid buses, both saw a spike in their stock prices.
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