Holistic Approach Needed to Charge Up China EVs

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Doug Young

Bottom line: Beijing should take a more holistic approach to developing green cars in China, which should include education of owners and creation of owner communities in addition to financial incentives and infrastructure building.

China made the latest new move to boost its sputtering electric vehicle (EV) program over the holiday, disclosing an ambitious plan to sharply accelerate installation of charging stations across the country. The plan was aimed at countering one of the biggest obstacles to EV development, namely concerns from potential owners about difficulties they might face recharging their vehicles.

The new move comes after Beijing announced new financial incentives for EV buyers in May, and could provide some more momentum to a national program that has fallen far short of expectations. These kinds of piecemeal measures look good in theory, but often seem to fall flat due to lack of national coordination and supporting education and other publicity.
Instead of relying on these kinds of one-off measures, Beijing should take a more holistic approach that includes development of an ecosystem to support broader development of the green vehicle industry.

Such a system should include not only subsidies and tax incentives for buyers and builders of charging stations, but also building of other infrastructure like service centers for car maintenance. A central element of such an approach should also include a stronger focus on consumer education, which could include holding of local workshops and creation of online social networking groups. It should also include more media coverage of issues related to EV ownership.

China has set ambitious plans for new energy vehicles, in a drive to reduce the country’s polluted air and foster development of a cutting-edge sector with big potential not only at home but also in the global market. The country aims to have 5 million green energy vehicles on its roads by 2020, equaling about a fifth of the 23 million total cars sold nationwide last year.

And yet EV sales have remained painfully low, despite tax incentives that were introduced last year, and were further boosted in May. Total sales of electric, hybrid and natural gas powered vehicles roughly doubled in the first half of the year, but even then the figure was only a modest 60,000 vehicles. Among those EVs, one area with the biggest potential, grew at a slower rate of about 40 percent to just 5,114 vehicles.

Accelerating Charging Stations

In a move to boost the slow growth of EVs, a top official at the National Energy Administration said last week that guidelines would soon be issued aimed at accelerating the roll-out of infrastructure for such vehicles. (English article) Those guidelines would aim to see charging facilities installed at one-tenth of the nation’s public car parks over an unspecified period.

The official conceded that lack of national coordination has been one of the major obstacles to EV development to date, resulting in widely varying standards for various brands of cars, batteries and charging stations. He added the government is now taking steps to improve the situation by creating a set of unified national standards.

The sector’s fragmented nature has dampened sales at big names like homegrown EV maker BYD (HKEx: 1211; Shenzhen: 002594; OTC:BYDDF), as well as US high-flyer Tesla (Nasdaq: TSLA), both of which had big hopes for the market. BYD has struggled to find a big consumer market for its vehicles, pressuring the company’s profits, while Tesla’s disappointing progress prompted the company to launch a major overhaul of its China operations earlier this year.

The National Energy Administration’s latest moves could help to jump-start EV sales, especially the drive to standardize charging technology. But the agency should take this more broad-based approach a step further and use its influence to create other standards and networks that would become part of a national ecosystem to promote the technology.

Bringing consumers more intimately into the process should be a central part of that effort, since such people will ultimately drive sales that could help Beijing meet its ambitious targets. Such efforts could include creation of online and offline EV communities, and other forums where potential owners could easily learn about the technology and get quick answers to their questions. That kind of educational campaign would provide consumers with the information they need to ease their concerns about adopting such a new technology that is still poorly understood by most.

Even such a coordinated approach may not be enough to overcome other obstacles, most notably the relative immaturity of some related technologies that still make EV ownership less attractive than driving traditional gasoline-powered cars. But creation of such an ecosystem would greatly improve the chances for success by giving consumers not only financial support but also the confidence they need before making the major decision to buy an electric car.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

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