Smog, subsidy spark surge of electric cars in China

Nevada is starting to look like th e place where the future of the electric car in the United States will be decided.

Last June, Tesla broke ground on a US$5 billion (S$7 billion) battery plant in Sparks and, on Wednesday, Chinese start-up Faraday Future announced that it had chosen a Las Vegas suburb as the site for a new US$1 billion plant to make electric vehicles. Faraday hopes to roll out a competitor to Tesla's flagship Model S in 2017.

But as glitzy as these bets are, the real action is happening in China, where smoggy skies and government subsidies are creating the perfect conditions for electric vehicles to thrive. The proof is in the numbers. According to data released this week by the China Association of Automobile Manufacturers, sales of electric cars are poised to exceed those in the US for the first time. Already, they've grown 290 per cent year on year to 171,145 vehicles, and are expected to reach 220,000 to 250,000 for the year, whereas the US market is predicted to top out at around 180,000 cars.

What's fuelling the mainland's electric-car surge?

Prospective customers checking out a BYD e6 electric car at a dealership in Beijing. Buyers of electric vehicles in China are offered various subsidies, some very generous. PHOTO: REUTERS

As with so many other things in China, cost is the main factor. Take Xindayang, a 14-year-old electric-vehicle manufacturer that recently linked up with Geely, the Chinese car Goliath that owns Volvo. Xindayang's new release, the D2, is designed for urban dwellers who drive short distances and don't generally use the highway. It's not a high-end ride: A 2013 review of Xindayang's first model, the D1, claimed it made "golf carts look luxurious by comparison". And, according to Forbes, the D2 makes a "harsh rattle" as it goes from 0 to 50kmh in a turtle-like 10 seconds. What the D2 does have, however, is an eye-catchingly low price of US$10,000, against US$70,000 for Tesla's Model S. That's helped Xindayang to sell 32,000 cars this year, roughly comparable to the 33,157 cars sold worldwide by Tesla through the third quarter.

"The guy who's making the US$100,000 car is not changing the world," one of Xindayang's financiers boasted to Forbes, referring to Tesla's flamboyant founder Elon Musk. "The guy who is making the US$10,000 electric vehicle is changing the world."

Of course, if not for a combination of local and national subsidies, Xindayang's cars would cost more than twice as much. China offers incentives - some very generous - for buyers of electric vehicles, depending on where they are sold. Shenzhen, a metropolis of 15 million that's home to BYD, an electric-car maker which counts Mr Warren Buffett as an investor, committed in March to investing up to US$800 million in support for electric vehicles. That includes a US$5,600 subsidy for locals on the BYD Qin plug-in hybrid-electric vehicle. Combined with national subsidies, that knocks down the car's price by a third to US$20,000.

While the US offers subsidies as well, China's are far more generous. For example, Shenzhen is also subsidising the installation of charging stations throughout the city, while China's State Council - its top lawmaking body - recently said the government would help develop charging infrastructure and standards for five million plug-in cars. New housing developments will also be required to include charging facilities.

In addition, local governments are offering free parking and registration for electric cars, insurance subsidies, carpool lanes and - in Beijing - access to highways on days when pollution levels are so high that other vehicles are heavily restricted. BYD says that combination of benefits produced a visible uptick in buyers seeking electric cars in Beijing during this week's "airpocalypse", when petrol-burning cars were forced off the capital's roads.

Electric vehicles still face challenges in China. When announcing its sales expectations for the year, the China Association of Automobile Manufacturers called on its members to focus on quality over quantity. Designing cars that don't remind buyers of golf carts is a good place to start; for their part, regulators need to be vigilant about potential safety problems. Still, there seems little doubt that whatever electric cars become will be determined on China's city streets, not out in the Nevada desert.


A version of this article appeared in the print edition of The Straits Times on December 12, 2015, with the headline 'Smog, subsidy spark surge of electric cars in China'. Subscribe