EIA: China promotes AFVs, fuel efficiency to curb rising oil demand

The Chinese government is adopting a broad range of policies, including improvements of fuel efficiency and the promotion of alternative-fuel vehicles (AFVs), to curb the country’s escalating oil demand and oil imports, according to an analysis of the US Energy Information Administration.

Driven by unprecedented motorization since the 1990s, consumption of gasoline in China has risen from 900,000 b/d in 2003 to more than 2 million b/d in 2013. Rising oil demand is increasing the country’s reliance on oil imports. Since 2009, China has been importing more than half of its petroleum needs.

In response to growing oil usage and imports, the Chinese government released in 2012 the Energy Saving and New Energy Vehicle Plan for 2012 to 2020. Under the plan, average passenger car fuel economy is targeted to increase to 34 mpg by 2015 and 47 mpg by 2020.

In its 12th and current 5-Year Plan, the Chinese government also launched a strategy to promote new energy vehicles (NEV, vehicles that are partially or fully powered by electricity) and to support its national automobile industry to mass-produce NEVs.

“The government plans to invest an estimated $15 billion in [AFVs] during the next 10 years. The national target for cumulative production and sales of electric and plug-in hybrid vehicles is 500,000 units by 2015. The NEV target for 2020, originally set at 5 million vehicles, was recently scaled back to 1 million vehicles,” EIA said.

The Chinese government has offered many financial incentives to meet NEV penetration targets. They include some $4 billion allocated for energy-saving products, primarily NEV and household appliances. In 2012 the Chinese Ministry of Finance announced it would provide annual subsidies up to 2 billion yuan to support NEV manufacturing. In September 2013, the government announced additional subsidies that will support the growth of NEV ownership through 2015.

Subsidies from the central government are often matched by local subsidies. “For example, in Beijing, the central government subsidy of 60,000 yuan is matched by a subsidy of equal amount from the city of Beijing. The Shenzhen government offers one of the highest subsidies for electric vehicles in the country—120,000 yuan/passenger vehicle—reducing the price of such vehicles by more than half,” EIA said.

In addition to financial incentives, some cities offer other incentives, including free license plates for NEVs and exemptions from vehicle license plate quota systems.

“Shanghai (where a license plate can cost as much or more than an entry-level domestically manufactured car) offered free license plates for 20,000 electric vehicles purchased before the end of 2013. Guangzhou offers 12,000 free plates allocated by lottery, and Beijing offers electric vehicles an exemption from the vehicle license lottery, which prospective owners of gasoline-fueled automobiles are required to enter,” EIA said.

However, despite many incentives, electric vehicles sales to date have been minimal. NEV sales account for less than 1% of total vehicle sales in China, which in 2013 remained the world’s largest vehicle sales market for the fifth consecutive year. According to China Daily, as of March 2013 an estimated 39,800 electric vehicles were on the road, about 80% of which are used for public transport.

According to the analysis of EIA, some of the reasons behind low sales of NEVs to date are high vehicle costs despite government subsidies, inadequate charging infrastructure, limited driving range compared with conventional internal combustion engine vehicles, lack of a national industry standard for charging connectors, consumer education and acceptance of the new technology, and vehicle safety issues, among others.

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