China and US PEV sales. Wang et al. Click to enlarge.

What happened in such a short time? First, monetary incentives by both central and local governments were boosted still higher. Second, several megacities, in particular Beijing, Shanghai, and Shenzhen, adopted aggressive non-monetary policies in 2014 and 2015 to boost PEV sales to reduce local pollution— with the result that PEV sales in the three cities soare 37% of total PEV sales in the entire country, even though those cities accounted for only 4% of the population.

Third, led by local companies such as BYD, BAIC, and SAIC, automakers greatly expanded the supply of new PEV models, providing 832 approved models as of June 2016 (compared with 28 PEV models available in California). Fourth, Chinese entrepreneurs started to experiment with innovative PEV deployment and infrastructure business models.

—Wang et al.

The scale of subsidies in 2015 in China was massive:

• The central government provided a much as US$8.4 billion—about 10x that in the US.

• Many local governments match central subsidies, often one-for-one.

• Central and local financial incentives amounted to up to $16,000 per car.

• The 10% sales tax on vehicles is waived for PEVs.

In addition to the monetary incentives, there are considerable indirect incentives. These include bypassing the lottery system for buying a vehicle—especially valuable in a city such as Beijing. (Beijing accounts for almost 10% of PEV sales.)

Combining the direct and indirect subsidies at both the national and municipal level, the incentives in Pudong district of Shanghai in 2015 amounted to about US$25,000 for a PHEV and US$28,600 for a BEV (Table 3). The magnitudes are comparable for Beijing for a BEV.

—Wang et al.

However, the authors note, continued sales growth is threatened by persistent regional protectionism, the unsustainability of these large subsidies, and widely reported cheating by some automakers.

China’s mix of government policies has been successful in increasing PEV sales. However, the scale and magnitude of monetary and non-monetary support is unsustainable. More cost-effective policies are needed. China is particularly well positioned to adopt innovative performance-based policies that are based on actual usage of PEVs—utilizing onboard data monitoring and analysis—to incentivize greater use of electricity in PEVs and more efficient use of subsidies. With a new set of policies that reign in local protectionism, curb cheating, and incentivize consumers and automakers to embrace PEVs that operate primarily on electricity, China would remain on its trajectory toward 5 million PEVs by 2020, with annual sales of 2 million. The benefits would be global, greatly reducing the cost of PEVs worldwide and contributing to accelerated adoption of clean vehicle technology.

—Wang et al.

Resources

• Yunshi Wang, Daniel Sperling, Gil Tal, Haifeng Fang (2017) “China’s electric car surge,” Energy Policy, Volume 102, Pages 486-490 doi: 10.1016/j.enpol.2016.12.034