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News - Editor, 2 April 2014

China Promotes New-Energy Vehicles



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In an effort to boost sales of electric-powered cars, China is reportedly considering cutting or waiving the 10 percent purchase tax applicable to new car purchases. The promotion of what China refers to as 'new-energy vehicles' is part of the drive to reduce the country's dependence on fossil fuels, while at the same time addressing the ongoing, and worsening, problem of air pollution. Shares of China's biggest electric car manufacturer, BYD Co. Ltd. (1211:HK) have risen in Hong Kong trading in response to indications that the government is determined to increase efforts at promoting new-energy vehicles.

Recently Hangzhou joined Shanghai, Beijing, Guiyang, Tianjin and Guangzhou in putting restrictions on car purchases by means of a license plate 'lottery'. In China, a buyer has to have a license plate before buying a car, so by restricting the number of license plates issued, the government restricts the number of cars on the road. Research reveals that in Hangzhou traffic jams reduce the average speed of cars to less than 20 km/h, thereby reducing transport efficiency and increasing pollution levels. The restriction of license plates, however, has opened up opportunities for black market trading in what has become a sought-after commodity.

Although China began promoting the use of new-energy vehicles five years ago, with a goal of reaching 500,000 by 2015, there are less than 70,000 of these cars on China's roads today. The blame for this slow development of the new-energy vehicle sector has partially been directed toward local authorities and the lack of charging stations.

Other measures being considered in promoting new-energy vehicle use include using some of the emission surcharge proceeds to finance these vehicles, as well as continuing to pay fuel subsidies to public transport companies using hybrid buses. Electric car rental services are another avenue for promoting this mode of transport. Kandi Technologies Group Inc. (KNDI:US) , which offers this service, has reportedly experienced a 34 percent gain in NASDAQ trading in this year alone, showing that there is a growing market for new-energy vehicles in China.

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