Chinese cities open up green car markets as government battles pollution

Thu Mar 20, 2014 6:06am EDT

* Shanghai relaxes conditions favouring local e-car makers

* Beijing, Tianjin, Shanghai list cars eligible for subsidies

* Government targets 500,000 EVs by 2015 from 50,000 now

By Samuel Shen and Kazunori Takada

SHANGHAI, March 20 (Reuters) - Three of China's biggest cities are helping consumers pay for a range of electric cars, heeding calls to encourage the sale of green vehicles that the government sees helping tackle pollution.

China's smoggy skies topped the agenda at the annual parliamentary session this year, while Premier Li Keqiang in January demonstrated the importance of green cars by visiting a factory of BYD Co Ltd , maker of the e6 pure electric car.

The government wants to put 10 times more e-cars on the road by next year but traffic management is under the remit of local authorities, and many cities including the polluted capital of Beijing have not had the framework to deem the vehicles roadworthy.

Tianjin lacked the means to issue licence plate numbers for e-cars, while in Shanghai, technicalities in traffic management rules meant only Shanghai-made vehicles were eligible for local subsidies.

But the cities last month said they would subsidise purchases of pure electric and plug-in hybrid cars from Chinese makers including Warren Buffett-backed BYD, SAIC Motor Corp and Anhui Jianghuai Automobile Group Co Ltd (JAC Motors).

Any sales rise will add to a population of 50,000 new energy vehicles (NEV) - defined in China as electric, plug-in hybrid and fuel cell - well short of a government target for half a million by 2015 and 5 million by 2020.

"This is the goal to strive toward, with the numerical targets putting pressure on car makers," said Luo Xing'an, secretary general of the Guangdong Automobile Association. "But there's no guarantee these targets will be met. The foundation of the industry is not yet solid."

Many other industry executives regard the targets as impossible, but China could edge closer if more cities broaden subsidies for which in many instances only locally made cars have been eligible.

BYD, for instance, sells most of its electric cars in its home of Shenzhen, where more than 800 taxis are its e6. The city offers subsidies for NEVs provided they are capable of 300 km (186 miles) per charge - criterion only the e6 satisfies. That effectively shuts out cars such as SAIC's Roewe E50 and JAC Motors' iev.

LOCAL SUBSIDIES

Rapid economic growth and urbanisation have turned China into the world's biggest emitter of greenhouse gases, with pollution a constant feature in newspapers and a topic widely discussed in the Chinese blogosphere.

The government has vowed to fight pollution and since 2010 has been encouraging consumers to buy green cars. Under its latest initiative, it offers to pay up to 60,000 yuan of the purchase price - an amount local authorities are encouraged to match.

Shanghai, before last month, only subsidised NEVs satisfying criteria such as the ability to reach 50 km/hour in 6 seconds, met only by models from Shanghai-based SAIC and Shanghai Zhongke Lifan Electric Vehicle Co Ltd.

In Beijing, the inability to obtain licence plates for e-cars prior to February meant the BAIC E150 of local maker BAIC Motor Corp Ltd came up against limited competition on its official release this month.

However, in September the central government said non-local cars should make up at least 30 percent of a city's NEV sales.

"Shanghai and Beijing are under pressure from the central government so they're setting an example of easing restrictions," said Namrita Chow, an analyst at consultancy HIS Automotive.

In Tianjin, the authorities only opened the market to green cars in January after BYD agreed to build an electric bus factory in the city.

"Given the current situation in promoting NEVs, it's necessary for the company to make some investment when needed in exchange for access to new markets," BYD said in an emailed statement to Reuters.

FOREIGN ONSLAUGHT

The opening up of city markets is likely to support China's fledging electric car industry before an inevitable onslaught from foreign brands, most of which will not be eligible for subsidies.

Tesla Motors Inc is taking Chinese orders for its Model S, BMW aims to import its i3 this year, and Volkswagen AG plans to sell more than 15 models in China by 2018.

Unlike the luxury cars of Tesla and BMW, Chinese models are aimed at the lower-priced end of the market. But even with subsidies, prices are high.

IT engineer Zhang Shuai, 32, paid 240,000 yuan ($38,800) for a BYD e6 after receiving 114,000 yuan in Beijing and central government subsidies this month. China's top selling petrol car, Ford Motor Co's Focus, costs half as much.

"Most of my friends and relatives were opposed to me buying the e6," said Zhang. "I'm a fan of electric vehicles, but many people in China are still sceptical."

($1 = 6.1920 Chinese Yuan) (Editing by Christopher Cushing)

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