China’s Electric Vehicle Policy Not Turning Over

November 6, 2014
By Robert O'Neill

Toward the end of the past decade, China set itself an ambitious goal: to dramatically ramp up its electric vehicle production and surpass the rest of the world’s automobile industries in this important new market. It was a policy intended to play a crucial role in the country’s economic development and long-term energy strategy and in solving some of its important environmental and health problems.

“Examining the Chinese effort to develop an electric vehicle market offers a window into the country’s economics and politics as it confronts these three challenges,” write Henry Lee, senior lecturer in public policy and Jaidah Family Director of the Environment and Natural Resources Program at Harvard Kennedy School, and his coauthors, Sabrina Howell and Adam Heal, both research associates at the Kennedy School, in “Leapfrogging or Stalling Out? Electric Vehicles in China.”

The Chinese government’s goals were to have 500,000 electric vehicles on the road by 2011 (accounting for 5 percent of total vehicle sales) and 5 million on the road by 2020. But, as the authors point out, “in mid-2013, China had only about 40,000 electric vehicles on the road, more than 80 percent of which were in public fleet vehicles, such as taxis and buses.”

For a country that in the past couple of decades has seemed never to fail to impress the rest of the world with its ability to deliver on bold ambitions, the failure to “turn over” on the electric vehicle policy is worthy of study.

“Electric vehicle production and sales play a prominent role in China’s strategy of achieving its vision of upgrading its industry to a higher-value, high-tech role in the global economic supply chain. Electric vehicles offered an opportunity to leapfrog foreign competitors,” the authors write.

To meet its ambitious goals, China (central and local government) initiated subsidies up to $19,600 in some cities and the state-owned grid companies committed to building public charging stations. Despite these subsidies, less than 16,000 electric vehicles and hybrids were sold in 2012 compared to 576,000 in the United States. While China’s program has been primarily driven by a desire to build globally competitive electric vehicles, air pollution, especially in the cities, has become a national imperative. Yet, if coal-fired power is used to meet electric vehicle electricity demand, the absence of tail pipe emissions will likely be entirely offset by incremental power generation.

The electric vehicle policy in China, the authors find, faces many of the same technical and economic challenges faced by the rest of the world: high battery costs, long charging times, and no obvious business model for charging infrastructure. “But domestic barriers loom even larger,” they write. “The country has a weak domestic auto sector, counterproductive trade barriers, a balkanized subsidy and infrastructure program, and uncertainty over standards and technology.”

Joint ventures with foreign automakers have not resulted in the hoped-for transfer of intellectual property and manufacturing know-how, they write. With electric vehicles slated to be a primary conduit for home-grown innovation, the Chinese government restricted imports of these vehicles and demanded more stringent technology transfer from foreign firms — which foreign automakers have so far been unwilling to make.

Mass electric vehicle deployment in China will require substantial policy adjustment. In particular, it will be necessary to permit foreign electric vehicle technologies relatively free market entry. In turn, this will require greater foreign intellectual property protection. China must also consolidate its domestic industry and place greater emphasis on smaller, cheaper vehicles aimed at its domestic, lower-end market. Finally, if electric vehicles are to contribute to air quality improvement, the government must ensure that the electricity used to power electric vehicles is generated from cleaner facilities than the current mix.

Henry Lee, senior lecturer in public policy

Henry Lee, senior lecturer in public policy

“Examining the Chinese effort to develop an electric vehicle market offers a window into the country’s economics and politics.”

 


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